Aarhus School of Business ASB Library University of Aarhus Scanned article Anthony, Robert N. & Govindarajan, Vijay, (2006). Chapter Case 4-6: Grand Jean Company. In: Management control systems: 6., pp. 200-203, McGraw-Hill/inwin, 8487_Anthony.pdt Copyright permission is given by Copydan with reference to agreement of February 2004 between Copy-Dan and The Library of the Aarhus School of Business. The volume of this article is in accordance with the instructions in the agreement. Redistribution of this article to third party is not permitted.Case 4-6 Grand Jean Company the Grand Jean Com founded in the mid-19th & The frm ket durability of its dominant product—blue denim jeans. Grand Jean had ena market leader with “wash-and-wears” bell-bottom and flare jeans, and modern easnal pants, By 1989 it was one of the world’s Largest clothing mm: tfacturers, It offered a wide variety of dress and fashion jeans for both m tnd boys and a complete line of pants for women. Tt enjoyed a reputation fo reasonably priced, quality pants. The company sold 40 million pairs of pant last year Production rs, Grand Jean » had to begin to ration its pants to buy he close of the production year. The company owned 25 manufacturing plant The plants’ capacity’ varied, but the average output was about 20,000 pairs of pants per week. With the exception of only blue denim jeans, the plants produced various typ Juction capacity by contracting with independent man: ‘oor three plants that usually produced of pants. The firm augmented its own ufieturers. Currently, there were 20 sueh eontractors maki blue denim jean year contractors produced onc sald by ( | Jean’s pants (includi Tom Wicks, vice president for production operations (see organization chart in Exbibit 1), commented on the firm's use of outside contractors: “The major y of these contractors hi rn with us for five years or more, Several of them ed Grand Jean efficiently and reliably for « ) years. In v gerness to get the pants made, we understandably link with some independe Jon’t know what they are doing and are {orved of business aft or so because their costs are too high. Usually from an ind pendent's experience and per unit contract price whether or ‘Contract agreements are made by me and my staff, The or maxima ‘ willing ach type of pants is very we ished by ni Ifa contractor impr able nal ty pants, we will f nt ¢ i ht bid 4 r a8 4) h. Henec often stepped of existing faciliBIT 1 Jean izatio ir k « 208 The Control System Mr. Wicks continued: "We treat our 25 plants as expense centers. Operations at each plant have been examined thoroughly by industrial and cost enginec You know, time-and-motion studies and all. 'm quite proud of the standard imes and costs we have in place, We have even developed learning curves that long it will take produetion of given type of pants to reach the urs allowed per pair after initial start-up or a product switch-over the rate at which total produetion time per pair reaches standard for ery basic style of pants we make. We use this information for budgeti plants cost. The marketing staff estimates the quantity of pants of each type it wuts produced cach year. Thait information is used to divide total production mong the plants, ['possible, we like to put one plant to work for a whole year on ane type of pants. That saves start-up and changeover costs. Since we ean Hall we make, we try to keep our plants at peak efficieney, Unfortunately, th narketing folks always manage to complicate production schedules withjonth b ‘i We alsa lo wer thin a f 1 nunity relations been Are his empl i any ave very cor about eto A constitnted the Grand dea tom. A U-to-5 seal eS was the rato, At year-end, Grand d p mat rgement determined 3 bonus base rating the firm ind profits for the year, The bonus base had been as high as $10,000. The pe mance rating for each member of Grand Jean's m ment mal ied by this bonus base to determine a given 1 Por exam muinager with a 3-point rating would receive Grand Jean's m ment group included many fina; I marketin jalists. The casewriter noted that these person corp ate headquart re consistently a ratings by th upervisors than were plant managers. This differe nsistontl The five marketing departments listed in Exhibit 1 unde joe presi marketing are treated ag revenue centers. Mark orucasts are used ‘et sales unit and sales dollar targets, The performance of marketing depa nent managers is measured on the basis of meeting these targets, To meet wer tores and clothing d tors. For marketing department perf i .ssment, the sales of each line of pant ned to th et marketing department (i.0,, basic jeans, etc. |. Marketing department manauer participated in the company’s b tem, Evaluation of the System Mia Pac cent business sc te, gave itor her opi ons regarding Grand Joan's production operations an weedures: “Mr. Wick the ecutives Pve ¢ i ry intelligent bi sman. But I really don't appro tation program, I accident na di of produced over quota, He d mn " 1 Th ui f mpany that W_ hate t Resp omer Rxpenset 203 Aso, Mr: Wicks worked his way up the ranks ofthe company: He was. very sol plant manager hinelfand lecls that everyone should run a plant the way enti For example, in Me, Wicks plant there were IL workers for every su visor or ember a the offie and administrative staff Since then, Me: Wieks vr clevated this supervision ratio of T:1 to some sort Vindex of lead Coship effeienes. Al plant m sim for wand, as result, usually under plants Theve simply aren't enough people in the offices out there to generate dlurd hours determined in these plants.and the older ones. The older sewing ma Questions |. How would you deseribe the goalls) of the company asa whole? Is this, or are these. the same as the goals) of the company's marketing onganization and tifturing plants and the marketing departments. What are the strengths and weaknesse sceause it would overcome some of the problems discovered by Mia Packard mal the easewriter This plant manager commented, "/Myi competitor isthe Jean asuny plant makes, And this outsider might also make pants for Grand Jean's eompetitors, Because of the competitive market, only the best. man | plants survive in this business. Therefore, like the outside comp: snager t should have bottom line responsiblity and be rewarded accord seanis 25 manufacturing plants? How would this approach affect the plan Ml to retailers and distributor ki :