External – various external benchmarks are used including Market share numbers where available, Customer share figures, customer satisfaction surveys and growth versus industry norms.
An outline of the organisational structure of Chemtek (E4)
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A clear description and explanation of how each functional area helps Chemtek to meet its objectives (E4)
Sales are responsible for all customer contact and are charged with managing both current customers and their ongoing business and in generating new business both from within the current customer base and from new customers. By generating new business this helps Chemtek to meet its overall objective of doubling its market share.
Marketing assist Sales in generating new business. They are responsible for analysing the wider market and assessing opportunities in new product areas and in new customers. They then provide the information, analysis and presentational tools to Sales in order for them to generate business. They are also responsible for managing all new business projects internally and work very closely with the R&D / Technical team on product formulation and packaging development to meet customer and consumer needs.
Purchasing is responsible for the sourcing of all raw materials and packaging to meet customers’ needs at the most cost effective price. They will work closely with Trade Marketing and Sales on the one hand to understand the customer requirements and with Manufacturing on the other hand to understand the opportunities and restrictions that various products may present to ensure that the business is able to manufacture products of the highest quality effectively and efficiently. This will improve quality of product and therefore customer satisfaction, enabling them to retain much of their business and attract new business
Logistics are responsible for managing the inflow and outflow of materials and finished goods from the main manufacturing site into the Intermediate warehouse. They are also responsible for ensuring delivery to customers warehouses “on time and in full” or for arranging backhauling of goods using customers transport. They also aid customer satisfaction which can retain and generate business
Manufacturing is responsible for manufacturing all the products that Chemtek makes. It is also the largest people division employing over 100 people across three shifts. They are responsible for organising the manufacturing lines and the people to ensure the absolute highest quality product is manufactured in the most efficient manner. They also manage all engineering on the site; both short-term maintenance and longer-term major capital expenditure projects.
Human Resources are responsible for managing all HR issues within the business and has ultimate responsibility for Health and Safety. Key areas of action include the recruitment and retention of all personnel in conjunction with the functional management, the management and communication of the pay and benefits system, the management of the time and attendance system and the strategic management, communication and implementation of the Business Values.
Finance is responsible for ensuring the finances of the business are managed prudently, for ensuring that adequate and robust financial controls are in place and operable and for providing the wider business with financial decision support.
A clear description of Chemtek’s management style (E5)
Whenever possible Chemtek try to adopt a consultative management style, this as the name suggests means they consult with their staff and customers before making decisions.
The managing director organises “Focus Groups” consisting of staff from all levels of the company. The members of staff are representatives from all levels within the organisation. Matters that affect the company are put to the group and their opinions are taken into account before a decision is made.
Each member of the group feeds back the information they have gathered from the focus group meetings to staff at the staff on their level. The reaction to the decision is then passed back to focus group at another meeting.
Having made a decision after considering its original reaction the management then relay this to the staff giving their reasons for making the decision they have made. Chemtek feel that this provides the employees with a sense that their opinions are valued and gives them a cooperative liability for the change. As a result the staff are more likely to make the change work well.
This sort of management allows Chemtek to draw upon a wide range of experiences before making a decision and reduces the possibility that staff think decisions that affect them are being made by people who do not understand their needs.
There are circumstances when an autocratic style has to be adopted for example if a change in government legislation. In this case management may have to make a decision that cannot be negotiated with staff.
A clear description of Chemtek’s management culture (E5)
Chemtek have adopted a task culture style of management. The members of staff work as part of a small team (e.g. bottling or capping). This section is part of a larger team (e.g. line 1). The line team is then part of the phase 1 (aggressive household chemicals), which in turn is part of the company shop floor.
The shop floor team will have objectives from which the phase teams draw their objectives. The line team draw their objectives from the phase team objectives and the small sections (e.g. bottling or capping) would draw theirs from those agreed by the line.
By doing this Chemtek ensures that staff working, within the company, knows what affect their section has on the overall plan of the company. As a result a strong team spirit is developed with staff willing to take on more responsibility to help the team and also make decisions to improve the working practises of the team. Chemtek encourage this empowerment culture giving recognition when it works well and support when it breaks down. This means that the company adopt the best practises when ever possible and reduce losses caused by inefficiency.
