Aloha Products Essay

Q1. Evaluate the current manoeuver systems for the manufacturing, market and get sections of ciao Products.Solution From the case we can see that Aloha products is structured on a cost instauration however the control system is attempting to none to each one limit on a profit basis. thus the keep comp each fork over a aboriginalized control system. This means that the main component takes all the main decisions regarding purchases, production, sales, marketing and advancements in order to save cost. moreover, the fix managers argon responsible for their profit and loss and ar labeld on the basis of their exercise despite lack of adequate control all over the activities by managers of the managed go d give. This type of structure is an unfair way of measuring the performance of the respective(prenominal) production localises.Based on the current system evaluating the deuce-ace major(ip) departments of Aloha Products are described below valuation of manufacturi ng departments There are tierce production plants within APs manufacturing department each 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 iniquity president of the manufacturing oversees all of the roasting, grinding, and packaging processes. Production schedules are provided to each plant manager for the current and following month. The plant managers also have no control over the verdancy beans purchase, production schedule, production mix, or the be of their inputs, as the acquire departing assigns the costs ground on specific quash for that shipment. If the inputs exceeded plants requirements, they are sold at the cutaneous senses regularise in the market, and could very well result in a loss.Evaluation of purchasing departments The purchasing department is responsible for obtaining the inevitable quantities and types of common coffee ber ry to be roasted in production plants. The level of sophistication and expertness needed makes this department a necessity proper staffing is vital establish on the complexity of the common coffee market. This department relies on the relationships with growers and brokers for littler firms, an important feature of this department is their ability to foresee demand and required inventory and subsequently entered into forward contracts with brokers anywhere mingled with three to 12 months in advance.The costs of each shipment are based on specific contracts for those green coffee beans, which can vary based on the various bell drivers as mentioned earlier. This can create diversified and erratic costs of inventory. Required inventory demand is based on conference amid marketing (sales) and the purchasing department, any discrepancies at the current find out is met by the purchases through the spot market, which incurs significantly higher costs. The costs associated with run way this purchasing department are charged to headquarters of AP. Currently at that place is no communication among purchasing and manufacturing department. Furthermore, purchasing department does non need to report to head office or meet any performance measurement hackneyeds. Ultimately power resides with upper direction of the purchasing unit.Evaluation of marketing (sales) departments Under the current structure, this department is centralized. The president of AP and guilt president of sales are in charge of advertising and promotion of the final products. The marketing department also determines the budgeted sales, which are then 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 right and effective communication among the three departments and providing key measures to evaluate t he managers performance objectively. 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 whole 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 accountable for the costs incurred to roast and package the green coffee. The performance measure for the manufacturing department at AP should be evaluated based solely 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 marketing testament not be transferred to the manufacturing department in this proposal, i t is logical to measure out based on controllable factors such as cost/ punt only when. 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 standard. It will still be possible 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 established 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 submission into. The purchasing departments main concern should be genuine contract costs. Thus, we recommend that the purchasing department be accountable for the disparity between the veritable costs per signed contracts and standard costs of green coffee raw materials. The actual costs should be measured 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 cost 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 faithful 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 th e forecasted requirements and actual requirements. 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 method of accountability for this department. The goal here is not only to hold each conference accountable but also to make sure managers feel they are being evaluated fairly and motivated to improve performance. In guardianship 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 congruence 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 amplification the goal congruence and communication, the department should also be evaluated based on the overall measure for the firm. This measure could be Economic Value 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 apostrophize 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.