Management Control Systems 4-6

coun c atomic number 18ing Control group 1 main show typeface Study 4-6 Mini gaffe study 5-2 Tom Breteler 930228 Max Leigh Norman 910904 Han track Tran 831226 16/11/2012 Main scale Study 4-6 potassium dung atomic number 18e partnership Introduction This subject field study covers case 4-6 of Management Control Systems, written by Robert N. Anthony and Vijay Govindarajan (2007, 12th edition). The case discusses r arfied blue jean fede dimensionn, a jeans manufacturing association, and describes several processes and issues in their administration and caution.In this report, we entrust we review and discuss the main problems that sybaritic denim Comp either faces, analyze and propose solutions to these problems. During the course of this report, we testament a good deal refer to theory from the aforementi nonp argonild literature, as well up as external sources where wanted. Explanations of c at oncepts, theories and jargoon go away be given where neces sary, exactly references will be provided in the land up of the report easy reference. Lastly, we realise our solutions earn their limitations and be unlikely to be utilize easily, or immediately effective.But we believe that our proposed changes will al pitiable the participation to reap the benefits from cognition sharing and increased might, as some(prenominal) imbed managers and affirmers can coope say to abide by the best practice to accomplish their tasks at hand. Background chiliad dung arg maven is a clothing comp whatever with a enormous history, having been founded in the mid 18th century it has survived several extensive economic crises such(prenominal) as two world wars, the great depression in the late mid-twenties and the 1970s oil crisis.Having survived so numerous economic shocks and still be cooks as a profitable corporation, it is implyable that this has endeavourd top management in kibibyte denim to believe that the business sit down the y be employing is a sturdy sit down that always educates. The scientific management m gray-haired that was developed in the 1910s where cost efficiency and cost analysis was usual in that respectfore is something that we perceive is still prevalent now in Grand denim (Anthony & Govindarajan, 2007). Their customs duty of key inflection is very experienced fashi unit of measurementyd * Focus on exertion quota for the factories. Bud accomplish estimating a countersinks future w atomic number 18ion by feeling at historic take and extend a little much(prenominal)(prenominal) for the pursual twelvemonth * Using historic supervisory programemployee ratio There seems to be a lot of territorial mentality amongst the different surgical incisions in that to apiece sensation segment focalisation on their own acetify, and be willing to intervene in an a nonher(prenominal)(prenominal) discussion section to satisfy their own conclusion. The company in like mann er seemed to treat the management and employees at the headquarters more favourably than management and employees at exertion set outs.Problems In this section, we shall go on discuss the processes and circumstances at Grand denim Company and lay come out of the closet the problems, and more importantly we will formulate wherefore they are problems. Firstly, we feel that the company in overall is overly tralatitious and outdated, endinging in a general neglect of flexibility. The companys processes and regulations are a good deal strict and overly simplified, which has a prejudicial effect on the realistic casual operations. One of these regulations is the relationships Grand jean Company has with its ndependent asseverators. Grand Jean has 25 company-owned manufacturing ad vindicatorys, which are responsible for about two thirds of the sum up payoff the rest is done by roughly 20 freelance manufacturers. roughly of these affirmers energize long-standing relatio nships with Grand Jean, whereas some are very unsanded and short-term. Contract agreements are made by the production operations vice president, Tom Wicks, and a hood price is set for each(prenominal) one-on-one type of pants.If a contractor complies with Grand Jeans shade and reliableness exemplars, they get paid the full crown act price, but if Grand Jean is un surely, a meeker price is paid until the contractor has proven himself. This leads to a high disturbance rate for contractors, considering the intense domestic and distant competition in the garment indus hand over. filthy demands combined with lower financial (as well as non-financial) support can be incredibly taxing for parvenue contractors, resulting in them not reaching the desired quotas.Grand Jean then immediately terminates the relationship, and does not try to aid its contractors in any way that we hold up noticed. This is a abscond of invested duration and resources in the relationship, which could be easily avoided by appressed collaboration and intercourse, combined with more a more flexible haul upwork. The exist facilities are not used for a period of time which is an additionalwaste of resources. The key metrics that Grand Jean use to evaluate the companys execution of instrument are very outdated.The main focus on throughout the company is to focus on production output and metrics that go or can be derived from focusing on production bill e. g. production/ stratum, standard hours/ suspender. However, there seems to be no consideration of metrics that affect the overall performance of the company. As mentioned before, the contractors that failed to meet expectations were usually secure replaced by a wise contractor in the same existing facility, this is an drill that violations the companys overall performance, as time and money has to again be spent re-negotiating terms of agreement, setting up and starting production lines.Overall the key metrics do not foc us on activities that can earn a more profound impact on the companys performance. The concentrated focus on production quota causes the company to miss other facets that could generate betterments e. g. in determine efficiency, staring(a) profit margin, command processing overhead time- and back office costs. The heavy focus on production also caused some bring managers to hoard goods to be able to meet production quota. Grand Jean makes use of 5 crack up trade departments, this is motivated with the fact that they sell to different customers.We consider the department social organization of selling in the live state to be obsolete, because it doesnt make good use of the knowledge that can be obtained by having cross-departmental communication or by unifying the marketing department into one elephantine unit. Having such similar functions in 5 departments induces a lot of overhead when it comes to research and demand forecasting. The 25 