Riordan Manufacturing Strategic Plan

. Riordan Manufacturing Strategic Plan University of Phoenix Strategic Management MGT/498 Riordan Manufacturing Strategic Plan A world renowned plastics manufacturer employing nearly 550 workers worldwide, Riordan Manufacturing Co. a leader in the industry of plastic injection molding, has more than $1 billion in revenue. With operations based in California, Michigan, Georgia, and China, review of current resources within Riordan’s business structure reveal numerous areas in need of redefining to improve operational efficiency company-wide.

Implementation of this proposed strategic plan will address issues areas of improvement including
• Ethical and social responsibility considerations
• Competitive advantages, strategies, improved innovation, and sustainability in domestic and international markets
• Strategy effectiveness measurement guidelines to be used
• Internal dynamics, cultural, and structural leadership
• Business continuity
• Assessment, feedback, and alternative directions as needed

Since the founding of the company in 1991, Riordan manufacturing enjoys status as Fortune 1000 company and shares a number of competitive advantages with many other companies in various lines of business.

Riordan shares the competitive advantages of direct selling along with customer, employee, and shareholder commitment with global Internet retailer Amazon.

com and juvenile product and toy retailer Toys”R” Us. Riordan provides revenue and profitability growth as they provide products at the lowest cost along with a commitment to the communities Riordan serves.

Riordan also shares the advantage of strong brand recognition in their industry just as Nike, Ford Motor Co.

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, Homes. com, and Federal Express have in their markets. Riordan is also known for their strength of quality in engineering on par with the Ford Motor Co. Strategic Plan Riordan was founded by Dr. Riordan, a professor in chemistry in 1991 (Apollo Group, Inc. , 2008). Over the years Riordan has expanded the business from development, to manufacturing and, to production. Riordan was able to accomplish this expansion by acquiring a manufacturing plant in Pontiac, Michigan, and an additional plant for production in Albany, Georgia.

In 2000 Riordan took their operation global and opened a manufacturing plant in China. Riordan has been able to manage three locations successfully to date. However, Riordan recognizes the need to develop a strategic plan to increase profitability by establishing new accounting and marketing systems. A strategic plan must be realistic and attainable. Riordan’s strategic plan should serve as the framework for future decisions, it should inform, motivate, and involve their stakeholders. The strategic plan should include benchmarking and performance monitoring.

The plan should stimulate change and become the building block to future plans within Riordan Manufacturing. Riordan’s strategic plan should address the finance and accounting department’s inability to obtain seamless data reporting within the three locations that cause delays in month end reporting (Apollo Group, Inc. , 2008). The ability to provide timely month end reporting to the board of directors is essential to recognizing potential financial threats and trends in the business. In addition the strategic plan should address the antiquated marketing system.

Riordan has achieved several accolades over the years. However, most of this data is filed away and not easily accessible to the marketing department. The development of a marketing information system will give research and development the ability to use historical data for tracking units, volumes, and products sold for developing new marketing strategies (Apollo Group, Inc. , 2008). The Role of Ethical and Social Responsibility Ethical and social responsibility will have an intricate role in Riordan strategic management plan. Ethics involves knowing right from wrong and simply doing the right thing.

Riordan must ensure they are reporting true and accurate financial records to all stakeholders. Today Riordan uses three separate accounting systems to compile financial data. This data is often re-entered by the headquarters office in San Jose. Manual entry of information is subject to reporting inaccuracies that may question Riordan’s ethics. The Sarbanes-Oxley Act of 2002 mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud. Riordan has a social responsibility to ensure the manufacturing plants are producing quality materials.

