Alex Rogo has been a plant manager for the last six months at Unico, a nationwide manufacturing firm. One morning, Bill Peach, the division vice-president arrived early at the plant to enquire about the status of an order from Bucky Burnside, a customer of the firm. That order being seven weeks late was just the tip of a bigger problem inherent not only to the manufacturing plant but to the entire division. Indeed, every order was late in the plant and the division was facing the worst losses in its history. They later discovered that Burnside’s order was late because of some missing sub-assembly parts. While Alex was blaming their timing problems on the second round of layoffs that took place three months earlier, Bill thought that the plant …show more content…
In order to control several factors which exist in the plant, they have to change the way they think about production capacity. A capacity of a resource cannot be measured in isolation. They realized that they should try to optimize the whole system. They then decided to call Jonas again to help identify the next step. Jonas told them that the next step would be to distinguish between two types of resources: the bottleneck resources and the non-bottleneck resources. A bottleneck resource is any resource whose capacity is equal to or less than the demand placed upon it whereas a non-bottleneck is defined as any resource whose capacity is greater than the demand placed on it. The first of nine rules that express the relationships between bottlenecks and non-bottlenecks and how the plant should be managed is balance flow, not capacity. They shouldn’t balance capacity with demand but rather, balance the flow of product through the plant with demand from the market. The bottleneck determines the effective capacity of the plant. With 10 weeks left before the deadline given by Bill Peach, they now must find the bottlenecks. Bob decided to list the areas he thought were short in capacity based …show more content…
Al’s performance resulted to the division recording its first operating profit of the year. However, Bill Peach was not letting them off the hook yet. He was asking for more good months otherwise he would go forward with the recommendation to close the plant. He specifically asked for 15% more on the bottom line than they did that month. On the phone with Jonas, the latter suggested that cutting batch sizes in half would reduce the amount of cash tied up at any one time and would ease pressure on cash flow. They have been setting batch sizes according to the Economical Batch Quantity formula; formula with flawed assumptions. If they cut the batch sizes, the total lead time would condense and customers would get their orders faster. They would be able to respond to the market faster and get an advantage in the marketplace which would result in more customers hence more sales. He applied that measure to another Bucky Burnside order which resulted in Bucky Burnside’s so satisfied that he paid a visit to the plant to congratulate the workers. Al thought that the measurements didn’t reflect their performance so with Lou, they decided to change the base of certain measures from the standard without the headquarters knowing about it. However, an audit team sent at the plant soon noticed that the base had been
James Leroy, the company’s sole owner is disappointed in the performance of his company as he intended to present the first quarter financial statements to the bank to acquire a $1 million loan to expand the company. Upon review of the statements it is explained by Mr. Leroy’s accountant Marcus Sims that the cost of company overhead doubled compared to the previous year due to a rise in rent, utilities, and repairs and maintenance of machinery causing the unexpected reduction in net profit.
Rocket-Blast, LLC, a beverage maker, has seen its profit margins reduced which presents a real problem for the company going forward (Precord & Macdonald, nd). Management has decided that operating costs must be reduced in order to increase profit margins to
By lowering selling prices across the board, Opossumtown, Inc. reduced its inventory turnover ratio, cutting the number of days to sell inventory from 174 days to 104 days; that is a 40% improvement. Opossumtown, Inc. also cut the number of days it takes to collect its credit accounts from 68 to 44 days, again that is 35% better than the previous year. The company is able to do this while cutting its debt ratio by 10% and increasing its current ratio by 25%, making it appear more favorable in terms of liquidity. As promising as this may look, this is not the whole picture. Opossumtown, Inc. shows an 11% decline in gross profit as well as operating income ratios, and a 3% decrease on the profit margin ratio. The decline of these ratios is a result of the company’s new strategy of decreasing the selling price and increasing its marketing and selling expenses. Opossumtown, Inc. made some noteworthy advancements with the implementation of its new plan for 2014. However, based on the assessment of the balance sheet, income statement and the ratios, the corporation did not achieve its goal to increase operating income by 6% and net income by 4%. Opossumtown, Inc. was only able to grow its operating income by a little more than half of one percent and net income by
Andy also needs to analyze how this data has impacted his company. To do so, Andy needs input from his quality and sales departments so he calls a meeting where he shares his data. Andy learns that a recent sales order was cancelled over no product being in stock, and that the quality issues have forced detailed inspections of each item delivered by AWI, which has led to a high amount of overtime. Andy asks these department managers to use the “Cause and Effect” method to determine the dollar value of loss from these issues. This will allow Andy to see how each cause (delivery and quality) lead to a monetary impact to
Particulars The Hershey Tootsie Rolls Net sales (A) $ 5,671,009 $ 528,369 Beginning receivable $ 390,061 $ 41,895 Ending receivable $ 410,390 $ 37,394 Average receivable (B) $ 400,226 $ 39,645 Account receivable turnover C = (A/B) 14.17 13.33 Average collection period 365/C 25.76 27.39 As can be seen from the above, the table shows that both The Hershey and Tootsie Rolls companies have very low receivable periods due to the nature of the industry and also reflects the efficient cash management and receivable management on the part of both the companies.