Each team is encouraged to develop their staff so they become multi skilled and are therefore able to operate more efficiently within that team. As a result of this culture staff feel valued and know there fellow employees share the same targets and ambitions as themselves.
Chemtek benefit because a more skilled workforce is able to interchange duties more easily and if for example a large number of staff are unable to work due to sickness the store is more likely to be able to move people from one section to another to minimise the disruption and maintain on schedule to meet deadlines.
A clear description with appropriate examples of how Chemtek uses different communication channels internally (E6)
Chemtek use a number of communication methods to pass information within the company
For instance they use focus groups made up of staff taken from all levels of the company who gather together regularly. These are used when changes are being considered these changes are fed back to the whole company via these representatives. These groups are also used to gather the views and opinions of the staff.
Newsletter are produced by the managing director and are separated into three sections. The first being company wide issues such as profit figures. The second is information based on more local level for example new initiatives that will enable the company to operate more efficiently and the third a lighter section where marriages newborn baby stories etc. are printed. Chemtek believe that by producing a communication document in this format will encourage staff to read it as it has a local and personal content.
There are also team briefings in which managers in a the company will gather staff together to pass on important information. This is used for example if a redundancy situation arises. Chemtek feel it is important to convey this information on a personal level. This is they believe it firstly reduces the chances of wrong or partial facts being passed to staff and causing them unnecessary concern or anxiety.
Another form of internal communication is reports. These are formal documents, which are normally produced by headquarters or areas. They would be used for passing on information such as monthly sales figures.
One-to-one meetings are used during staff appraisals (Where staff are being told how well they are doing their job) and also for personal and sometimes disciplinary matters.
A clear description with appropriate examples of how Chemtek uses different communication channels externally (E6)
Chemtek use a number of communication methods to pass information to external organisations/customers
Chemtek has its own Internet site. This contains information giving users information on the company’s values, structure, plant location and a portfolio of its products.
Chemtek hold many conferences as a means of external communication. Chemtek will hold conferences with their suppliers and customers. This will usually occur when Chemtek want to pass on news of a big initiative and they want the suppliers to help them to make it a success and attract customers. One such conference was organised with its bottle supplier when Chemtek wanted to widen the range of bottle designs available for its customers.
Chemtek use letters, telephone, fax and e-mails for day-to-day business transactions
Chemtek try to get involved through environmental projects or sponsorship deals with local schools and organisations. For example they are currently sponsors of the Hereford United Youth Academy. This makes people think the Company is part of the community. As a result Chemtek believe that this helps rectify any preconceptions of what they produce, how they produce it, or how they dispose of waste products because they are associated with chemicals
A clear description of how Chemtek uses its production and quality control system to help “add value” to its product or service (E7)
Chemtek’s goal is to manufacture, package and supply Cleaning Chemical Products that are consistently of the very highest quality available on the market. Chemtek believe each and every employee of the company is crucial to achieving this goal and are responsible for the quality of working practises.
Every employee is encouraged search for ways of improving the quality of their function or the function of others. This continual effort to improve working practises will ensure Chemtek produce products of the highest quality.
By having an uncompromising attitude toward quality of their products they feel that their competitors can never better them in this department. Therefore their customers will not be able to find improvement anywhere else
The business also operates a quality control and process system designed and audited by an International body called SRG. This is specific to the chemical industry and sits above ISO 9000 quality procedures. Most chemical businesses do not believe that ISO 9000 provides anything other than a method of working. However Chemtek believe that by employing this it enables safe, efficient and quality manufacturing to take place, thus producing a much better quality product.
For this very reason Chemtek employ the SRG process throughout all of their manufacturing operations. This enables it to add real value at each stage. From the designing and testing of product formulations to development of packaging that consider and cater for consumers and their expectations. Via this manufacturing processes Chemtek are able to provide their customer with quality assurance. There are control systems that are designed in such a manner as to provide maximum output in the most efficient manner whilst ensuring that the absolute highest quality of product is produced.
Raw materials and packaging are delivered into the system carrying self-certification quality certificates. These are then sampled using agreed AQL (Agreed Quality Level) standards to ensure the accuracy of suppliers in their own quality standards. Chemtek believe that to provide their customers with the best quality products possible they need to acquire the best raw materials to do so.