Riordan must ensure they establish an effective quality control program consisting of design reviews, engineering analysis, adequate recordkeeping of raw materials and finished goods, inspection of incoming materials, testing during the manufacturing process and finished part inspections. These records should be of sufficient detail to document the steps that were performed in manufacturing the product. Such records should include results of design reviews; supplier information, product testing and inspection; equipment calibrations; and product tracing information (AM Trust North America, 2010, p. 4). The records will assist in timely detection of safety hazards and trends within Riordan Manufacturing. Environmental Scan To better understand what Riordan’s competitive advantages are and which competitive strategies Riordan should use to improve innovation and sustainability, members of Team A must first perform an environmental scan. The simplest and most effective way of conducting the scan is by performing a SWOT analysis on Riordan (Wheelen & Hunger, 2010). Riordan possesses manyuch strength’s as the team observeds fromin the internal environmental scan.

The corporation’s brand is widely recognized in the automotive parts, aircraft, and appliance manufacturing industries as well as with the Department of Defense, beverage makers, and bottlers. The company manufactures its products on two different continents, so it can reach an international market and reduce some costs by manufacturing in a more underdeveloped country, China. This adds to Riordan’s ability to offer their products at lower prices while maintaining revenue and profitability growth. The manufacturing firm also boasts high standards of quality as it exceeds ISO 9000 standards (Apollo Group, Inc. 2008). Riordan has several weaknesses. The first is their costs of goods are directly related to the rising cost of oil. Because Riordan’s products are made from polymer and derived completely from oil, profit margins are greatly affected when oil prices rise. Riordan’s finance and accounting systems in each of their manufacturing branches are not compatible with one another. This has resulted in higher labor costs, costly monthly auditing, slow reaction time to financial dilemmas, compliance to government regulation strains, and high inventory costs (Apollo Group, Inc. , 2008).

The external environmental scan shows some opportunities for Riordan. Consumer demand and capital spending remain steady in the midst of a global economic downturn. Globalization is also allowing manufacturing companies to lower operating costs by producing their products in underdeveloped countries where labor costs are much lower. Finally, Brazil is becoming the leading producer of bioplastics and recently has discovered technology to compete with current oil derived plastics prices (Apollo Group, Inc. , 2008). Threats to Riordan could be devastating to the company if not approached correctly.

The downturn in the economy is affecting every industry and thus the supplier of polymer parts. Oil prices are rising each year and increasing the costs of producing plastic materials and parts. Finally, more consumers are pushing for environmental practices and products from large corporations (Apollo Group, Inc. , 2008). Competitive Advantages From this SWOT analysis, Team A observes Riordan’s competitive advantages. Like Toys R US and Amazon, Riordan provides low prices to its customers and maintains revenue and profit growth.

The firm has strong brand awareness and provides the highest quality in manufacturing (Apollo Group, Inc. , 2008). Competitive Strategies and Measurement Guidelines To improve innovation and sustainability in both domestic and international applications, Riordan must approve and implement a few competitive strategies. Riordan managers must reduce inventory costs by 30% and lower labor costs in its existing plants and headquarters by 10%. This strategy can be accomplished by seamlessly integrating each Finance and Accounting department of each branch manufacturing plant and the corporate headquarters.

By implementing a state-of-the-art ERP manufacturing, distribution, and financial software application software, Riordan can reach the above stated strategic goals (Apollo Group, Inc. , 2008). The cost of the integrated system is $1,350,000. Riordan’s CFO will need to make two payments of $250,000 over the next year, and the remaining will be financed through the bank with 8% interest, which will be paid over 60 months. The investment will include manager training and additional licensing for expansion. The system implementation and training will take one year.

The second year will be used to observe opportunities to minimize labor and inventory costs. By year three, audits should be reduced by half, labor costs by 15%. Inventory cost will also drop to 30% by year three because invoices and accounting information will be delivered in real-time, which will allow the company to ship products quickly after they have been produced (Apollo Group, Inc. , 2008). Measurement guidelines must be in place to ensure these strategies effectiveness. By the end of the second year of deployment, labor costs should be minimized by 5% with the remaining 10% reduced by the end of the third year.

