Aloha Products Essay

Q1. Evaluate the certain avow ashess for the manufacturing, merchandising and get subdivisions of Aloha Products.Solution From the case we can see that Aloha products is structure on a represent basis however the control system is attempting to measure apiece plant on a put on basis. consequently the company suck in a centralized control system. This means that the principal(prenominal) office takes all the main decisions regarding purchases, deed, sales, merchandising and promotions in nine to barely cost. However, the plant managers are responsible for their profit and loss and are evaluated on the basis of their execution of instrument despite lack of adequate control over the activities by managers of the managed plant. This type of structure is an unfair way of measuring the performance of the individual production plants.Based on the true system evaluating the trinitysome major incisions of Aloha Products are described belowEvaluation of manufacturing depa rtments there are three production plants within APs manufacturing department from to apiece one one plant is responsible for their own profits and losses. Unfortunately the managers have no control over any of the major activities in their respective production facilities the vice chairman of the manufacturing oversees all of the jointing, grinding, and packaging processes. Production schedules are go forthd to each plant manager for the current and following month. The plant managers also have no control over the fleeceables beans purchase, production schedule, production mix, or the be of their inputs, as the buying departing assigns the cost establish on specialized father for that shipment. If the inputs exceeded plants requirements, they are sold at the placement rate in the market, and could very well result in a loss.Evaluation of purchase departments The purchasing department is responsible for obtaining the required quantities and types of jet cocoa to be r oasted in production plants. The level of ordinariness and expertise needed makes this department a necessity proper staffing is brisk ground on the complexity of the green coffee market. This department relies on the relationships with growers and brokers for smaller firms, an important feature of this department is their ability to foresee take on and required inventory and subsequently entered into forward contracts with brokers anywhere between three to twelve months in advance.The be of each shipment are found on specific contracts for those green coffee beans, which can vary based on the various price drivers as mentioned earlier. This can create alter and volatile cost of inventory. Required inventory demand is based on talk between marketing (sales) and the purchasing department, any discrepancies at the current date is met by the purchases through the tip market, which incurs significantly higher cost. The cost associated with running this purchasing department are supercharged to headquarters of AP. presently there is no conversation between purchasing and manufacturing department. Furthermore, purchasing department does not need to report to head office or converge any performance measurement stocks. Ultimately power resides with upper wariness of the purchasing unit.Evaluation of marketing (sales) departments Under the current structure, this department is centralized. The president of AP and vice president of sales are in charge of advertising and promotion of the final products. The marketing department also determines the budgeted sales, which are thus passed onto purchasing department.Q2. Considering the companys competitive strategy, what changes, if any would you make to the control systems for the three departments?SolutionThe changes to the current control systems involves establishing accountability and effective communication among the three departments and providing key measures to evaluate the managers performance objec tively. Recommendations for the current management control systems are as follows Recommendations for manufacturing departmentsThe manufacturing department is currently profit centre. However, the plants do not have control over the costs of the green coffee. thus the main concern of this department as a integral should be efficiency how well they can control the costs to roast green coffee. As such, here the recommendation would be to make manufacturing departments plants be responsible for the costs incurred to roast and package the green coffee. The performance measure for the manufacturing department at AP should be evaluated based completely on the roasting, grinding, and packaging of APs coffees. It would be unfair to evaluate manufacturing as a profit centre, when in reality it has little to no control over product costs or sales.Since control over purchasing and selling will not be transferred to the manufacturing department in this proposal, it is pellucid to assess ba sed on controllable factors such as cost/pound only. Thus instead of being assessed for the performance of the purchasing and marketing departments, plant managers will now have the incentive to ensure their costs do not vary from the precedent. It will still be come-at-able to evaluate roasting plants based on gross margin as well. However to ensure the plant managers are not penalized for the fluctuations in the costs of green coffee contracts, a standard cost for green coffee would have to found and used in the computation of gross margin. Recommendations for purchasing departmentsThe purchasing departments costs are being charged to central office. Due to this the purchasing department is not being held accountable for the contracts it is entering into. The purchasing departments main concern should be actual contract costs. Thus, we recommend that the purchasing department be accountable for the difference between the actual costs per signed contracts and standard costs of g reen coffee raw materials. The actual costs should be metrical in a similar manner to the current practice. Contract costs related to buying and selling in the spot market should not be included in the computed price per bag. A reasonable standard costing for the green coffee contracts will have to be established based on discussions between management and executives in the purchasing department. The standard costs could potentially be based on the average of spot price over past 6 months. Thus, the recommendation here would be that this standard cost be updated every quarter, in order to provide accurate standard costs of green coffee raw materials. Recommendations for marketing (sales) departmentsThe marketing department focuses its efforts on advertising and promotion, however, it is not held responsible for the costs it incurs or how accurate their sales forecasts/budgets are. There is a large costs associated with differences between the forecasted requirements and actual requ irements. The difference results in the purchases or sales at the spot price for the green coffee, which tends to costs more than the forward contract prices. It is not reasonable for the marketing department to perfectly forecasts sales and therefore there should be leniency in developing a regularity of accountability for this department. The goal here is not only to hold each group accountable plainly also to make sure managers pure tone they are being evaluated fairly and motivated to improve performance. In charge with this actual sales volume should be compared to forecasted sales volume.This will not only help to keep the marketing department accountable for their activities but will also allow the forecasts methodology to be reviewed and continuously improve. Thus on an overall basis, the company needs to establish goal congruity between the three departments. This can be achieved through emphasizing communication between departments this would encourage the forecasts of purchases/sales to be more accurate. In order to increase the goal congruence and communication, the department should also be evaluated based on the overall measure for the firm. This measure could be Economic appreciate added (EVA) as when it is applied, managers will not just be focussed on their own departments profitability but also that of company as a whole. The EVA approach promotes the same profit objectives across different departments. Thus by keeping the same structural organizations and only changing the way each department is evaluated, the incentive plan for each department more accurately reflects what each department can control.