Group Management Consultancy Report

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EBGM03 – MANAGEMENT CONCEPTS & PRACTICES (B)
GROUP ASSIGNMENT
GROUP MEMBERS:
RHYS JONES
PETER GILBEY
SOPHIE PICTON
JULIE MCKENNA
LUCY EVERETT
IN PARTIAL CONTRIBUTION FOR AN MSC IN MANAGEMENT
SEMESTER 2
2013

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1.0 INTRODUCTION 3
2.0 ANALYSIS 3
2.1 GLAMORGAN TIMBER MILL ISSUES 3
2.2 SMOOTH FINISH ISSUES 5
2.3 SWANSEA BOARD SUPPLIES ISSUES 6
2.4 GLAMORGAN GROUP ISSUES (HOLISTIC VIEW) 7
3.0 INVESTMENT PROPOSAL DISCUSSION AND RECOMMENDATIONS 8
3.1 SHOULD SWANSEA BOARD SUPPLIES HAVE THE NEW WAREHOUSE? 8
3.2 SHOULD SMOOTH FINISH HAVE THE NEW HIGH CAPACITY NO.2 MACHINE? 8
3.3 SHOULD GLAMORGAN MILL HAVE THE NEW OVEN FOR LIGHT GAUGE? 9
3.4 WHAT, IF ANYTHING, SHOULD WE DO ABOUT THE INCREASING LEVEL OF COMPLAINTS? 10
4.0 FURTHER RECOMMENDATIONS 10
4.1 COMMUNICATION 10
4.2 IMPLEMENTATION OF A LEAN PRODUCTION SYSTEM 13
4.2.1 JUST-IN-TIME MANUFACTURING 13
4.2.2 TOTAL QUALITY MANAGEMENT (TQM) 14
4.2.3 RESPECT FOR PEOPLE 14
4.2.4 FURTHER IMPLEMENTATIONS OF JIT 14
4.3 SUPPLIER RECOMMENDATIONS 15
4.4 IMPLEMENTING CHANGE 15

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1.0 Introduction
The purpose of this report is to identify the problems within the Glamorgan Group (GG),
together with addressing the proposed investments submitted by Glamorgan Timber Mill
(GTM),Smooth Finish (SF) and Swansea Board Supplies (SBS).We will also provide
recommendations to the issues uncovered.
This report will address the following questions:
• Should SBS have the new warehouse?
• Should SF have the new high capacity No.2 machine?
• Should GTM have the new oven for light gauge?
• What, if anything should we do about the increasing level of complaints?
In order to make investment recommendations, it is necessary to conduct calculations,
including: investment appraisals, re-scheduling, capacity and utilisation. We will then analyse
the calculations using both qualitative and quantitative techniques, in order to justify which
investments should be granted. We will draw upon general and operation management theory
when making operational improvements, looking to increase efficiency throughout the GG.
In addition to addressing the investment proposals, we will identify what we believe to be the
root causes of the organisation’s underperformance, and look to offer solutions to these
issues.
Whilst we have no evidence to suggest that the figures provided are accurate and valid, for
the purposes of this report we are taking these figures at face value, and assuming that the
figures provided by GTM, SF and SBS have been produced in a fair and legitimate manner.
2.0 Analysis
2.1 Glamorgan Timber Mill Issues
We noted a distinct lack of professionalism and respect in Mr. Burr’s correspondence, which
perhaps indicates underlying managerial issues. Mr. Burr’s manner of superiority, stemming
from his relationship with the company founders, is potentially damaging to the GG as a
whole; ignoring skills and suitability, in favour of nepotism. This should not be tolerated, and
career progression should be awarded based on merit.