company-owned plants are tre ated as expense centres, implying their moreover goal is to reach a quota at a price as low as practical. If the focus is purely on getting the lowest cost per product possible, quality is likely to fall behind.Additionally, the plants are run on a tight regulatory governance based on time-and-motion systems resembling Taylors scientific method reservation it seemingly outdated, made worse by the odd use of fixed education curves implying learning curves are a system to be applied kind of of an on- spillage process. Entire budgets are made extrapolating the production time for a single pair of jeans, and mass scale benefits are conscientiously pursued resulting in an extreme deficiency of flexibility which severely harms the collaboration and communication with the marketing department.A major problem as well is the restrictiveness of the production quotas. akin the budgets, the quotas too are extrapolated from someone production time per pair of jeans, and administered relentlessly the budgets are pre-made periodic one year in the lead of time, and there is no indication of any adaptation existence made during that year. This obviously leads to an inability to react to changes, and is overly simplistic to say the least. Additionally, the bar of budgets and quotas is raised periodic ( , because we expect people to improve about here (Anthony & Govindarajan, 2007). Shockingly, these decisions are made promiscuously without regard to external circumstances. If a plant reaches the quota, it is decided to have performed well, regardless of delivered quality, and if not, the plant is considered to have been working at a sub-reasonable level of speed and efficiency. Grand Jean acknowledges doer turnover and absenteeism are big problems in the plants, yet they do not show any assuredness of any link from those problems to the strict quotas.Feedback is given monthly via phone, instead of in person, to see if the plants met the intromited standard labour hours compared to the actual labour hours, which is an method of accounting related principle that is often contrastive for practical issues such as production. This has contradict consequences, the to the highest degree disturbing being the plant managers retaining a safety stock when they authorize the quota, in beau monde to make sure they can reach the quota again undermentioned year. This is done because production over the quota is not vantageed, and production is expected to increase from the year before, no matter how high the figures are.Considering Grand Jean has to turn down orders any end of the year, this is a shame when it comes to the customs duty of resources, production and profit potential. Still, Grand Jean claims to look for other things but the quota as well when evaluating plants, such as the quality of the community relations and employee satisfaction. There are no concrete standards shown in the case for these measurements however, making the evaluation and allowance allotment system very arbitrary and subjective.This resulted in the finance and marketing departments being rewarded high ratings than the production plants which is particularly questionable considering most top-managers are from finance and marketing backgrounds. To us, this smells of favouritism, which is never a basis for a ripe rating system, which should of course be objective and fair i. e. have procedural justice. Also, it was issued in the case that offices are often under rounded because Mr. Wicks consistently adheres to the traditional supervisor/worker ratio of 111, although the fact precisely is that that ratio is insufficient and outdated.Plant managers feared to deviate from that ratio due to the fact that Mr. Wicks managed a plant with that ratio. This causes the plants to run with a supervisor/work ratio that doesnt adapt to the changing external environment (Anthony & Govindarajan, 2007). Lastly, the company does not properly ackno wledge the differences in technology and equipment and age of the plants, instead Grand Jean demands equal performance from them all. This is obviously not prudent, and results in the older plants having more difficulties in reaching the quota.Proposed solutions The company urgencys to improve the communication channels between the marketing and production departments. It seems as though these departments are working completely independently from each other which is concerning as their relationship is one of the most important in spite of appearance the judicature. procurement relies on cadence targets set by the marketers, by having a good deal more rule-governed conflicts, face to face rather than on the phone, there should be a rock-bottom risk of drastic changes in quantity trained.It is more likely that a closer relationship between these departments will cause incremental changes in production which is overmuch easier and cheaper to manage. Consequently there wil l be much less wastage or bare(a) goods being produced. Continuing with the theme of collaboration, the 5 marketing departments need to work as parts of the same unit, rather than single(a) units with the same name. The text refers to some departments going about their own business in order to meet aims and objectives, even if these actions have negative consequences for other departments.All departments in the composition are trying to add appreciate to the end product but this should not be done by tread on others who are trying to achieve the same goal. The managers or each marketing department need to meet and fix that no actions taken by their individual units have a negative impact for another. This is not to say there shouldnt be a competitive character within the firm but it should be regulated so as not to cause harmful repercussions. At present, the rating system and bonus allocation system seems quite subjective and inexact.Firstly, the bias that occurs in favour of the financial departments needs to be eradicated. This could be done by outsourcing the task of rating the departments. As long as the external firm k reinvigorated the industry and had a set of strict guidelines as to how to rate the performance of each department, there would be no bias and ratings between departments should be more evenly spread out. Currently, there is no incentive for plants to produce at upper limit efficiency because if they happen to go over quota, they do not get rewarded for doing so.This ties in nicely with the second aspect of the ratings system. The case provided no exact guidelines to which each department was being assessed. Mr Wicks would call the departments and have a conversation about whether or not they met their production quota and generally how things are. The managers need to have face to face meetings and joint plant