Inventory costs should drop by 10% by the end of the second year and the remaining 20% by the end of the third year of implementation. These percentages will be monitored quarterly by the executive management with the current budgets, income statements, and balance sheets. The next proposed competitive strategy is to expand to new markets and increase the company customer base and revenue by 25% in five years. This will be accomplished by moving to a joint venture with Braskem, the world’s leading producer of bioplastics.

Based in Brazil, this venture would allow the corporation to broaden its customer base by manufacturing products for the medical device, cosmetic, food packaging, and personal-hygiene industries. The move would also protect Riordan from fluctuating oil prices by diversifying its resources with plastics made from renewable resources, which are now competitively priced with oil-derived polymers. Providing products out of renewable resources or green products would allow the company to reach more environmentally conscious customers (Morales, Pulido, & Ticas, 2009).

The venture would cost $15 million dollars, which would be funded by Riordan Industries and would surpass the 12% hurdle rate. The investment includes infrastructure, logistics, labor, marketing, and additional machinery and supplies (Apollo Group, Inc. , 2008). The measurement guidelines to ensure the strategy’s effectiveness are based on a percentage of yearly growth added to the company’s current revenue growth from established locations. By the end of the second year of implementation, 2% growth must be recorded, 7% at the end of year three, 15% at the end of year four, and 25% by the end of year five.

These benchmarks will be monitored by the executive management against current revenues. Metrics for new clients, life of existing clients, and lost clients will be monitored monthly to ensure strategy effectiveness. Cultural and Structural Leadership Cultural and structural leadership strategies need to be implemented at Riordan Manufacturing, “Strategy implementation is a process by which strategies and policies are put into action through the development of programs, budgets, and procedures. This process involves changes within the overall culture, structure, and management system of the entire organization” (Wheelen & Hunger, 2008, p. 1). The culture and structure of the organization must be compatible with the new strategy. The strategy implementation is reviewed by the top management team and is conducted by middle and lower lever managers of the organization. Leadership in an organization is vital at all levels of the organization. Ongoing communication is necessary at all levels of the organization as Riordan moves forward to implement the strategic changes (Wheelen & Hunger, 2008). The mission of an organization is the purpose for the company’s existence. The mission tells what the company does.

The vision of an organization describes what the organization would like to become. The mission and vision should capture the culture of the organization (Wheelen & Hunger, 2008). The current mission of Riordan consists of four parts: focus, customer relationship, employees, and future of the company. The focus of Riordan is Six Sigma, having the leading edge of research and development (R&D), and exceeding ISO 9000 standards. Their focus also includes continuing to be the industry leaders in using polymer materials and identifying industry trends.

The mission of their customer relationships is to strive to be a solution provider for their customers and not be part of customer challenges. The focuses of the long-term relationships are to maintain quality control, a responsive business, innovative solutions, and reasonable pricing. The mission for their employees is to maintain an innovative and team oriented working environment. The focus of their future is to achieve and maintain reasonable profitability to ensure that the financial and human capital of Riordan is available for sustained growth (Apollo Group, Inc. , 2008).

Corporate culture should be considered when implementing the business strategy for Riordan, ”Corporate culture is the collection of beliefs, expectations, and values learned and shared by a corporation’s members and transmitted from one generation of employees to another” (Wheelen & Hunger, 2008, p. 149). Intensity and integration are two attributes of corporate culture. The cultural intensity consists of the degree to which members of a unit accept the values and norms associated with the organization. The cultural integration is the extent to which the units throughout the organization share a common culture.

The corporate culture on an organization reflects the mission and the values of the founder. The culture also reflects the organization’s values (Wheelen & Hunger, 2010). Divisional structure, functional structure, strategic business unit structure, and matrix structure are types of the organizational structures that could be considered by Riordan to implement their business strategy. Divisional and functional structures are examples of the basic organizational structures. In the divisional structure the employees tend to be functional specialist organized according to the product/market distinctions.

The divisional structure is used in large corporations with many products lines in several related industries. In the functional structure the employees tend to be specialists in the business functions vital to that industry. The business functions include manufacturing, marketing, finance, and human resources. Functional structure is commonly used in medium-sized organizations with several product lines in one industry. The strategic business unit structure is groups or divisions composed of independent product/market segments.