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Considering the new oven proposal, it is necessary to establish whether the pulping process
could cope with the extra demand from the new oven. We calculated that all five ovens were
running at 100% utilisation, indicating that if GTM wishes to increase output, an extra oven
would have to be purchased (increasing capacity from 200,000 to 240,000 boards). The
pulping’s current utilisation is 57%; with the addition of a new oven, the ovens new
maximum capacity would be 96,000,000 lb per year (assuming only the heaviest board was
produced). This signifies that the pulping process could cope with the increase in demand
from an extra oven, with its maximum capacity of 100,000,000 lb per year.
!"#$%& ($#)$#
*+,-./ 0%)%"-#1
=
57,000,000 &7 )+8 1+%8
100,000,000 &7 )+8 1+%8
= 57% ;$&)-/. <#-&-,%#-=/
The current operating profit of GTM is £617,200; the addition of a light gauge oven,
including extra overheads, could increase the operating profit to £891,600 if ran at full
capacity. If used for all types of board (which is more likely considering the forecasted
reduced demand for light board and increased preference for heavy board) operating profit is
estimated to be £848,320. This shows that despite an increase in overheads, operating profit
increases significantly, with an investment payback period of less than 12 months.
Breakeven analysis reasons that GTM would need to produce 16,376 extra boards in order to
break even. This is estimated to take 103 days if the new oven is run at full capacity, it is
likely that this could be achieved due to the increased forecasted demand and if SF were to
buy all of their boards from GTM.
>-?+@ 0=,#,
!A+8%.+ 0=/#8-7$#-=/ )+8 7=%8@
=
£50,000
£3.05
= 16,376 7=%8@,
Another issue is the fibre-glass strengthener content of light board, which has led to
complaints and compensation paid out by SBS (p.15 & p.23). The resin cost per board
reduces from heavy to light board. However, when thickness has been taken into
consideration resin costs for light board are still less than the other boards (Table 1). To
increase the resin content to the same level as medium gauge with respect to thickness would
require an increase in resin cost per board by £0.32 to £3.92. This would result in a total cost
increase of £27,200 which is less than the compensation payout for that year of £40,000. It
should be noted that the resin cost for the heavy board is higher than medium board when

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taking into account thickness and if also lowered to the same level as medium board could
result in a saving of £0.64 per board, resulting in an annual saving of £8,000 before taking
into account compensation savings. It is therefore recommended GTM investigate further to
find the optimum resin content with regards to thickness and apply this to all boards. This
issue is discussed further in Section 4.1.

Gauge

9 8 6
Resin Cost (per 103
lb) £21.20 £19.60 £18.00
Boards per 103
lb 2.5 3.3 5.0
Resin cost (per board) £8.48 £5.88 £3.60
Thickness (inches) 1 0.75 0.5
Resin cost (per thickness) £8.48 £7.84 £7.20
Savings can further be made by reassessing their relationship they currently have with their
current suppliers. This issue will be addressed in Section 4.3.
When GTM’s figures for heavy board were converted from weight into price per board to
make them comparable with SF this created an anomaly. The converted GTM figures show
each heavy board to be sold at £55.84, however, SF figures state this to be the price they are
purchasing heavy board from competitors Lavers, and GTM prices are in fact £1.12 more
(£56.96). Combining these anomalies and the anonymous fax message (Appendix), we have
concluded that Mr Burr and Mr Bookcook are embezzling company profit. GMT have stated
how they sell 40,000 heavy boards externally at the same price as to SF, combined with the
15,000 sold to GTM, we identified a total embezzlement of £61,600 last year (55,000 x
£1.12). This issue is addressed in Section 4.1.
2.2 Smooth Finish Issues
The numerous changeovers during production is an issue for SF (over 50 in one day). The
current production system lacks order, resulting in inefficient operations. With 35 minutes for
every gauge changeover, and 15 minutes for every finish changeover (we have assumed these
times were included in the set-up times at the start of each day), 1780 minutes are wasted in
the example day (p.22; Appendix).

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Considering the example day, current utilisation rate for the machines is 58.02%. However,
this increases to 80.83% when finishes are re-ordered, and to 88.65% when re-ordering
gauge. With current actual output, the efficiency capacity is 61.2%, increasing to 85.27% for
re-ordered finishes, and to 93.52% when re-ordering gauge. The efficiency capacity provides
the most reliable evidence, as this considers the maximum output rate that can be sustained
under normal realistic working condition, rather than the ‘ideal’ which may be harder to
achieve (Reid, 2010). These figures show a more efficient process can be achieved when re-
arranging the order of production.
Although, the new machine is faster and reduces the annual overheads by £10,000, the high
initial cost of the machine (£350,000) and increased available capacity achieved by
rescheduling lead us to recommend that the investment is rejected and reassessed later if a
large increase in demand occurs. Note that the example day provided was of an above
average day and therefore providing additional evidence that the new machine is not required.
!"#$%& ($#)$#
*+,-./ 0%)%"-#1
=
203,072.92
350,000
= 58.02% ("$88+/# $#-&-,%#-=/ I=8 +?%J)&+ @%1)
282,916.67
350,000
= 61.2% $#-&-,%#-=/ L-#ℎ I-/-,ℎ 8+ − =8@+8-/.
310,260.42
350,000
= 88.65% ($#-&-,%#-=/ L-#ℎ .%$.+ 8+ − =8@+8-/.)
SF state how 75% of boards are bought from GTM (figures for 2013 show this to be 82.5%),
with the remainder being purchased from GG competitors (p.19). Although consistent with
the practice of autonomy, this has created an environment of hostility and unhealthy
competition within the organisation, as well as resulting in profits being lost.
2.3 Swansea Board Supplies Issues
SBS have paid thousands in compensation following increasing customer complaints
concerning the quality of light gauge board. This issue stems from an on-going reduction in
the fibre-glass strengthener content at GTM (p.23), a decision made by Mr. Burr, who
seemingly disregards SBS’ calls for change (p.15). Although “expensive stuff”, quality should
not be compromised here. Failure to adhere to change could result in the loss of valued