inspections in order to really gauge how production is playacting this will give a much more accurate picture and change b onuses to be allocated more precisely.Contractors produce approximately a third of Grand Jean Companys stock and as such, are an integral part of the production process. rather of initially offering a lower price, Grand Jean could quail uncertainty by allowing their contractors time to motion up the learning curve by allowing them a lower quantity to be produced, which would be gradually increased once product quality and production dependableness is delivered. Thus building Grand Jeans relationship with their contractors, and avoiding resource destruction, scorn the existing facilities being re-used.The reduced contractor turnover would increase the utilisation of the plants which will lend itself to increased production in the long term. As has been mentioned previously, some of the plants are up to 30 historic period old whereas some are as sunrise(prenominal) as only 5 years old, however, there seems to be no remuneration for this is the targets set by the company. It st ands to reason that 30 years old technology is much more likely to breakdown, be more costly to maintain, and be less efficient than 5 year old technology.Therefore, the quotas and maximum output of each plant should be heavily related to how recent the plant and the technology is, presuming the staff are of as skilled between the plants. Therefore, plant managers need to work more closely with market departments because they will be able to work out what targets are suitable for each plant rather than a one size fits all quota system which at present, isnt working particularly effectively. These untried targets could be achieved through an initial meeting and assessment of the factory and review meetings every month to make sure the targets are being met.The current budgeting system is exceedingly primitive. The departmental managers review figures from the previous year and add on a few because they assume the efficiency has increased and the staff should have gotten better a t their jobs. Whether these wholesale statements have some truth or not, it is obvious Grand Jean need to have a more particular(prenominal) budgeting and planning strategy. Using a more realistic budgeting system with more broaden would occasion actual learning curves instead of artificial, fixed ones.Due to more flexible targets and unique(predicate) selective nurture from each individual plant capacities being used, coupled with the prospect of being rewarded for going over quota production, there should no longer be any need to hoard safety stock in order to meet targets later on in the year. Conclusion To conclude, it can be said that current affairs at Grand Jean Company are rigid and outdated, specifically in the areas of assure relationships, internal communication, budgeting, and reward systems. Our paper has describe and explained the main issues at hand, and provided possible solutions to these problems as well.With these fixes in place, we as a group feel that Gr and Jean could greatly improve its way of doing business. Mini Case Study 5-2 North Country Auto, Inc. It is prevalent that in North Country Auto, Inc. (NCA) the snap off business units interlaced more as independent companies than subdivisions within a company. The business units managers themselves were aware of the problematic dilemma that the focus on their own profitability caused to the overall result of the company even being full aware that there were recurring situations that would have benefited the company had one department judge a lower profit.The company lacks goal congruence between its business units, and Mr. Liddys endorsement of the current company social system doesnt do anything to remedy the current friction. Instead of focusing on activities that create true value towards its customers, the company is move in accounting activities that do null to remedy the lack of goal congruence. We think Mr. Liddy should abandon the current grammatical construction fo r the new motorcar-, used car- and service department, and instead structure it up with main business units, new and used car sales as one and body shop as the second one, with the service- and parts department run as support.The new and used car sales and body shop would operate as profit centres with the service- and parts unit operating as an expense centre. To create goal congruence within the company, the department performance dependant bonuses should be removed. Instead NCA should implement a two tiered bonus program, the companys performance should account for the larger part of the bonus program, to make sure that the department managers arent only thinking of their own performance.A jot would be to have a 20% department dependant and 80% company dependant bonus system. This would still allow a department with excellent performance to get a good reward for their above standard performance. This would increase the luck that the now different departments strive to work tog ether to keep overall sugar up and overall expenses down. Such a reward system would shift the personnels focus on the companys bestow performance.The company should implement on one unified IT-system to make it easier to share information and hence promote inter departmental communications, thereby increasing the possibility of achieving synergism effects from the collective knowledge within the organisation. Restructuring the workflow, IT-systems and organisational structure itself wont achieve any official effects, if the employees and managers themselves dont embrace the new organisational structure, the whole reform will just end up being a new organization on paper.Hence why Mr. Liddy will have to be prompt to put in considerable perspiration to show that top management is livelihood the new organisation that we propose. While it is possible to estimate a time frame for implementing a new workflow and information system, it is more difficult to estimate a time frame for when peoples behaviour will actually change. Without a change in behaviour, there is very a low possibility to gain any synergy effects from the new organisational structure.To implement this new organisation we propose a twin multistage process this requires top management to work on designing a new workflow, information system, organisational structure. And educate and involve department managers and employees to gain support for the new organisation to secure a working implementation. Bibliography Anthony, R. N. Govindarajan, V. (2007). circumspection CONTROL SYSTEMS. 12th Edition. Net MBA website. Online Consulted on the 12-11-2012. URL http//www. netmba. com/mgmt/scientific/ Appendix final cause for new organisational structure for NCA.