Riordan Manufacturing's internal challenges and operational improvements

¶ … IRAC (Riordan)

Any company that is a leader in an industry knows that what they sell had better be both quality and innovative in order to compete within their designated industry. Riordan Manufacturing is no different. Riordan has long been a company that offers both quality and innovative products in the plastic molding and parts industry. It also has a strong internal structure that works harmoniously with the objectives of the company. Despite Riordan's position as a leader in their industry, the company does face some internal challenges, which work against their company objectives. This paper will look at these areas that require improvement, including finance and accounting, training budget, shipping and receiving, human resources, and the new pyramid bottle cap design for The Taylor Group. The paper will utilize the Issue, Rule, Analysis and Conclusion (IRAC) method in each distinct area.

Finance and Accounting

Issue: One of the chief reasons for Riordan's immeasurable success in their industry is their ability over time to keep delivering quality products to its customers, offering solutions that are effective and competitive. After careful examination of Riordan's finance and accounting systems, it appears that the company cannot maintain seamless compatibility and there is the potential for violations of the General Accepted Accounting Principles (GAAP). Riordan's operations are located in Georgia, Michigan and California, and there is another joint venture with the People's Republic of China. Each operating entity has its own finance and accounting systems and provides consolidated input to the corporate office in San Jose, California.

Rule: The Financial Accounting Standard Board (FASB), under the authority of the Securities Exchange Commission, is the governing body that establishes standards for financial accounting. Financial accounting standards play an essential role in the economy because investors, creditors, auditors and others rely on the credibility, transparency, and comparable financial information (FASB 2011). Generally Accepted Accounting Principles (GAAP) are uniform minimum standards of guidelines for financial accounting. GAAP established appropriate measurement and classification criteria for financial reporting. Compliance to GAAP provides a reasonable amount of comparability among financial reports of state and local government units.

Analysis: There are costly consequences of Riordan's failure to address the financial and accounting system's compatibility issue in relation to Michigan and Georgia's operating entities. Currently, San Jose's finance and accounting system has a license-integrated and entirely Windows-based ERP manufacturing, distribution and financial management software application, which was created specifically for plastic processors and assembly manufacturers (University of Phoenix 2010). The application does not include the source code with the license. The vendor that developed the software application and the attendant source code for the Michigan entity is no longer in business. The software application runs on a pair of DEC's alpha using VMS operating system and VAX4000 work stations programmed in C. The Georgia entity has a developed software application and an attendant source code to process manufacturing process applications. Georgia's system programmed in RPG400 runs on a pair of AS400s using UNIX operating systems and PCs as workstations (2010).

Riordan's San Jose office is unable to reach an ideal state of compatibility. Because each operating entity must send its finance and accounting data to the corporate office as both data files and hardcopy reports, the corporate office is required to re-enter the sent information and convert the data files so that they reflect the correct account codes. Output has proven to be equally challenging for the corporate office. The corporate office then works to combine the data for the general ledger, the balance sheet and the income statement, which proves to be labor-intensive and, in addition, it delays completion 15 to 20 days after the month's end. In utilizing external auditors, not only is there extra labor, but also there are additional costs. The corporate office's efforts to adhere to new government compliance reporting requirements at the consolidated level proves to be a challenge that increases every single day. Riordan Enterprises is adamant about finding an alternative method for this challenging situation.

Conclusion: The current state of Riordan's financial and accounting process is both time-consuming and costly. There is too much time being spent on re-entering and converting data to generate financial statements and ensure compliance with government mandated reporting requirements. Riordan is unable to achieve its full potential because of the plethora of deficiencies that are present in the finance and accounting. Upgrading San Jose's system to include the application source code is one potential solution to the problem. After this step, Michigan, Georgia and China entities would have to have systems that mirror the corporate system. Riordan could benefit quite significantly from this move. Training would be required for each of theses steps in order to make an easy transition and ensure efficiency. A reduction in process time, elimination of converting data files and hard copies, more accurate government reporting, and less frustration for accounting employees are just a few of the benefits that Riordan will experience because of this change. Riordan can thus focus on achieving and maintaining reasonable profitability (Riordan Manufacturing 2006).

Training Budget

Issue: Riordan's training budget is well over budget. There is the need for project management to determine exactly how the budget became this way and come up with a practical solution to this problem. Chief Financial Officer Dale Engel suggested that Riordan utilize teleconferencing for training, but was unsure how effective this would be. Engel has already set aside a budget and a timeline for completion.

China Move-Receiving-Shipping

Issue: Each operating entity of Riordan Manufacturing has its own set of procedures in order to ensure consistency and quality control. These procedures apply to raw materials receiving, manufacturing tracking, and accounting of finished good inventories. Still there is the issue that Riordan's procedures is comprised of steps that are deemed unnecessary and also depend greatly on paper forms and human input, which creates an increased risk for error.

Analysis: When receiving accepts the delivery of raw materials, the shipping document is passed from the delivery driver to the shipping area supervisor for validation. Once validation is verified, the receiving staff unloads the raw materials and they are moved to the raw materials designated area. The receiving supervisor then passes the received raw materials log as well as the shipping documents to the receiving clerk for entry into the inventory system. The receiving clerk then enters the types of materials received, the vendor information, as well as the quantity.

The manufacturing team logs the quantity of raw materials used on a raw materials use form during the actual manufacturing operations. The team then gives the form to the inventory clerk who, upon receipt, enters the information into the inventory system. At the end of each workday, the manufacturing team also gives a form that specifies the number of sub-assemblies and completed end-products for that day.

