Case solution

Topics: Forward contract, Control theory, Management Pages: 5 (1658 words) Published: January 22, 2014
Aloha products
Aloha Products is a United States-based coffee-processor company that has been providing non-specialty and low-priced coffee for over a hundred years. It purchases the raw materials or what buyers and sellers refer to as “green coffee” from brokers and trade firms then processes the coffee and sells the final product to customers. Large companies such as Nestle and P&G directly import the unprocessed or green coffee beans from coffee plantations in tropical countries such as Brazil and Colombia while companies with smaller levels of business such as such as Aloha buy the green coffee beans from brokers or trade firms. Aloha Products is managed by the owners and its headquarters is located in Ohio, United States. It has three plants located in Midwestern United States, each plant being responsible for its own profit and loss. Each plants performance is measured by each plant managers gross margin generated per plant. The raw materials or green coffee beans are handled by the company’s purchasing unit that is located in New York City. Each plant receives a production schedule that is determined from the center and receives raw materials as well as pay in accordance with the production requirements of each plant. Aloha’s Top management is regulated by the members of the founding family. Company uses centralized control system where all main decisions regarding purchases, production, sales, marketing and promotion are made on corporate level while plant managers are only responsible for their profit and loss. Also there is centralized preparation of overall financial statement at home offices. This organization has led plant managers to a lack of adequate control over the activities of the managed plant; however, they are still assessed on the performance. This method has been done until in the 1990s, when the plant managers started to speak out on their dissatisfaction on the computation of their bonuses since they do not have authority to determine the prices of raw materials, production schedules and output prices from the manufacturer. External factors such as the steady decline in Americans consumption of coffee from 1965 to 1990 affected the sales and profits of coffee processors as well. Because of this, the company president hired a consulting firm to evaluate the current control systems in the three major departments: Plant Operations, Sales and Marketing and the Purchasing groups. 2. Case Question No-1: Evaluate the current control systems for the manufacturing, marketing, and purchasing departments of Aloha Products Answer is: From the case we can see that Aloha products have a centralized control system. What this means is that the main office or headquarters handled the purchasing, marketing and sales activities of each of the three plants. Based on the current control system evaluating three major departments of Aloha Products are described as follows…… Evaluation of Manufacturing Departments: There are three production plants within AP’s manufacturing department; each plant is responsible for their own profits and losses. Unfortunately, the managers have no control over the any of the major activities in their respective production facilities. the vice president of 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 green beans purchase, production schedule, production mix, or the costs of their inputs, as the purchasing department assigns the costs based on the specific contract for that shipment. If the inputs exceed the plant’s requirements, they are sold at the spot rate in the market, and could very well result in a loss. Evaluation of Purchasing Departments: The purchasing department is responsible for obtaining the required quantities and types of green coffee to be roasted in the production plants. The level of...
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