All other quality control is completed as part of the standard manufacturing process. For example Chemtek carry routine raw material checks, leak trials, bottle trials, packaging and transport controls on a closed loop system.
By carrying out the processes I have just mentioned Chemtek believe it enables the business to control exactly how things are processed. Therefore they control what comes onto the site and what leaves the site, thus ensuring the highest standards are met and exceeded at each point to ensure customer satisfaction.
C1 –Make Judgements about how successfully the business is meeting its objectives
The business has two distinct sets of objectives; Long term strategic objectives – statements that portray the place the business wants to get to, and short term annual objectives: statements that describe the path they will follow in a specific year. These long and short term objectives support a vision that aims to double the size of the business in the next 3 years (beginning in Jan 2001) to become a clear Number 3 behind Jeyes and McBride’s.
As outlined in section E2 they have four strategic objectives:
- To double their share in the retail sector by focussing on the development of washing liquid, trigger sprays, shampoos and conditioners.
- Broaden their business into the professional cleaning market through the launch of recognised cleaning brands.
- Increase their business in the contract packing market by developing relationships that result in winning business with major global branded businesses.
- Actively seek out strategic acquisition opportunities in the UK and Europe.
To support these strategic objectives a number of specific annual objectives were laid out through the budgeting process for 2003.
These were:
- To grow the businesses turnover (Net Sales Value (NSV)) from £12.32m to £14.8m – 20% increase
- To increase the bottle volume from 23.3m bottles to 29.6m bottles – 26.6% increase
- To increase Management Net Profit (MNP) from £880k to £1.171m – 33.1% increase
- To improve the Net Margin from 7.1% to 7.9%
These top line annual business objectives are designed to provide a stepping stone to the overall strategic business objectives of doubling in size over the next 3 years.
Supporting these top line objectives were a number of other KPI’s (key Performance Indicators) that ensured the health of the business and included elements of cash flow, stock holding, new business leads, staff turnover and absence.
The September Management Account show that with three months of the year to go the latest forecast is as follows:
On the dimensions of Bottle Turnover and NSV the budget objectives are likely to be exceeded.
However, the Net Profit target will be underachieved by £79k and the net margin will only move forward by 0.1% instead of the 0.8% that was planned.
Investigations reveal that these last two numbers are of some concern to the management. The grocery trade is becoming ever more competitive and therefore the prices that can be obtained for products are getting squeezed by the major UK retailers. The business has had to run faster to make broadly the same net margin.
The increased volume has also necessitated the provision of additional line operating on the night shift. This has been more costly that was envisaged in the budget and in the main accounts for the undershoot in net profit.
On the other KPI’s the business has achieved the majority of what it set out to do. Cash flow has improved; the gap between debtor days and creditor days has moved from 7.9 days to 10.2 days, staff turnover has reduced from 7.3% to 6.7%, finished stock levels have reduced from 19.4 days to 15.3 days and service levels have improved from 96.2% on time in full to 97.4% on time in full.
They have also recently embarked on a new project called Project Chrysallis. This is designed to further improve the internal working processes of the business across Warehousing, logistics and purchasing operations, in order to make them significantly more efficient and therefore get back on track in their Net margin ambitions.
Looking at the longer term strategic objectives the business has almost achieved its objective of doubling in 3 years at the end of year 2. At the end of 2001 they turned over £7.8m. At the end of 2003 they will turn over £15.1m. This has necessitated a reappraisal of this target. The new target is to grow to £25m in the next 3 years.
Given the current level of growth this is stretching and forces the business to look at acquisition.
In terms of their other objectives they have significantly increased their share in the Grocery retail market. They now have 65% of the Own Label trigger spray category (55% in 2002) and have just won a massive new contract in Sainsbury for Washing Up Liquid. This will come in February 2004 and adds over 8m bottles to their sales volume. They have also begun discussions with Proctor & Gamble to develop a packing operation for their new product development arm across Europe.
As yet nothing has happened on the acquisition front. This will become a key priority in 2004.
