Coors is a family owned business in the beer industry offering 16 different kinds of beers in the US market. Coors has 3 production plants in the US with its Colorado plant being the largest brewery in the world and serving 70% of the US market. Coors has implemented a supply chain management (SCM) software solution from the Computer Integrated Logistics (CIL) project to solve urgent problems in the logistical area such as meeting seasonal demand, surges from promotion and introducing new brands each year. Other issues addressed by the CIL project were filling routine customer orders, filling rush orders and shipping beer to distributors before it was spoiled. The project’s objective was to increase the company’s profitability by reducing cycle times and operation costs while increasing customer satisfaction. The CIL project was followed by the implementation project of a Balanced scorecard (BSC) to maintain CIL’s standards and to focus on continuous improvement, learning to enhance performance and rewarding employees for increased productivity.
The traditional cost based performance measures which were developed from the benchmarking data during the CIL project had failed to achieve the desired targets and resulted in performance gaps. Moreover, the unit costs per barrel of beer were still higher than the competitors’. The challenge for the BSC project was to translate Coors’s business strategy into operational and performance-related measures.
During a benchmarking process, higher unit costs per barrel of beer were identified for Coors compared to its two main competitors Anheuser-Busch and Miller (Appendix-Exhibit 1). Exhibit 2 identifies gaps in operational measures (load scheduling, load accuracy and production stability) comparing the results of the CIL projects against targets set by management. We identified some possible causes for these performance gaps as follows: *
Lack of training and knowledge about new processes and use of new technology leads to issues in planning and less productivity. *
The load scheduling performance measure depends on forecasting accuracy. There is a trade-off between filling rush orders and precise forecasting of the production schedule. High unexpected fluctuations in the number and type of orders will lower the load scheduling performance. * Suppliers rely on accurate forecasts so the right amount of raw materials is delivered at the right time. If final production plan differs greatly from forecasts then this might lead to shortage of raw materials which in turn affects all performance measures. * Quality problems during the production process which will later affect all the performance measures might be a possible cause. * Maintenance of equipment is important for effective production since machine breakdowns and equipment issues affect production stability performance measure as well as load scheduling.
From a change management perspective, it is very important that all open questions are answered and addressed to ensure the success of the BSC project. Main areas of concerns for the employees are that the actions assessed by the BSC performance measures are under their control. Furthermore, it is important that the BSC evolves with changes in the production reality and offers employee participation in feedback process. Detailed answers to the concerns of the employees related to BSC project, can be found in the FAQ’s in Appendix.
In order to breakdown the overall goal of increased profitability, Coors needs to design new performance measures for the BSC project. A BSC measures an organization’s performance from four key perspectives: (1) financial, (2) customer, (3) internal business process and (4) learning and growth. Reducing cycle times and operating costs can be addressed by developing measures focusing on the internal perspective as well as the learning & growth perspective. Increased customer satisfaction can be addressed by identifying...
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