Consolidating plants from different locations for the company poses a major challenge, which should be approached carefully in order to avoid poor results. Notably, there are benefits associated with consolidating. For instance, cost reduction is one benefit so significant, which presents appropriate advantages. There are also challenges like the challenge of feasibility. Not all consolidation plans work out successfully. Therefore, it is usually necessary for a company to assess the feasibility of a consolidation plan . Sleep more plans to make the consolidation in order to enjoy the benefits associated with consolidation of plants. However, it is constrained by the possible challenges, which may affect its performance once it has consolidated the plants. Various factors that occur in the context of the organization have special implications for the consolidation plan. The questions to be discussed in this assignment are the quantitative attributes to consider, appropriate weights of the quantitative attributes, comparison of the three locations based on ratings and weights, the order of phasing the consolidations and the level of dominance of either location in influencing consolidation.
Rate the four quantitative attributes and describe your rating
The four quantitative attributes to rate include productivity, sales, profitability, and performance. Consolidation has the effect of bringing production activities together. Efficiency will lead to increased productivity. Increased productivity triggers increased sales. Sales may increase considerably on consolidating due to increased efficiency in production and marketing activities. However, effective marketing and sales promotion techniques are relevant in this case in order to ensure increased sales volume . Profitability rises with increase in sales volume. If the volume of sales increases, profitably increases proportionately as long as the terms are maintained. Performance improves based on the level of productivity of the organization as such, sleep more mattress will experience significant levels of performance if productivity increases.
The plant size (sales) =$35m
Benefits for consolidating = $15
Total size of the plant (sales value) = $50m
The productivity will increase by 15/50*100% = 30%
This is clear indication of increased productivity. Based on the reliance of each of the attributes on the other, there will be proportionate increment in the values of the attributes.
Weight for the attributes
Notably, productivity has a higher weight in this case. Increased productivity has significant implications for the other quantitative attributes. Productivity has the highest percentage of contributing to the success of the organization. If productivity increases, there are supply is sufficient to meet the market demand. Productivity gives birth to increment in the volume of sales. Increased volume of sales will only occur if the rate and level of production is high. Increased volume of sales results to higher profitability. Higher profitability entails making profits higher than the previous profit records. As such consolidating the plants will ensure efficiency, which is responsible for the indicated outcomes. Performance is the product of productivity . Low profitability indicates low performance. High productivity indicates high performance. Hence, performance is dependent on the attributed listed above. Without the attributes, it would not be possible to quantify or rate performance.
Consider that the attributes below
Current productivity = 500,000 units
Profitability = $100M
Performance = 20%
\the new value of the attributes would be (holding all factors constant and assuming a proportionate increase upon all attributes)
Productivity 500,000*130% = 650,000units
Sales =250M*130% = $325M
Profitability = 100*130% = $130
Performance = 20%*130% = 26%
Comparison of the three locations
The three locations have different levels of contribution towards the current level of profitability and performance. The combination of the plants consolidated depicts higher performance than both plant 1B and plant 1A take individually. This is a clear indication that a consolidation would work more effectively than the independent plants. Plant 1B depicts better performance in various attributes of concern compared to plant 1A. Based on the evaluation of 1A and 1Battributes, including labor, quality, and service among others, 1B leads in most of these aspects. This clearly indicates that it has a higher rate of contribution among the three. Plant a follows in terms of the attributes highlighted above . Essentially, it shows a considerably desirable level of performance based on the noted attributes. It is clear that consolidating the two plants 1A and 1B into a single plant has better results than the individual plants located in different places.
Order of phasing consolidations
If I were to phase the consolidations at one time, I would arrange them as follows: 1A and 1B, 1A and 2B, then2A and 1B. The phasing would occur in this order since the value addition is high based on this combination. This is a clear implication that their feasibility is appropriate based on this order of phasing . Essentially their performance would also be high based on the order as presented in this list. This has been obtained after a thorough assessment of the various attributes of consideration as indicated in the case of the plants of sleep more mattress.
Dominance of any of the locations
Essentially, the location of plant 1B dominates the others. Based on the scope of its operations, it depicts a higher level of performance. This clearly demonstrates its dominance over the other locations in terms of business feasibility. Productivity is high just as other attributes under consideration. Based on the weight of the plant, its marginal contribution within the consolidation is higher . This clearly implies that the plant location dominates the other and should be chosen as the place for the consolidated activities of the three plants.
Sleep more mattress will experience higher benefits once it consolidates its plants in one location. This is because it will cut on some operational costs, which have been reducing consolidated profitability of the company. Merging the different weights held by the plants will have far many benefits than have been experienced previously . However, it is necessary to determine feasibility of consolidating by considering the effect of this change to the overall operations of the business. This will enable a clear analysis, which will lead to development of informed decisions. Notably, the plants should be paired for consolidation based on the effect that one will have on the other. The effect should be positive in all aspects in order to ensure objectivity.
Max, Krotman. & Joel, Sinkin. "Which Way Is the Wind Blowing? the State of Consolidation of Accounting Firms." The CPA Journal, Vol. 70, No. 8 (2000): pp 5-55.
Trond, Kkudsen. et al. "Brand Consolidation Makes a Lot of Economic Sense: But Only One in Five Attempts Succeeds." The McKinsey Quarterly, No. 4 (1997): pp 6-45.