In summary, 2003 has been a very strong year where the business has achieved most of what it set out to do and delivered a very robust set of results. Concerns over the undershoot on net profit and the static growth in percentage margin are already being addressed through additional efficiency projects. There long term strategic objectives have been adjusted to take account of changing circumstances with a focus going onto acquisition as the key method of delivering revenue and profit growth over the next 3 years.
C2 Explain how the organisational structure, culture and management style of the business affects its performance and operation and helps it to meet its objectives.
The organisational structure, culture and management style described in sections E4 & 5 helps the business to perform in a number of ways.
Firstly, the business operates in the Fast Moving Consumer goods market. Lead by the major retailers, the pace of change in this market is absolutely critical and therefore it is vital that the business can move quickly to fulfil their customer’s needs.
A flat organisational structure helps the communication of decisions and leads to actions being implemented faster. This ensures that the needs of customers are met quicker and that the business can react faster to any potential competitive threat. It also helps in the feedback loop from the factory floor back to senior management. Comments and suggestions for improvement can be listened to and acted upon quicker than if the business had a long line of authority through which people had to communicate. The Factory Floor to the Managing Director is only 4 levels and the Managing Director is seen on the factory floor almost every day so that individuals can grab him and make their suggestions to his face.
The task culture that the business uses also helps in ensuring that people understand exactly what is required and can get on with it. Their objectives are set jointly alongside the overall business objectives and so each individual and each part of the overall team understands the impact that their work can have on the whole business.
Consultative Management helps to ensure that people have a clear perspective on the reason why they are doing a particular task. This enables empowerment of the workforce because they can understand more of the total picture allowing them to make sensible decisions to change the way they are completing a task without referring to their line management. They have a good picture of the overall task being completed, which areas are critical and which areas are less important and can therefore take action to correct faults or inefficiencies quickly.
Tying these three areas of flat organisation, task orientated culture and consultative management together enables objectives to be communicated and worked towards in a clear and open manner.
C3- Provide a detailed analysis of the impact of ICT on the internal and external communications of the business
Servers: Servers are used as a storage device. For example the server at Chemtek Limited is used to store the database, roaming profiles etc. This allows the employees to store data that is needed by other employees in one local directory or storage place.
Networks: Networks are becoming a vital part in businesses because they allow multiple computers to connect to one local data storage device (e.g. Database on server, printers) A network can consist of multiple computers which all connect to the same server to access the data on the server. The computers connect to the server through a switch, hub or both. Computers can be connected to the network via different topologies. The Star topology is generally used the most.
The main advantage for using this topology is because if one computer crashes, the other computers will still be able to use the network and have access to the server. Another advantage about networking it that you can share one printer with all or some of the computers on the network.
Example
One main advantages of networking is it allows data sharing and data transferring, if an employee in the production department receives an order and wants to know if there is enough materials to produce the order, instead of having to phone up the production department or get them to print it of, the person in the production department can simply log onto the network and view the information they require, this cuts down man hours and limits the possibility of human error.
Another main advantage is because you can restrict what a person can do to data, for example only certain people will be allowed to change certain data inside a file and others will only be able to read it, but some people in the company will not be able to see it at all, this helps enforce data protection.
Exchange servers: Exchange servers are becoming more vital in businesses today. This is because more people prefer to communicate through email because it is a fast way of communicating with other people.
Example
When a person receives an email they will have a copy of the data on their email provider. This has a major advantage over telephones in the sense that you might not say the information correctly; the other person might misunderstand or forget what was said, and you do not have to worry if they are at their desk or not as it will remain in their in box until that person returns to their desk and reads it.
Internet: A lot of businesses are using the internet to conduct business. Using the internet on at 1Mb line provides a fast service, data transfer or data entry in more or less instant.
Example
Chemtek uses the internet to raise invoices, for example if an employee of Chemtek Limited logs onto the customers secure web site and raises a invoice. This is far faster, better and more reliable then the old way of doing things i.e. post. Because a hard copy is sent straight to the customer. This means the employee of Chemtek Limited does not have to print of an invoice and post, or fax it to the customer. By using this technology we cut down on man hours.