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customers, negative publicity/feedback, and/or subsequent reduction in profitability. This
issue is discussed further in Section 3.4.
The forecasts show an increase in demand for heavy gauge board. However, due to poor
delivery from SF, SBS are reluctant to place heavy gauge orders to prevent customer
dissatisfaction, and are contemplating sourcing from outside the GG (p.24). Also, in an
attempt to counteract SF’s poor delivery, SBS are keen to supply from stock; aiming for 4
days’ safety stock - 20 working days, as opposed to their current mean lead time of 16
working days - this would require an increase in stockholding volume by 30% (p.23). Poor
delivery may begin to affect SBSs’ delivery reputation; this is a key reason for loss of custom.
These issues will be addressed in Sections 3.1.
2.4 Glamorgan Group Issues (Holistic View)
It is apparent from your correspondence with GG managers, that there is a lack of
communication within the firm. This is evident in the ignorance demonstrated by Ms. King
when she refers to Triton, as ‘Trident’ (p.25). Furthermore, forecasts obtained by SBS were
not shared with GTM or SF resulting in misinformed operations regarding demand for light
gauge board (p.19 & 21). This issue is addressed in Section 4.1.

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3.0 Investment Proposal Discussion and Recommendations
3.1 Should Swansea Board Supplies have the new warehouse?
We believe SBS are looking to extend storage for the wrong reasons. Reid and Sanders (2010)
note that firms often hold excess inventory to protect against uncertain or poor delivery from
its supply chain networks, i.e. the underlying issue is SF’s poor delivery (and SBS’ ordering
system), not SBS need for storage. By altering supply chain efficiency and the way orders are
placed, these proposed expansions are rendered unnecessary. Further recommendations that
encompass improvements to the supply chain and ordering system, i.e. the implementation of
JIT (just in time), are discussed later in Section 4.2.
Volume UK Market
9g. Heavy 8g. Medium 6g. Light Total
6,665,000.00 3,250,000.00 4,585,625.00 14,500,625.00
7,081,562.50 3,250,000.00 4,543,937.50 14,875,500.00
7,498,125.00 3,312,500.00 3,543,437.50 14,354,062.50
7,414,812.50 3,375,000.00 2,001,000.00 12,790,812.50
9,164,375.00 3,437,500.00 1,917,625.00 14,519,500.00
9,997,500.00 3,500,000.00 1,834,250.00 15,331,750.00
10,830,625.00 3,500,000.00 1,834,250.00 16,164,875.00
Difference from 2013
374,875.00 103%
- 146,562.50 99%
- 1,709,812.50 88%
18,875.00 100%
831,125.00 106%
1,664,250.00 111%
Therefore, it is our decision to reject the warehouse proposal but recommend that the new
handling system.
3.2 Should Smooth Finish have the new high capacity No.2 machine?
As discussed in Section 2.2, the current inefficient arrangement for the production process
was addressed by batching primarily by gauge and then finishes (Reid and Sanders, 2010).
The SF report states that the new machine is to be used to supply light gauge boards.
However, demand for this gauge is predicted to decrease, therefore there is no need for the
increased capacity.

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Whilst the new machine would reduce the company’s overheads by £10,000 a year, this is not
much compared to the initial purchasing cost of the machine and therefore in considering the
above analysis we concluded that this would be an unnecessary purchase.
As previously discussed, it will be beneficial for GG to reschedule the production process so
that all gauges of the same type, are batched together and secondary by finish (See appendix
for alternative arrangement). As a result, the changeover time will be significantly reduced
and machine 5 has effectively been freed, allowing SF to take on extra demand when
necessary.
To establish the most efficient way of processing the boards, it is recommended to invest in a
computerised system. This will save time and help optimise the finishing process. We also
recommend an order deadline, to ensure enough time for computing the best processing
order. For this to be fully efficient there must be a high level of communication between SBS
and SF. This particular issue will be addressed when discussing JIT in Section 4.2.
Whilst the company should be operating a 3 week cycle, most of the orders are smaller than
this which leads to a rush of delivery as soon as an order has been placed. A 2 week cycle
worked previously and should work with the new re-ordered batch.
3.3 Should Glamorgan Mill have the new oven for light gauge?
From the analysis in Section 2.1, it is evident the pulping process could cope with increased
output; the new oven is profitable and the investment could be paid back quickly. Financially,
it is clear that the new oven could be beneficial to the GG.
Therefore, it is our decision to recommend purchasing the oven. However, there is evidence
suggesting a decrease in demand for light gauge board (Figure 1). With Group discussions
regarding the forecasted demand for all three boards, the new oven may be used more
effectively.
Figure 1: Forecasts for GG Market: 2008-2019

