Cover page 1
Introduction of Report . 3
Main body of Report …. 3
Order management .. 4
Unplanned orders 5
Employee Management 6
Cost tracking, cost allocation and pricing . 7
Conclusion and Recommendations . 8
Signed …. 8
Accessing CoolSchool and Scrubs Companies
Introduction: I was asked by the managing director to write a report regarding the merger of CoolSchool and Scrubs plc and identify the differences between the important operations of companies which are performed in different ways and suggestions.
This report has described the advantages of merger between the CoolSchool and Scrubs plc Companies. Moreover, the main issues such as, inventory management, employment and salaries structures, motivation of employees, order management, unplanned orders, pricing and allocation of overhead costs are discussed in details. The recommendations of these conflicts are also given in the report.
The merger between two corporations or the businesses play an important role in the enhancement of the businesses. However, it is very important to state that the merger must comply or adopt the working standards and organizational structure of another organization effectively and quickly to maximize the profits of the business. In the current scenario, the two organizations CoolSchool and Scrubs plc are planning the merger to give strength to each other in the difficult economy environment. The main advantage for both organizations is that the CoolSchool and the Scrub plc are performing their businesses in the same sector. However, the main issue for the management of CoolSchool and Scrubs plc is the way and methods they use at the operational level of the business. Therefore, followings are the few potential threads or risks associated with the operational operations of the CoolSchool and Scrubs plc after the successful merger. Moreover, the appropriate suggestions are also discussed accordingly. (Phair-Sutherland and Turner, 2003)
The order management of the CoolSchool Company is based on the past data. In these circumstances, it is highly probable that the CoolSchool will produce wrong number of school uniforms. Moreover, the excessive amount of the production is placed in the stores or warehouse of the business which is increasing the holding cost of the business. Furthermore, it is uncertain that the color and the symbols of the schools will remain same for the next year. Therefore, the over production of the uniforms can cause loses to the CoolSchool. These business risks must be resolved before or immediately after the merger with the Scrubs plc because the method of Scrub plc regarding the number of production level is more accurate. Scrubs plc use the exact amount of products required by their customers and produce their products according to the actual amount required. This tactic of Scrubs plc assists the business to reduce their expenses in terms of holding cost and over production of the goods. (Hill and Weiner, 2008)
Therefore, in these circumstances, the management of the CoolSchool must contact their customers in timely manners to collect the estimated amount of uniforms required by the schools and start production accordingly. Moreover, another option for the CoolSchool is to produce a specific portion of the demand before receiving the actual order and then use the machinery of Scrubs plc to complete the order in timely manners. For example, CoolSchool must complete the fifty percent of the demand of last year before new order and then produce the required number of products by using their own machinery and the machinery of Scrubs plc. This tactic will reduce the expenses incurred by over production and holding cost of over production. (Atul, 2009)
The unplanned orders are one of the easiest and the best ways of making profits in the result of merger. In the current scenario, the CoolSchool is producing the product which is categorized as the seasonal product and the products Scrubs plc are producing is a quarterly product. Therefore, in these circumstances, the best decision for the businesses is to maximize the satisfaction level of their customers. The approach of CoolSchool to satisfy their customers by completing their unplanned orders will ultimately convert these clients into their loyal clients. Moreover, it is stated that the overall economic environment is not favorable for the business. Therefore, it is very important for the management of the Scrubs plc to change their tactics regarding the unplanned orders. (Rigsbee, 2007)
With the help of a merger between CoolSchool and Scrubs plc, the management of the Scrubs plc can use the equipments, labor and the resources of CoolSchool to manage the unplanned orders from their customers. This action of the management of Scrubs plc will increase the client’s confidence in the Scrubs plc. Moreover, the unplanned orders will increase the profitability of the business. Another important advantage of merger between CoolSchool and Scrubs plc is that the unplanned orders will reduce per unit fixed cost of the business automatically. The expenses such as salaries of the labor, machine maintenance cost and the rent of the plant are the expenses which are very difficult to reduce. Therefore, to utilize these expenses fully, it is very important for the CoolSchool and Scrubs plc to accept the unplanned orders to maximize their profits. (Willis. co. uk)
In the difficult economic environment, it is very important to manage the inventory and the expenses associated with the inventory to minimize the expenses of the business. In the current scenario, the approach of CoolSchool and Scrubs plc are different regarding the inventory management. The management of CoolSchool is in favor of maintaining the buffer stock as compared to the Just in Time (JIT) approach of Scrubs plc. However, according to the scenario, the just in time inventory management approach is not active in Scrubs plc completely and the management of Scrubs plc are converting their inventory management system on just in time approach. (Dreismeier, 2012)
In these circumstances, it is advised to the management of CoolSchool that they must continue their current inventory management system and assist Scrubs plc in adopting the just in time approach. In case of successful adoption of just in time management system in Scrubs plc, the management of CoolSchool can adopt the exact standards set by the management of Scrubs plc. Moreover, the management of CoolSchool can utilize the suppliers of the Scrubs plc to minimize their holding costs of buffer stocks. (Dreismeier, 2012)
According to the given scenario, it is very important for the both businesses to maintain and improve the employee satisfaction level. If the employees of the organization are satisfied and motivated, then it is highly probable that the organization will improve the profitability. The approach of CoolSchool is better that the approach of Scrubs plc. The basic pay for the employees will help in motivating them. However, in the case of Scrubs plc, the salary process in based on the performance of the employees at the workplace. Moreover, any defect or the delay in one department will affect the working in other department. This problem will cause delay in the production and reduce the motivation level of the employees because their salary is based on the completion of their relevant tasks. Similarly, the basic pay rate will reduce the clerical work in Scrubs plc. Moreover, the labor cost on the unplanned orders will remain similar to planned orders. Therefore, to reduce or to maintain the labor cost of the business, both businesses must adopt the basic pay rule. (Dugar, 2009)
After the merger between CoolSchool and Scrubs plc, the management of both companies must plan and develop a combine bonus plan for the employees of the business. The standardized bonus plan will motivate the employees of both companies. Moreover, the skill level of the employees will improve and the production quality will improve automatically. (David, 2001)
Cost tracking, cost allocation and pricing
The pricing structure of both companies is different and it is very important for the businesses to check and analyze their pricing strategy. The main flaw in the pricing system of CoolSchool is that they use simple markup method for their pricing. Instead of analyzing the prices of the market, CoolSchool are using the simple markup method of applying twenty five percent on the total cost of the product. As compared to the CoolSchool, the Scrubs plc accumulates all the costs incurred to the production and make annual contracts. Therefore, it is very important to establish a proper and standardized way of pricing. (Weedon, 2014)
Similarly, the costing method of both companies must be improved. Instead of using the historical data, the management of CoolSchool must use the up to date information in the making of budgets. The up to date and relevant information regarding the costs of the overheads and the material will help the organization in making contract with better pricing. In the case of Scrubs plc, the overhead allocation method on the basis of machine hours will affect the profitability of the overall business. The Scrubs plc is producing different uniforms for the hospitals and it is very important to identify the actual amount of overheads absorbed by the different products. Therefore, Scrubs plc must use the Activity Based Costing method to identify the exact amount of overhead costs utilized by different products. This approach will assist the business in proper pricing of the products. (Ebscapstone. com, 2014)
Conclusion and Recommendation:
The management of CoolSchool and Scrubs plc are advised to use the resources of each other to maximize the profits after the merger. Both companies are performing their business in the same market, therefore, it is easy for both companies to align and schedule their operations accordingly.
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