A. Define the Problem Natureview Farm, Inc. (Natureview), a small yogurt company founded in 1989, produces and markets yogurt using natural ingredients and a distinct manufacturing method that yields a smooth, creamy texture without adding artificial thickeners. As a result of this emphasis on natural ingredients, the brand has established a reputation for high quality, great tasting yogurt and is the leading natural foods brand of refrigerated yogurt. Natureview’s yogurts – available in twelve flavors in 8-ounce cups, four flavors in 32-ounce cups, and multi-pack yogurt products – are distributed nationally and the company shares leadership in the natural food channel. In 1999, the company’s revenues grew from $100,000 to $13 million; however, despite Natureview’s success and well-established brand, the company has long battled to preserve a steady level of profitability. In 1996, Jim Wagner was hired as chief financial officer and was able to successfully achieve steady profitability for the company.
One of the key issues faced by McGraw is that there is a large gap between his projections for next year, and what the manager’s are promising him . His goal is to obtain a 15% increase in the operating income from his division (OM, LR and NP). The managers are projecting a decrease of 5.2% from the current year. In absolute terms there is a gap of $27 MM in the projected divisions operating income.
Alex is the Plant Manager of a division of Unico, which is a rather loss making plant, and having a lot of trouble mainly as far as its with its productivity and meeting with the deadlines was concerned.
In John Kotter’s article, the first error mentioned I believe is one of the most important of all the steps. Not establishing a great enough sense of urgency is a very common error. Without this, a company usually has no idea how it has already started the failure process. In the reference to the NEWC, Gregory Peck’s character Andrew "Jorgy" Jorgenson is the benevolent and folksy leader who is very near and dear to the small Rhode Island company. He is in a sense the hometown hero. Even his nickname, Jorgy, shows the affection that the workers established and personal relationship they with their boss. From his speech, it is clear that he and everyone else knew NEWC was in trouble financially. During Jorgenson’s appeal to the shareholder, he spoke as a friend and not as the leader of the company.
Don Bradish was recently hired to fix scheduling issues with the new company in which he works, The Fitzgerald Machine Company. There are a few relevant facts that were given in this case study. The first and foremost fact is Mr. Bradish was hired because the company is having issue with their scheduling. This is important because he comes in with a relevant degree and years of experience with a reputable company. He is going to be looked for to find a solution to the issue outlined in the case study. The second relevant fact in the case study is that the company that The Fitzgerald Machine Company is working with is having labor issues. This is considerable because the $300,000 order is a considerably large
The 3 percent decline in sales causing a 21 percent decline in profits can be attributed to the identification of the accounting concept of operating leverage. Operating leverage is what business managers apply to boost small changes in revenue into sizable changes in profitability. Fixed cost is the force managers use to attain disproportionate changes between revenue and profitability. Therefore, when all costs are fixed every sales dollar contributes one dollar toward the potential profitability of a project. Once sales dollars cover fixed costs, each additional sales dollar represents pure profit. A small change in sales volume can significantly affect profitability (Edmonds, Tsay, & Olds, 2011). So, therefore, if sales volume increases,
Another lesson of the game materialized gradually at first, but steadily became more and more evident with each round of play. This lesson was the demonstration of the overwhelming ineffectiveness and utter futility of approaching logistics from the position of total ignorance. With no forecast or sales history to serve as a guide or predictive tool, the participating supply elements simply had nothing to base their projected order quantities upon other than pure conjecture. Operating in a vacuum relative to the other players of the supply chain was nothing less than counterproductive. Closely related was the development of a subdued, but underlying, sense of hostility within the supply chain as orders were placed that didn’t correspond with anticipated amounts. When this type of communication breakdown exists in the real world, an irritation between supply elements invariably manifests itself. Additionally, the resulting waste of time, material, storing of inventory and other resources expenses further fuel the fires of frustration and discord between supply elements.
During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Harry Davis’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task.
Climate change is one of the most common problems faced by the world, climate change happens when the greenhouse gases level increases. The reason of climate change can be divided into two which are natural causes and human activity. Some Natural causes consists of volcanic eruptions, changes in the sun, and asteroids. However, examples of human activities are: smoking, burning fossil fuels to get electricity, and driving vehicles. People can reduce climate change by using public transport, reducing smoking, and replace normal lights with compact fluorescent bulbs. All of these changes also have impact on economy and business. This essay will examine potential economic effects of climate change on 4 industries namely : health, commercial fishing, tourism, and agriculture. It will also discuss ways in which economy might adapt to these problems. Health care sector adapt by offering more medicine and doctors, commercial fishing can adapt by making fish storage and using sustainable industry,agricultural industry adapts to the problem by putting the animals in thermal zone, however in tourism industry
According to Slack et. al. (2001) the best mechanism for running a business is to match level of demand (goods, services that customers need) with supply of capacity (recourses, labor force that the business inputs in the production process). They also define capacity as “the maximum level of value –added activity over a period of time”. Thus three main factors come into force here – the capacity of resources and labor force, the process operation which itself leads to satisfying customers through matching demand. It is very important to plan and coordinate all 3 factors very effectively because a difference in capacity and performance easily affects: costs, revenues, working capital, flexibility, quality of goods, speed of response and others.