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3.4 What, if anything, should we do about the increasing level of complaints?
Given the amount of compensation paid out by the GG last year, it is essential that
complaints are taken seriously with immediate action. The nature of the industry means GG
relies heavily on loyal customers; it is therefore necessary to embrace complaints in order to
improve quality, retain a customer base and improve practices within the organisation
(Customer Expressions, 2012).
Whilst we are unsure of GG’s current complaints procedure, we recommend a review of its
current policy to ensure that all complaints are addressed and investigated fairly and quickly,
providing feedback to the complainant (Customer Expressions, 2012).
Regarding GTM, we suggest that the fibre-glass strengthener is the root cause of all quality
issues at the present time. However, we calculated that the cost of increasing the quality of
light board would be offset by the savings made through elimination of customer
compensation, so pursuing this improvement would be beneficial to GG.
4.0 Further Recommendations
4.1 Communication
When dealing with issues regarding supplies and costs from GTM, the current ‘autonomy
policy’ must be abandoned, and improve communication between all three companies. This
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Number of Coated Boards
Year (2013-2019 = estimated assuming maintaining their coated board market
shares of heavy 10%, medium 18% and light 13%)
Glamorgan Group Sales and Estimated Sales Figures
Heavy
Medium
Light

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appears to be the source of most problems and, until the GG starts working as one, it will
prove extremely difficult for any change to take place.
Grunig (1992) describes internal communication as the ‘catalyst, to organizational excellence
and effectiveness’. There is a distinct lack of horizontal communication between the three
companies which has resulted in customer complaints regarding quality, pricing issues
between the companies, and unreliable delivery times. To improve communication, a greater
focus into the structure of the GG is required.
Horizontal communication can be encouraged through a matrix structure, which uses both
divisional and functional chains of command within the same part of an organisation (Daft
2012). Whilst the current structure does adopt elements of the matrix, e.g. vertical integration,
there is a lack of horizontal elements. Therefore, it is proposed that the new structure shall
take the following form:

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Matrix
Bosses’
Smooth Finish
Swansea
Board
Suppliers
MD
John Peterson
Finance
Director

Personnel
Director
Marketing
Director
Production
Director
Glamorgan
Mill

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The Managing Director, will oversee the product and functional chains of command, with the
matrix bosses acting as the functional or product supervisor responsible for certain aspects of
the matrix. Both matrix bosses and managing director must work together to reach joint
decisions and resolve conflict (Daft 2012).
Larson et al. (2003) state that, as a result of increased communication; motivation and
commitment is likely to increase among the workforce, due to increased involvement with
the decision making process.
It is recommended that Mr. Burr and Mr. Bookcook step down, due to their part in the
embezzlement from GTM. We recommend their replacements have some experience in
implementing lean production systems, to assist the smooth transition to JIT management
(see 4.2.2).
4.2 Implementation of a Lean Production System
We recommend implementing a Just-In-Time (JIT) production system throughout GG. This
is an all-encompassing philosophy, founded on the concept of eliminating waste i.e. anything
that does not add value: material, time, space etc. (Reid & Sanders, 2010). Following JIT
principles, SBS’ proposal for excess inventory storage – 4 days safety stock – is therefore
wasteful. Excess inventory has been highlighted as an explanation for hiding underlying
operations management problems (Daft, 2012; Schonberger, 1982), further justification for
the rejection of a warehouse expansion for SBS in 3.1JIT consists of three elements that
should be implemented at GG: Just-In-Time Manufacturing, Total Quality Management and
Respect for People.
4.2.1 Just-In-Time Manufacturing
JIT Manufacturing specifically calls for a master production schedule, therefore
complementing the aforementioned rescheduling of board production (by gauge). Achievable
through utilisation of computer software programmes (e.g. ERP), you could easily establish
the most efficient production schedule possible, using order cut-off points from the previous
production day (e.g. midnight). This computerised system could then act as a ‘digital kanban’
for relaying orders through the companies.
The efficient arrangement of board production further supports the rejection of a warehouse
expansion; JIT produces the correct quantity of goods to arrive at the correct time,
eliminating the need for safety stock. This lowered inventory also means less working capital
is tied up in storage, eliminating the risk of damage, theft or obsolescence of boards.