These groups are given the primary authority and responsibility for the management of their own functional areas of the organization. In the matrix structure the functional and product forms are combined at the same level of the organization. The matrix structure the employees have a functional manager and a product manager (Wheelen & Hunger, 2010). Team A has determined that the best organizational structure for Riordan to implement their business strategy would be the divisional organizational structure. Riordan products include plastic bottles, fans, heart valves, medical stents, and custom plastic parts.

Riordan must manage a diverse product line in different industries. The divisional organizational structure will allow Riordan to decentralize the decision-making authority. Implementing the divisional organizational structure will allow Riordan to maintain their functional specialization in each division. Evaluation and Control Once the company’s strategies have been integrated into its operation, the final stage of strategic management is utilizing applications that will properly and accurately assess the performance outcome within a corporate, a divisional, and a functional viewpoint.

Employing measures that will evaluate and control the implemented strategy by Riordan will enable the firm to ensure that the company is in the direction of reaching its goals by simply comparing its actual performance outcome with the expected results consisting of its performance data and its activity reports, which will provide the compulsory feedback for management to evaluate results and to take corrective action, as necessary (Wheelen & Hunger, 2010). Evaluation and Control Process The evaluation and control process will provide Riordan with a general outlook of the firm’s productivity.

Primarily, it is usually initiated when a gap appears between a company’s financial objectives and the expected results of current activities (Wheelen & Hunger, 2010). Evaluation and control consist of a five step process that assesses and establish guidelines that will address the efficiency and the effectiveness of Riordan’s integrated plan. The five steps are 1) Determine what to measure, 2) Establish standards of performance, 3) Measure actual performance, 4) Compare actual performance with the standard, and 5) Take corrective action.

In summary, the process evaluates and establishes a level of standards on the elements of concern of any new stratagem and then comparing its actual outcome with its level of standards. Should the outcome fall below the set standards, only then remedial actions would be necessary. Figure. 1 depicts the evaluation and control process:  [pic]Figure. 1 Measuring Performance Measuring productivity following Riordan’s integrated plan is done by evaluating the firm’s performance level.

Utilizing the numeric values extracted from its activity and financial reports can calculate the effectiveness or lack of the company’s performance, in an effort to expose any unwanted flaws or unexpected discrepancies. There are specific tools that Riordan can use to measure performance in order to analyze its results within the present time or to foresee possible outcomes. Return on Investment (ROI), Earnings per Share (EPS), and Return on Equity (ROE) are tools typically used to evaluate the corporation’s or division’s ability to achieve the firm’s profitability objective (Wheelen & Hunger, 2010).

Each tool can only calculate earnings during the present time and does not foresee likely profitability; however, ROI, EPS, and ROE are done only when all the accounted figures from the company’s financial and activity reports have been documented. In contrast, these feats would not be ideal when evaluating social responsibility or employee development (Wheelen & Hunger, 2010). A more appropriate tool to better evaluate Riordan’s overall performance level is by utilizing a method known as steering control, which will research variables that will manipulate prospect profitability.

Steering control is categorized into three subcategories, which are input controls, output controls, and behavior controls. Input controls oversee the company’s resources such as knowledge, skills, abilities, values, and motives of the employees. This will help assess of Riordan’s internal infrastructure. Behavior controls are company protocols based on the firm’s policies, rules, operating procedures, and orders from its management. Output controls focuses on areas of the business that are done in a specific way based on the effect of the behaviors through the use of objectives and performance targets (Wheelen & Hunger, 2010).

Shareholder value is a present-day application that most companies employ to evaluate its performance. To help asses Riordan’s operation, this will be a valuable tool in order to estimate economic value, likely profitability, and strategic management effectiveness. Shareholder value is the present value of the anticipated future stream of cash flows from the business plus the value of the company if liquidated (Wheelen & Hunger, 2010). Cash flow is the element that is measured to determine the financial strength and stability of a company.

