Case Study - Grand Jean Company

8/10/2019 Case Study - Grand Jean Company

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Presenting A Case Study for

MANAGEMENT PLANNING & CONTROL SYSTEM

Submitted to Faculty of Management Studies

Masters in Business Administration

(Faculty of Management Studies)

2012 - 2015

Submitted to: Submitted by:

Dr. Rakesh.Manocha Hoshang Bhesania (07)

Zulfiqar Vohra (40)

Mihir Yadav (42)

Jemin Shah (24)


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Case Overview: Case of Mr.. Wicks a VP who is an Overgrown Plant Manager


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Contents

*An Introduction of Grand Jean Company

*Questions-Answers


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*The Grand Jean Company was founded in the mid-19 the

century.

*It had been a market leader : Jeans and casual pants.

*By 1989 it was one of the worlds largest clothingmanufacturers.

*The company owned 25 manufacturing plants.

*Plants average output capacity was 20,000 pairs of pants per

week.*Company had 20 contractors for jeans production.

*


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*

President

Vice President(Marketing)

Basic JeansDepartment

Boys JeansDepartment

Mans CasualDepartment

Mans Dress& Fashion

Jeans Dept.

WomansJeans

Department

Vice President (

Corporate Planning)

Vice President

(Finance & Administration)

Vice President

(Production & Operations)

DistributionDepartment

TrafficDepartment

Plants

(25)


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* Increase profitability and increase sales

* Improve Plants production capacity

* Keep all plants at peak efficiency

*Fast production and savings of time, efforts and cost -- No!

*Marketing divisions is treated as a Revenue center (Profit center) and so

the goal of it is to maximize revenue and sell.

* Company total productions forecasts estimates on basis of Marketing

divisions forecasts.

*Manufacturing plants have the goal to just meet the budget figure (accordingto marketing) and fulfill the quota allocated to each plant.

*Meet the standard labour or production hours

* Plant Managers community relations should be good

* Employee happy

*Goal of the Company- are these same as goals of Plants Managers and

Marketing Organization?


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7

*Evaluation current management planning and control system (Strength& Weakness

Strengths

* The company has 25 manufacturing plants and 20 contractors, so it has huge

production capacity.

* Strong sales history

*Very strong marketing department- It has 5 marketing divisions

* Company has implemented time and motion studies, developed learning

curves

Weaknesses

* Focus solely on Sales.

*Weak organization structure and lack of communication between different

departments

* Production forecast estimates on marketing performance benchmark- The

manufacturing plant will not get anything if they do so much production.

*The reward system is not good. The people who work at headquarters aregetting higher rating for their performance than the plant managers.


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Weaknesses (Cont..)*Standard hours calculation were done on same scale for new

and old machinery plants. Hence the results were not accurate.

*Relatively ineffective in corporation level, Vice president wants

to run his principles in other plants also.

*There is lack of staff for some departments as they continue to

maintain 11:1 supervision ration to achieve leadership

excellence.

*Complicated production schedules due to mid-year changes in

pant needs provided by marketing department.


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* The manufacturing plants have the goal to just meet the budget figure

and fulfill the quota allocated to each plant.3

* There is no inventive to the manufacturing plants to exceed production.

Agree!

* It would be good idea to convert the manufacturing plants to a profit

center as that would increase profitability

* There is no immediate monetary reward to compensate by increasing

responsibilities or requirements, so they are not motivated to achieve

higher efficiency.

* Plants need to be competitive in market because there is a lot domestic

and foreign competition.

*Recommended Plants Be Operated as Profit Centers Recommendationof One Plant Manager


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*Using selling price recorded by Grand Jeans sales personnel for pants sold

to retailer and distributer will not leave the sales department with any

margin.

* The Sales department would not earn any profits. Hence it is not a

feasible option.

* Every department needs to generate revenue for its sustenance.

* Also, the sales department is already getting their products manufactured

from 20 other outside suppliers for almost 5 years now.

* If the manufacturing plants would charge the mat the price at which they

are selling to retailers and distributors, then the sales department would

switch to the external suppliers for supply at a lower cost and will not

continue with this system.

*

Alternative 1 Use the selling price recorded by Grand Jeans salespersonnel for pants sold to retailers and distributors.


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* Also, if the manufacturing department thinks of selling their products to

the outside market even then they will have to reduce their price to the

market price.

* So, considering both the points that are mentioned above using selling

price recorded by Grand Jeans sales personnel for pants sold to retailers

and distributors, it will not do any good either to the manufacturing or to

company as a whole.

* Alternative 1 Use the selling price recorded by Grand Jeans sales

personnel for pants sold to retailers and distributors. (Cont...)


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*Using full standard manufacturing cost per unit plus a fair fixed percentage

mark-up for gross profit means manufacturing unit calculates the per unit

cost of manufacturing and add a predefined Fair Profit percentage to it to

arrive at the transfer price.* This method has the advantage that there is incentive for the manufacturing

department to do well and to increase efficiency.

* There is a fixed percentage of the cost that the manufacturing unit will

charge over and above the cost and that will be its gross profit. So, for

every unit they produce and sell they get profit for it.

* This profit will make them workharder and attain more efficiency.

* Also as a profit center even if they produce more than what is their own

companies requirement they may sell it to the market as contracted

manufacturers and earn further profit as a Fair percentage of cost.

* Alternative 2 Use full standard manufacturing cost per unit plus a fair

fixed percentage mark-up for gross profit


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* But in this case there is nothing motivating for the employees to focus on

keeping on cost of production as low as possible.

*The employees should try their level best to keep the cost as low as possibleand competitive.

*Hence, this alternative has several advantages of motivation, but cost factor

needs to be taken care of.

* Alternative 2 Use full standard manufacturing cost per unit plus a fair

fixed percentage mark-up for gross profit (Cont)


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* If we consider the option of the average contract price that Grand Jeans is

paying to outside companies to get its product made that would give them

the price range with very little margin to work with as the bargaining power

of Grand Jeans is pretty high.

*Hence, this may lead to reduction in the quality so as to maintain a fair

margin for themselves.

* This may in turn lead to increased number of rejections at the customer end

and may lead to reduction in brand value and loss of market share to the

company.

* Alternative 3 Use the average contract price Grand Jean paid outside

companies for making similar pant types.


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* Considering the three alternatives given to us the best one would be the cost

plus fixed margin (Alternative 2).

*All other options dont fit well in the situation of Grand Jeans.

*Moreover, the manager of manufacturing and sales may sit down and

negotiate and reach at a consensus.

* This price could be between the cost plus margin price and selling price of

the sales department.

* At this price the sales department will have sufficient margin as well asmanufacturing department will have good incentives to do well.

*

Evaluation of above three alternatives. Along with the recommendation

and selection of either of the alternative


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Case Study - Grand Jean Company

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