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4.2.2 Total Quality Management (TQM)
This element of JIT emphasises effective communication, cooperation and integration of all
levels and functions of the three GG subsidiaries (Reid & Sanders, 2010). For enhancing
communication, you could implement regular daily/weekly workforce meetings with links to
a higher management committee.
TQM requires issues of quality to be uncovered and corrected at the source. We propose a
more inclusive attitude towards problem solving within the GG, and active encouragement
for workers to highlight problems.
We recommend that the current policy of autonomy be abandoned. The GG should start
afresh with vision and mission statements detailing the shared direction the companies are
taking. This will enable strategic planning and provide clear organisational goals for all
members.
4.2.3 Respect for People
The final element of JIT centres on the HR function; it considers workers to be an essential
part of the company, and requires participation from all GG employees. Aspects of Respect
for People currently exist, as demonstrated by Bill Board, who pronounced SF’s best asset to
be their experienced workforce. While this is positive, it is vital to extend this respect to
employees throughout the GG.
4.2.4 Further Implementations of JIT
It is important to reassure employees that their jobs are safe and that changes do not have to
result in job loss. Assuming the implementation of gauge reallocation (SF – see appendix)
and the subsequent freeing up of Machine 5, it is proposed that the multiskilling of workers is
used to reallocate personnel based on response to orders and the external environment. This
could include performing maintenance jobs to eliminate the need for paid outside contractors
(Daft, 2012).
Contingency planning throughout the organisation would support flexibility and avoid supply
chain disruption (Svensson, 2004). For example, illness outbreaks in the workforce could be
avoided by offering weekend/night shift overtime.
JIT will affect GG business functions in the following ways:

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Accountancy: Allocation of overheads based on activity costing, rather than direct labour
hours. Therefore, the subsidiary that operates the greatest amount of activity would be
allocated a higher share of spending capital (Reid & Sanders, 2011).
Marketing: Operate towards a customer-driven standard of quality, rather than quality as set
by the producer (the subsidiaries) (Ibid.). A new customer service department should be
established, to maintain excellent customer relations and to increase adaptability concerning
customer needs. This will aim to reduce the level of compensation currently being paid out.
Finances: Investment in training multi-skilled staff, and if needed engineering new
mechanisms on the product line (Ibid.).
Sustainability: through a philosophy of elimination of waste, it is fully compatible with
environmentalism which could prove attractive to existing and new customers (Ibid.).
Transparency in JIT operations is vital; currently there is none, as highlighted in section 2.1;
this matter could severely inhibit the successful implementation of JIT, as all GG
stakeholders must fully embrace a change and support each other. JIT’s successful
implementation is dependent on trust and truthfulness within the GG.
4.3 Supplier Recommendations
It is recommended that further investigation into a supplier closer to Swansea be undertaken.
This is due to the likely high transport costs associated with sourcing from across the North
Sea. Suppliers must be continuously reassessed in tandem with a changing environment.
However, I understand that the Mill have been sourcing from the same company for years
and have a good relationship with the suppliers and therefore, if you did wish to continue it
may be would be worth negotiating a better price, possibly to match that of a supplier closer
to home. There is certainly the potential for money to be saved here.
4.4 Implementing Change
Given the range of changes across the GG, it may be necessary to put together a strategy in
order to facilitate change across the organisation (Daft, 2012). A training and development
programme will be necessary to train all employees in relation to the new changes.
Whilst most may be in favour of change, the possibility of resistance to change must be
considered. Factors such as risk of increased work load, or change in practices may make
employees resistant to change (Daft, 2012). A lack a trust within the organisation is another

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reason for change resistance (Ibid.). The issue of embezzlement between Mr.Bookcook and
SF could ignite a lack of trust within the organisation, inhibiting the implementation of
various changes throughout the GG.
It is necessary, as CEO, to consider implementation tactics in order to facilitate change.
Tactics such as communication, education and negotiation would enable employees to
understand fully understand the why these changes are important to GG (Daft, 2012). As a
last resort, it may be necessary to adopt coercive techniques in an attempt to carry through the
changes (Daft, 2012).

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