Sensitive analysis as strategic solution in reorganization management process.

Izvercianu, Monica ; Vartolomei-M., Mihael ; Staicu, Florentiu 等

1. INTRODUCTION

The subject of the paper is a plant in difficulty and the aims and objectives of this work are to find strategic solution in order to manage the plant slump. The main objective is to find the optimum solution (Deaconu, 2002) for go plant out the crises. The paper's subject belongs to the economist and engineering preoccupations in the field of organizations' strategic reorganization (Prediscan, 2004). The actual economic dynamic with frequently market movements and many more unexpected factors suppose some restructuration and reorganization processes for competitive companies in order to adapt to the new market challenges (Vartolomei-M, 2009). Scientific literature presents the plant in difficulty as being the plant where "profitableness and liquidity objectives can't be achieved" (Bailesteanu, 2006, Negrila, 2003). The study regards a real plant from Timisoara, in automotive field, the place where our students make faculty practice.

In order to capture the practical evidence the methodology used by authors in this paper consists in sensitive analysis: to design a Business Plan and to simulate the situation (in realist, optimist and pessimist scenario--as Reserve Plan) to realize forecasting on short term.

2. SIMULATION (SHORT TERM FORECASTING)

The fine analysis (detailed analysis of the solution) supposes to modify a parameter of the problem.

Table 1, for instance, reveals the cost components of one plant products: strand cable. Then it is realized a simulation regarding direct workers forecast for L90 shifter product.

The authors made this simulation with Hyperion Retrieve for Excel, in order to improve work participation to a product, or sales situation, in future years. In this fine analysis, it will be made a risk analysis or sensitive analysis. The risk analysis can refer even political, social, and economic factors or the possibility they can be modified. Any factors influence the product cost, and if initial we considered them as fixed, anytime they can be modified. This process will implicitly have influence on manufacturing cost.

3. SENSITIVE ANALYSIS (BUSINESS PLAN)

In the following the authors studied the present and the current economic and financial status of the plant in Profit and

Loss draft for 2008.

Regarding "sales", they were higher than AOP (Annual Operation Plan) in February 2008 by 1.4 mio Ron. Major variances in business are:

* Ford Group +1.183 k Ron (actual vs. AOP).

* DCX Group +196 k Ron (actual vs. AOP).

* Brose +300 k Ron (actual vs. AOP).

Regarding "exchange rate impact", Ron is currently weaker against Euro:

* Current 3.6953 Ron = 1 Euro.

* AOP 3.392 Ron = 1 Euro.

Regarding "material" there's a product mix impact. There is further negative impact of zero purchasing savings considering net material. Actual versus AOP is better with 0.2% from sales.

Regarding "scrap", its level is smaller than AOP by 1.3%. Scrap Pareto is showing that major driver with about 78% of total scrap is assembly. There were small improvements in February compared to previous month. All actions covered by continuous improvement meeting are in progress and weekly reviewed.

Regarding "maintenance & repairs" there is positive difference 328 thousand Ron vs. AOP. More of the repairing started to be made in-house, compensating with materials & supplies.

Regarding "materials & supplies" there is negative difference 300 thousand Ron vs. AOP. Major part of the expenses is for old equipments transferred from Barcelona.

Regarding freight" it's lower than AOP due to reduced deliveries in samples and prototypes.

Regarding "physical inventory (gain/loss) and inventory adjustments", inventory adjustments relate to roll up of standards for new items or for any existing item where routing is updated. There are a lot of changes each month and it's necessary to roll up not only this changed or new item but all parents items which are affected. Second issue is that plant is pushed to produce but not all contracts are available, so standards cannot be set.

Regarding "warranty & other customers charges", there is a positive impact of 56 thousands Ron. For a bigger part of the claims received in January there were accruals build in December 2007 (the parts were shipped in 2007).

Regarding "direct headcount", there was an increasing of direct headcount due to BCN transfer in November 2007, and then we have continuously decreasing it based a very strict control and labour efficiency increasing. Also grading and bonus system implementation is one of the contributors of this positive trend. Direct headcount reduction tracking system in place.

If all issues mentioned above will be solved in 100%, there are good premises to fulfil all the targets.

3.1 Realist Scenario

Thus, in realist scenario the authors had foreseen the indicators as shown in table 2. The total sales will have a positive trend, due to an aggressive market penetration of a new market segment. The trend of Earning before Interest and Taxes and Amortization (EBITA) is positive too. The cost of sales trend is negative, a good situation for the plant, in condition to maintain sales per direct headcount.

3.2 Optimist Scenario

In optimist scenario (table 3) the authors suppose total sales will increase with 15% in condition of direct headcount decreasing (10%) till the end of studied period, due to an increase of labour productivity and labour efficiency paper' authors count on that Logan and Ford Project settlement will be achieved.