In turn, to label a company financially sound, profits are weighed against the cost of capital. If Riordan’s profits outweigh the money invested as capital, the company will appear financially strong to its shareholders. There are two methods to measure shareholder value, which are, 1) economic value added (EVA), which assesses the dissimilarity between the pre-strategy and post-strategy values of a firm, and 2) market value added (MVA), which is the difference between the market value of a business and the capital provided by shareholders and lenders (Wheelen & Hunger, 2010).

In combination with the shareholder value method, Riordan will also employ a balanced scorecard. A balance scorecard is a combination of financial and operational measures that will entail data outlining the results of business actions that have occurred along with detailed information documenting customer satisfaction, internal processes, and the corporation’s innovation and improvement activities. These components are the drivers of future financial performance (Wheelen & Hunger, 2010).

There are four elements that make up a balanced scorecard, which are 1) Financial: How do we appear to shareholders 2) Customer: How do customers view us 3) Internal business perspective: What must we excel at, and 4) Innovation and learning: Can we continue to improve and create value (Wheelen & Hunger, 2010)? Business Continuity Riordan struggles in the continuity of its finance and accounting systems in three locations, San Jose, Michigan, and Georgia, with the three locations running separate accounting systems.

Although each system is effective separately running the core functions of general ledger, accounts payable, accounts receivable, order entry, procurement, sales and purchasing history, invoicing and shipping, payroll, financial reporting, three other critical functions, EDI, bar code reading, and EDSS exist only in the San Jose office, where all data is summarized. This lack of continuity causes time-consuming internal audits and re-entry of data once received in the San Jose location.

As San Jose is running a licensed ERP accounting and finance system, additional licenses need to be acquired for the Michigan and Georgia locations. This license purchase will eliminate the costly deciphering of data in San Jose and increase the value of the allotted budget allowance. Cost effectiveness is attained in a year three break-even point and cost savings from that point forward. Another area of continuity concern is the Riordan Human Resources (HR) function in two areas, job requirements and payroll.

Numerous positions need a review in terms of job requirements to ensure qualified employees are in place to significantly reduce reporting errors. Additionally, performance appraisals (Riordan Employee Handbook, 2011) need to be moved to an employee’s anniversary date as opposed to the Riordan fiscal year, thereby staggering budget allocation along with increasing the pay period length to every two weeks to reduce time spent on payroll by 47%. Conclusion

Riordan Manufacturing needs strategic plan implementation to strengthen competitive advantages which increase market and shareholder value. Implementation will reduce inventory cost by 30% in operational plants globally resulting in an addition 10% cost reduction in finance and accounting in the San Jose location. The long term goals of the strategy must be totally supported by Riordan’s executive management team and communicated strongly to the entire organization. It must be measured and controlled and adjustments must be made in light of any unforeseen occurrences.

Installation and training in new systems and procedures must be timed to occur over two quarters with quarter three as a backup plan. Failure to implement a strategic as suggested places Riordan at risk for reduced profits, cost overruns, decreased market share, customer and employee dissatisfaction as well as that of shareholders. As a leader in the plastic injection molding industry, Riordan Manufacturing cannot afford anything less than full implementation of this strategic plan. References Wheelen, T. L. , & Hunger, J. D. (2010).

Concepts in strategic management and business policy (12th ed. ). Upper Saddle River, NJ: Pearson Education. Apollo Group, Inc. (2008). Virtual Organizations [Multimedia]. Retrieved from Apollo Group, Inc. , MGT498 website Morales, R. , Pulido, D. , & Ticas, S. (2009, April). The Brazilian Bioplastics Revolution. Knowledge@Wharton, (), 1-5. Apollo Group, Inc. (2008). Virtual Organizations [Multimedia]. Retrieved from https://ecampus. phoenix. edu/secure/aapd/cist/vop/business/Riordan/HR/Riordan%20Manufacturing%20Employee%20Handbook. pdf