Case #2: Grand Jean Company
Background:
1. In 1989 it was one of the largest clothing manufactures in the world.
2. 2~3 manufactures out of 25 of GJ Co. usually produced only blue jeans. Currently, there were 20 contractors making all lines of GJ pants.
3. The contract price ceiling is established, but overall, it’s all depends on contractors’ performance.
4. Treat 25 plants as expense centers
5. The market is highly competence, the pressure comes from domestic and foreign competitors.
6. Grand Jean is using the incremental budgeting.
7. It uses one plant to produce one kind of jeans each year, but they usually need to do the change in the midyear.
8. Use 1-to-5 scale reward system.
Strengths:
1. Company’s been profitable for a long time.
2. The contractors are very reliable to the company.
3. Developed the learning curves to see the production’s stand hour.
4. Use budgeting to set the quota, which can evaluate the performance easily.
5. 1-to-5 scale reward system can motivate employees work harder.
6. Very clear marketing department system. Also has the reward system to support it.
Weakness:
1. Single style of pant every year, then need to do the change in the midyear.
2. Make marketing department confused about the production schedules with the midyear changes.
3. Outcome budgeting is not accurate, because plant managers will hide some of the pants. They want to hide them for the future production deficiencies.
4. The reward system is not that fair, the people who work at the headquarter have higher awarded rating then the plant managers.
5. For some departments, they lack of staffs. But based on the 11:1 rate, they can’t hire new people. This will lower the product ...