Case Study TRG

Introduction: Since 1986, The Rubber Group has produced and distributed rubber products for a variety of industries like yours including Medical/Healthcare, Transportation, Process Control and a variety of industrial applications from high tech printing equipment to precision measuring devices. We can provide you with small prototype runs to full production with very short turn around to satisfy your schedule. You can choose from our standard line of mechanical products which include rubber grommets, isolation mounts, bumpers, feet, tubing & cord and o-rings. If we don't have the right part for your application, you can take advantage of The Rubber Group's full range of custom manufacturing capabilities: custom molded parts, custom extruded profiles die cutting and fabrication and all with a full compliment of value added processes. The Rubber Group has developed engineered synthetic and natural rubber compounds including Silicone, Natural Rubber, Fluoroelastomers (Viton) and others. Many of these meet UL, FDA, ASTM and military specifications. Materials and processes are controlled to ISO 9001:2000 standards. Our lean manufacturing practices assures you competitive pricing of quality parts. Our rubber parts are shipped worldwide, produced with lean manufacturing practices on timely and efficient Kanban schedules. The Rubber Group satisfies Fortune 500 companies to industry start-ups. Sixty plus years of staff experience provides you with confidence in part design, integrity and economic return for you; our most important customer, large or small. (a) 1. 2. 3. 4. 5. 6. 7. 8. Problems related to the use of budget Meeting only the lowest targets. Using more resources than necessary. Making the bonus- whatever it takes Competing against other divisions, business units and departments. Ensuring that what is in the budget is spent. Proving inaccurate forecasts Meeting the target but not beating it. Avoiding risk.

Meeting only the lowest targets it infers that once a budget has been negotiated, the budget holder will be satisfied with this level of performance unless there is good reason to achieve a higher standards.

Using more resources than necessary is about once budget has been agreed the focus will be to ensure that the budgeted utilization of resources has been adhering to. Indeed the current system does not exceed to budget level. It may be however the failure to achieve budget targets would reflect badly on factors such as future promotion prospects or job security. A bonus system is linked to the budget setting and achievement process might lead to action by employees and management which they regard as fair game. This is because they view the maximization of bonuses as the main priority in any aspect of budget setting or work output. Competing against other divisions may manifest itself through the attitudes adopted in relation to transfer pricing of goods and services between divisions, lack of willingness to cooperate on sharing information relating to methods, sources of supply. Management budget setting process as a competitor for resources. Irrespective of the budgeting method used, there will be a tendency to feel that unless the budget allowance for one year is spent, there will be imposed reduction in the following year. This will be particularly relevant in the case of fixed cost areas where expenditure is viewed as discretionary to some extent. Inaccurate forecast is the misrepresentation may be employed by the budget holder in order to gain some advantage. Misrepresentation refers to creative planning in order to suggest that the measure is acceptable. (b) Using data from the Bettamould division. 1. Meeting only the lowest targets: there is no specific incentive for the BETTA MOULD division to try to achieve better level of performance. 2. Using more resources than necessary: moving to outsourcing the machine maintenance from a specialist company could help reduce idle time levels and permit annual output in excess of 100,000 tones. 3. Making bonuses: there is no sanction mentioned. 4. Competing against other division: the material of equal specification could be sourced for 40% of annual requirement from another TRG division which has spare capacity. 5. Ensuring that what is in the budget is spent: since this could lead to the need to reduce the number of employees, which they may see as having a detrimental effect on the ability of the division to meet its annual budget output target if 100,000 tones. 6. Providing inaccurate forecasts: in the scenario there may have been deliberate efforts to increase the agreed budget level of aspects of measures and cost. Problem may be overcome. 1. Meeting only the lowest targets: there must be additional incentives. 2. Using more resources than necessary: it may be that engendering a culture of continuous improvement would help ensuring that employees actively sought way of reducing idle time levels.

3. Making the bonus: Dissemination of information to all staff relating to trends on performance, meeting targets, etc may help to improve focus on continuous improvement. 4. Competing against other divisions: input from directors may help. 5. Ensuring that what is in the budget is spent: it is necessary to educate to management into acceptance of aspects of budgeting such as need to consider committed, engineered etc. 6. Providing inaccurate forecasts: TRG may insist an independent audit of aspects budget revisions by group staff.