Leadership in innovative quality plastic molding parts production

¶ … 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.

Rule: Company Directives-Training Budget Guidelines

Analysis: An analysis of the situation shows a significant increase in the general and administrative line that puts it up from last year and the previous quarter. The training budget is nearly $100,000 over budget for the quarter. The increase appears to be a result of the overrides in emergency training of the rollout of new systems. There is the question of whether some employees may have charged new project training against the wrong cost center. Adding to the confusion is the fact that the Machining and Systems line also came in just over budget. Human resources management had expected travel and training costs to increase with the implementation of the systems integrations project. Project management failed to include training along with the technology projects training material and strategy development.

Further examination shows specific travel details that have contributed to the additional costs. For example, 22 domestic round trips, three round trips between San Jose and China, per diem costs, hotels, rental cars, and overtime are just some of the added expenses. Each of these additional costs may prove to be verifiable, but there is the question of whether another method exists that would allow the training management teams to accomplish the same objectives without the added costs. Failure to integrate training into product development has proved to be one costly mistake for Riordan. This mistake is one of the chief reasons for training being over budget.

Conclusion: Riordan Manufacturing would benefit from development of a project of high priority that offers a solution for distance learning via teleconferencing that is efficacious. Teleconferencing, also known as videoconferencing, occurs via telephone lines and uses restricted frequency bands that allow participants to conduct meetings by telephone (Encarta® World English Dictionary 2009). Utilizing teleconferencing would reduce if not completely eradicate various costs associated with travel expenses. The benefits are numerous and include reaching large and small populations and offering wider access to public meetings; a wider group of people will only bring a wider range of ideas. In addition, teleconferencing is a proven training tool that saves time and travel costs for individuals as well as the company at large.

Although teleconferencing could potentially provide significant benefits to Riordan, the company still must be cautious and not leave out any necessary costs in the budget. There are related costs that come with teleconferencing such as equipment, connection sites, transmissions, and moderator training (U.S. Dept of Trans Federal Hwy Admin 2011). Project management must also take into account that the implementation of teleconferencing will be complex. Some of the basic equipment will include PCs, a main computer control system, dedicated telephone lines or satellite hook-up, a television or computer monitor for each participating group and a video camera for each participating group (2011). Initially, the costs of implementation of teleconferencing will be substantial, however, the benefits of this investment will outweigh the costs of implementation and will offer savings in the long run. Riordan already owns some of the necessary items for this implementation, however, training is still mandatory for a smooth transition. Project management must include every cost of implementation and must set safeguards for the prevention of budget spending (e.g., pre-approvals from VP or higher person). With the costs of implementation and safeguards in place, Riordan stands to profit from this training challenge.

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.