EDI(Electronic Data Interchange): The EDI system is basically a glorified fax machine. Chemtek Limited uses this service because when a customer raises an order the order will go straight to the relevant person who deals with orders. This is better than using faxes because they can get lost in the office or misplaced. The EDI system is also used for sending the customers invoices. Before invoicing was sent through the post which can take a day or even more and it can get lost at the post office or when it arrives and the customers company it can be lost or misplaced. But by using EDI for this purpose the invoice is sent instantly to the correct person and that person has a hard copy so if they print it off and lose it they can print another copy instead of phoning Chemtek Limited and ask for another to be sent out.
In summary when using these ICT technologies it cuts down the room for human error, improves data protection and cuts down man hours. It gives you the ability to share resources and hardware (i.e. printers).
A1 – Explain how the organisational structure, culture and management style interrelates in the business
It is clear that the best example of the interrelation between a flat organisational structure, a task oriented culture and a consultative management style is the through the communication of objectives and the manner in which those objectives are carried out.
This starts with the budgeting process. This process takes the strategic objectives of the business and looks to break those down for the coming year. The Chairman and Managing Director are responsible solely and wholly for the strategic direction that the business follows. This direction will take input from each function but is ultimately owned by these two. As a result of the setting of this strategic direction they will also determine the top line outputs expected from the business in the coming year – financial turnover, net profit and % margin.
They will not determine how the business delivers these numbers. It is up to each of the functions to cooperate with each other and determine how they can fulfil these targets and if possible beat them.
Each function will take those top line objectives and work out, in conjunction with their colleagues in other areas what it means for them and how they will deliver their part of the budget.
Because the structure of the business is flat and people have a clear idea of roles and responsibilities within that structure then the task orientation and consultative style can work together to produce an effective involving process.
For example, Sales and Marketing will examine areas of opportunity within both customers and consumers. These could be either new products in terms of formulation or new packaging which allows consumers to use products be in an easier way. They will also look at pieces of business that are currently made by competitors and examine how that business may be targeted in order to win the contract away from a competitor. Having come up with an outline plan they will involve their colleagues in Manufacturing and Research & Development to develop those ideas further either through new technologies or more efficient ways of working that enable the business to offer a better price. This process will continue throughout the business so that each function, and within each function, the smaller teams have a good idea of where the business wants to head, the pace at which it wants to go and the clear priorities that it has set itself.
This whole process enables the business to empower its people to make decisions and implement change within a broad framework confident in the knowledge that its people know the direction the business is headed and can therefore make those decisions within that broad framework.
A2 – Evaluate the impact of the organisational structure, culture and management style on the performance of the business
Looking specifically at the business and its performance in the last two years, the flat organisational structure, the focus on task management and the consultative management style appears to have worked well.
Clear consultation and agreement on the roles and responsibilities of each function, backed by a set of Key Performance Indicators (KPI’s) that measure the success of the business at each level, weekly or monthly, ensures that the annual objectives are kept at the front of everyone’s mind and there is a real pace to the business.
Where the KPI’s have indicated underperformance or an issue arising, action has been taken quickly and examples have been initiated from both the top and, encouragingly in a number of instances, from the bottom of the business.
One specific example was on wastage. The wastage KPI had been set at no more than 600 litres of product per month. This was measured through the stock system i.e. raw material and component stock into the business, minus finished goods out of the business, indicates the amount of wastage that has been lost through the manufacturing process.
One of the bulk operators on the factory floor noticed that he seemed to be having to put more water into a number of chemical formulations that was specifically called for in the chemical make up instructions. He investigated and found that the water meter was not covered by the KPI set and that the meter was faulty. He communicated this issue and liaised with his colleagues in both Technical and Engineering to resolve the issue. This saved the business 2% of their water additions on a number of formulations adding up to significant cash savings to the business.
This came about because of the consultative style of the business ensuring that the bulk operator felt empowered to go ahead and investigate an issue without referring the thing up the line and then consulting with his colleagues on a solution. The flat management structure ensured that the solution could be aired quickly and a decision implemented with pace.
Occasionally the flat management structure can lead to issues which a longer structure would help to eradicate. Specifically this involves the closeness of senior management to the detail of what is happening in the business.