In this situation, the cost of sales will also increase with 10%

3.3 Pessimist Scenario (Reserve Plan)

In the pessimist scenario (table 4), the sales will decrease by 10% due to a movement of production from Europe to Asia (China, India). Thus, the cost of sales will also decrease with 5%.

And because of direct labour fluctuation, the direct headcounts will increase with 5% in order to provide proper training programs. If suggestions pointed above won't be taken into consideration, the perspectives of the plant can have a negative impact on financial and economic results of the plant.

4. CONCLUSION

In conclusion, the authors realised scenarios in order to improve plant situation. In realist scenario sales have positive trend, because of aggressive market penetration of a new market range. In optimist scenario we model the sales, direct headcount, labour productivity and labour efficiency. In pessimist scenario we model sales, cost of sales, direct labour fluctuation and direct headcounts. The change must be a permanent inner state for the firm, because problems must be solved only by firm (in a market economy framework). It is very important to succeed in changing the financial discipline: supplier attitude (payment in time), absenteeism rate, productivity rate. Authors make proposals imposed by plant necessity to surpass the crisis moment: financial discipline and technological changes, especially innovative solution in process or product that can launch the plant in front of the market, and furthermore, the authors' study search innovative solutions in products with a great quality, not especially with low cost - by the contrary, high cost products, addressed to the elite segment.

Because the quality of information, communication inside the plant depends on the informational system quality and the type of organizational structure it is necessary to enlarge the activities of electronic data processing, the endowment with efficient informatics equipments, know-how and with specialists (Draghici et al., 2008).

5. REFERENCES

Bailesteanu, Gh. (2006). Plant diagnostic, Mirton Publisher,

ISBN 973-661-945-1, 978-973-661-945-8, Timisoara Deaconu, A. (2002). Plant diagnostic and evaluation, Intelcredo Publisher, ISBN 973-97879-8-3, Deva

Draghici A., Molcho G. & Draghici G. (2008). Intelligent System and Solutions for Knowledge Management in Virtual Research Teams--Ontology and Expertise Map, Proceedings of the 19th International DAAAM Symposium , Katalinic, B. (Ed.), pp. 0433-0434, ISBN 978-3-901509-681, Trnava, October 2008, Vienna

Negrila, A. (2003). Restructuration of plant in difficulty, Mirton Publisher, ISBN 973-661-000-4, Timisoara

Prediscan, M. (2004). Organizational Change. What, when and how to change?, West University Publisher, ISBN 9738433-89-4, Timisoara

Vartolomei-M, M. (2009). Contribution to the management of change and energy in military industry in the frame of suprastate play, Politehnica Publisher, ISBN 978-973-625803-9, Timisoara

Tab. 1. Cost draft of 3 products for Plant Timisoara

Item Cost
Number Material Labour Burden Overhead Total

17101112 0.45916 0.00249 0.02389 0.04592 0.53145

STRAND 0.45916 0.00249 0.02389 0.04592 0.53145
CABLE

17101113 0.46314 0.00249 0.02389 0.04631 0.53584

STRAND 0.46314 0.00249 0.02389 0.04631 0.53584
CABLE

17101114 0.49634 0.00249 0.02389 0.04963 0.57236

STRAND 0.49634 0.00249 0.02389 0.04963 0.57236
CABLE

Tab. 2. Realist scenario of indicators

Indicators 2007 (N-1) 2008 (N) 2009 (N+1)

Total Sales 48913 64235 102966
EBIAT -13012 -3978 64557
Cost of sales 60921 66625 35456
Gross Profit -12008 -2390 67510
Total Headcount 506 500 529
Direct 405 392 421
Indirect 22 30 30
Salaried 79 78 78
Sales per Direct Headcount 121 164 245

Tab. 3. Optimist scenario of indicators

Indicators 2007 (N-1) 2008 (N) 2009 (N+1)

Total Sales 48913 64235 118411
EBIAT -13012 -3978 64557
Cost of sales 60921 66625 39002
Gross Profit -12008 -2390 79409
Total Headcount 506 500 487
Direct 405 392 379
Indirect 22 30 30
Salaried 79 78 78
Sales per Direct Headcount 121 164 312

Tab. 4. Pessimist scenario of indicators

Indicators 2007 (N-1) 2008 (N) 2009 (N+1)

Total Sales 48913 64235 92.669
EBIAT -13012 -3978 64557
Cost of sales 60921 66625 33683
Gross Profit -12008 -2390 58986
Total Headcount 506 500 550
Direct 405 392 442
Indirect 22 30 30
Salaried 79 78 78
Sales per Direct Headcount 121 164 210