¶ … save five percent of the company's sales and one is using last year's sales as a yardstick, that would be a saving of about $5.485 million. However, there are indeed some questions that have to be answered. First, it has to be deciphered what the sales would be for the year during which the improvements are being done, not to mention the years after that. If the sales projections over the next three to five years are not all that great or the sector or wider economy is sputtering, it would be hard to justify the project. If sales are consistent, there would indeed be a business case for the project as the project would pay for itself in six months. However, it has to be defined and figured out how much productivity and movement would be lost while the improvements are being made. Indeed, one third of the supply chains in the company would be affected.
Question 2
It would seem there is a good business case but there are two things that would need to be answered to. First, there is the matter of how long it would take to get the changes done and how much of a financial drain this would...
Second, if company B is operating at 95% capacity, at least some of these changes would be potentially wasted as the output gains could not be fully offset by the fact that the supply chain is nearly maxed out. It would be a bit hard to justify this case as is without a concurrent expansion in capacity. Otherwise, the money spent might be wasted. The $111M alone on the raw materials would pay for the project nearly five times over but the real cost savings would be less than $100M if capacity is maxed out as a result of the improvements (Enslow, 2016).
Question Three
It would all come down to change management. If there is a major change being executed in an organization and there is not buy-in from the functional departments and organizations within the wider company, the change will not go off as planned and thus the benefits of the changing will be at least partially negated (if not wiped out). Whatever changes are to be made need to be explained to the powerbrokers and front-line people of the company. The management in particular needs to be…