Sales orders are received by phone or fax in the shipping department. A shipping clerk then enters the sales orders into the customer shipping and billing system. According to the shipping documents that are generated on a daily basis, the shipping department then loads the trucks for delivery. A shipping clerk updates the inventory system with the shipping documents. At the end of each year, a clerk reconciles raw material quantity, sub-assemblies, and finished products against a physical inventory.

Conclusion: In analyzing Riordan's inventory management and control system, it is revealed that there are a total of eight distinct forms used beginning with receiving raw materials and ending when the driver leaves the shipping area. A clerk must then enter each of these eight forms into the inventory system. Tracking has proven to be a challenge, especially if information is needed expediently. Because the shipping clerk does not enter information into the inventory system until the end of the day, someone looking for tracking information would have to peruse hand-written logs in order to confirm data. This process is not only time-consuming, but it requires labor that is unnecessary and it is a waste of money in terms of having employees spend so much time tracking items.

Radio Frequency Identification (RFID) could be used to increase efficiency. The Association for Automatic Identification and Mobility (2010) defines RFID as "a system that transmits the identity (in the form of a unique serial number) of an object or person wirelessly using radio waves." The RFID system enables information transmission via a portable mechanism known as a tag. It is then read by an RFID reader and processed based on the specific needs of the application. RFID is not only beneficial in tracking information, but it is also beneficial for supply chain management, retailing, payment systems, security, and access control (2010). Upon receipt of raw materials, the RFID device scans the item bar code, updating the inventory system, and allowing easier tracking and reducing time. It also updates inventory when finished goods ship out of inventory. A major benefit of the RFID system is that it eliminates the majority of forms used and thus reduces human error in inputting. The savings that are incurred could be put to use in other areas of Riordan.

Human Resources- Calendar Complaint

Issue: Edwina Hernandez, an employee of Riordan Manufacturing, is offended by a calendar depicting women in bathing suits that hangs on the back of employee Ed Ledford's office door. Human resources is required to investigate this complaint and determine whether or not the issue can be viewed as sexual harassment.

Rule: Title VII (Civil Rights Act) and Employee Handbook

Sexual discrimination is prohibited in the workplace as documented in Title VII of the Civil Rights Act. Title VII classifies sexual harassment as a type of sexual discrimination and is a violation of Title VII (U.S. EOE Commission 2011). Title VII categorizes sexual harassment in two categories: quid pro quo and atmosphere of harassment. Employers who require employees to agree to sexual advances in order to keep their employment characterize quid pro quo cases. The U.S. EOE Commission is the governing agency that investigates all sexual harassment and sexual discrimination complaints that are filed. Atmosphere of harassment involves invitations, language, pictures, and suggestions that have become so pervasive that they create an antagonistic work environment (Jennings 2006).

Analysis: Edwina Hernandez reported the calendar situation to Assistant Plant Manager Allen Tanis, asserting that the calendar had "naked women" on it. Tanis asked Hernandez to contact Karen Essenburg, an employee specialist, and follow the procedures of a sexual harassment claim. Hernandez was insistent in her refusal to cooperate with human resources in filing a harassment claim against Team Superintendent Ledford. Allen thus reported Hernandez's allegations to Essenburg, which resulted in Essenburg confronting Ledford about the calendar. The calendar, it should be noted, did not have naked women in as Hernandez asserted, but rather depicted women in bathing suits. Essenburg still insisted that the calendar was not appropriate for the workplace, which resulted in Ledford throwing the calendar in the trashcan.

Conclusion: There is a policy governing business ethics and conduct and guidelines for sexual harassment in Riordan's employee handbook. According to this handbook, "any supervisor or manager who becomes aware of possible sexual harassment must notify the Human Resources Director or any member of management so that it can be investigated in a timely and confidential manner" (Riordan Manufacturing 2010). Tanis' actions were consistent with company policy regarding management duty to act in relation to sexual harassment. Because Ledford acted immediately in removing the calendar, further action may not be taken against him; however, Ledford should have been aware that the calendar was not appropriate for the workplace. Hernandez's refusal to cooperation with human resources may prevent her from filing a sexual harassment claim.

Pyramid Bottle -- New Cap Design

Issue: The Taylor Group, a client of Riordan Manufacturing, has requested that a new bottle top be designed in order to complete their pyramid bottle. The Taylor Group is currently working with the French government on another one of its products and is under pressure to include French companies in its work. Riordan must determine all items to be considered before moving ahead.

Rule: Intellectual Property Laws, Trade Agreements

Analysis: The Taylor Group, a client of Riordan Manufacturing, requires a new bottle cap design for completion of their pyramid bottle. The designers have the new design already created for them. However, because the Taylor Group is working under pressure from the French government to include more French companies in its work dealings, the need for intellectual property protection is essential. The Taylor Group is asking that the new bottle caps be outsourced to a French company. As a result, Riordan has acquired the details to outsource the bottle cap production to the Boffy Company.

Conclusion: Riordan must consider aspects of intellectual property (e.g., patents, copyrights, and trademarks) as well as trade agreements. Utility or function patents are patents that cover machines, processes, and improvements (Jennings 2006). Riordan must protect any current or existing process or improvements. Design patents protect a product's features (e.g., the new bottle cap and bottle design). Riordan must also protect its ideas, photographs, name, and logos so that Riordan will maintain its exclusive rights to sell, control, and/or license its copyrighted works (2006). The copyrights are especially important if a French company is to share in some of Riordan's work. Riordan must also be sure to consider trade agreements. Trade agreements have specified terms for the free flow of goods throughout trade countries. The Geneva-based General Agreement on Tariffs and Trade (GATT) is an important trade agreement for the United States. The GATT was created in order to develop uniform trade policies between the U.S. And European countries (2006). Riordan must review the specific details of the GATT before committing to the Taylor Group's request to outsource the bottle top design to a French company.