VERSHIRE COMPANY ANALYSIS
MANAGEMENT CONTROL SYSTEM
Vershire Company has several division and one of the largest one is the alumunium can division. This division is one of the biggest can manufacturers in United States. However, the market characteristics in which the customers loyalti is low and entry barriers does too. One of the Vershire’s strategies is to have lean production system along with tight control over their plants,budgets, and performance to have process efficiency. There are several strengths and weaknesses in Vershire’s planning and control system.
Strengths | Weaknessess |
* The divisional managers are required to make 5 years-expenditures and two years-market forecast in order to be able to predict the future decisions and goals. * Between corporate controllers, divisional managers, and plant managers have ...view middle of the document...
* The forecasting method for all divisions is similar. * The incentive measurement is not efficient since it is measured by profit target. * Less corporation between manufacturer managers and marketing managers. |
It is clear that plant managers should be responsible for profits unders several circumstances as follows:
a. There should be correlation between plant managers and sales managers. Sales managers are the ones who are responsible to pricing, sales mix, and customers relation. To boost the profit maximally, they should work together.
b. Since corporate controller visit the plant managers, plant managers can give insight toward what happen in the market. This can help the corporate level to arrange the profit target reasonable.
c. The company has the incentive program for plant managers for those who has high profit performance
In exhibit 2,the Velshire management focus on profit. However, it is the responsibility of plant managers to drive the sales in order to reach the targeted profit. Commonly, the plant managers is responsible on how to make production system work efficiently and effectively. The one who is responsible for profit and sales is sales manager. Thus, the performance evaluation system in exhibit 2 can not work properly since the plant managers cannot control sales.
Further, in exhibit 3, plant managers only have the ability to control what cost to produce. Meanwhile, the performance mechanisms are being made similarly between one to another. This would create bias in analyze the work performance.
In order to maximize the company performance and win the market competition, there are several steps can be taken:
a. More open communication among corporate managers and division managers in terms of formulating the upcoming year’s budget.
b. Create doted line between marketing managers and manufaturers managers so there will be direct communication among them.
c. The incentives program should not only focus to profit only but other factors such as production efficiency progress.