There are times when senior management has to stay away from the detail in order to maintain a proper perspective on what is and is not the right thing to do in any given situation. Occasionally, the management can become too involved in fixing a specific problem or issue and can therefore let its sense of priorities get distorted. It could be argued that some of the underperformance on net profit that is forecast for the year end could be attributed to this.
In trying to ensure that a new contract which had a number of brand new or “difficult to make” products in it, was made on time and to the quality required, additional labour was employed to run an extra shift. However, because the manufacturing team focussed on ensuring the product was right they became involved in that detail and took their eyes of the cost ball. This lead to a significant underperformance on productivity and with more people on the lines they were actually not making the expected amount of product. This took a month to discover through the KPI system before action was taken. In that month the Factory payroll overspent by some £40k versus their expected spend. In itself this would be okay if the additional product produced was in line with the expected product per head that the business measures. It was some 18% below expectations and therefore the business suffered a double whammy of more cost and less product.
The good thing is that the culture of the business lead to a very quick solution to the KPI system being produced and the business then pulling together to ensure the same mistake was not made again.
Overall the organisational structure can be seen as a real strength allowing rapid communication up and down the line. The task focus in the business ensures that the job gets done within clearly defined roles and responsibilities and the consultative management style ensures everybody knows broadly where they are heading, why and at what sort of pace.
A3- Evaluate an alternative approach to quality control or quality assurance and the effects it could have on the functions of the business and how it achieves its objectives.
Current ‘Control’ Culture
The picture painted by the way quality is managed at the moment is a rosey one!
Whilst the current approach ensures that no substandard product goes out of the door it does not prevent substandard raw materials and packaging coming on site or minimise substandard product coming off the end of the production line.
For this reason a lot of value is wasted in weeding out substandard materials, correcting errors and subsequent downtime for the production facility.
Cost is therefore tied up in :
- Weeding out substandard materials and product
- Correcting the result of uncontrolled production errors
These factors create significant and unnecessary costs to the business without adding value. If they could be eliminated profitability would increase significantly.
An alternative approach to eliminating wasted resource whilst increasing product quality is outlined below:
Cost of Quality Analysis (COQ)
Evaluating how profitability would increase is difficult but a good starting point would be to initiate a ‘cost of quality analysis’ which attaches a price to each failure i.e.: Costs associated with:
- downtime due to ‘snagging’ to weed out substandard packaging components which were are urgently required for production
- downtime associated with correcting a failed batch
- time wasted rejecting faulty raw materials
- slowed production due to labelling difficulties
- inefficient batch production due to ill-thought-out order of addition
- product recall ….
The list goes on. Establishing an estimate of the costs for common/frequent operational failures focuses attention of areas which most merit quality/ management review.
This process would then highlight a number of high priority improvement initiatives. Continued COQ analysis would then gauge the success of those initiatives and highlight new ones.
Initiatives are likely to come under the following categories:
Supplier Management
Costs associated with defective materials/late deliveries/batch rejections etc. would form a critical element of supplier evaluation.
This in turn would lead to more careful pre-selection/appointment of suppliers so that only those operations which were capable of matching Chemteks requirements were seslected.
Supplier performance would become an ongoing element of business management with regular review meetings being used to force changes in suppliers own practices/quality processes.
As supplier performance improves COQ associated with their performance will fall with the associated benefit of relaxed QC inspection on their materials.
Management of Product Design
COQ analysis would also highlight costs associated with poor design of products and production methods.
This is turn would initiate a series of corrective projects to improve the manufacture of existing products.
But more significantly lessons learned from this exercise could then be used to
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ensure most efficient order of addition is designed in collaboration with the production department prior to launch.
- create tighter development guidelines to ensure that products emerging form the development department were designed to minimise production/quality failures.
- ensure careful design of QC test specifications to ensure that testing is minimised but still ensured product safety and quality. Production delays due to QC inspection minimised.
Delegate Ownership of process quality to production operatives
Training for production operatives in critical elements of quality within their roles would engender an awareness of and empowerment to suggest and implement changes to working practice. Leading to improved product quality and speed.
Implementation of SPC (statistical process control) and relevant training would enable production operatives to monitor critical production parameters spotting where a process was drifting before it went out of spec.
Simple quality control tests could be delegated to trained production operatives to reduce delays associated with waiting for QC.
