Mangrove Logistics Limited is a shipping company that specializes in the delivery of horticultural products. This Business Case Analysis example explores the company’s prospects of improved financial performance following the adoption of an ultramodern technology support system. The proposed technology is supposed to replace the current system, which is associated with a previous drop in profits.
Mangrove Logistics Limited Case
In the first quarter of 2016 fiscal period, Mangrove Logistics Limited reported a 37% drop in profits. The Chief Finance Officer (CFO) attributed the decline to reduced work rate across the departments because of the gross inefficiencies of the company’s outmoded systems. Audit reports showed that close to 60% of the workforce routinely lagged behind deadlines because of the technical flaws in the systems, which affected their speed of work. The chief executive officer, Hemmingway Brown, assigned a taskforce to explore ways of spurring the company’s performance and deliver specific recommendations to the board of directors within one month. According to report, the company needed to adopt new support technologies based on the Siemens model to improve efficiency of processes and enhance harmony across departments.
Among the foremost challenges that the changes would entail includes funding and training. The adoption of the system would require a complete overhaul of the company’s internal systems, which would be both costly and disruptive. The raw estimates showed that the changes would result in a 45% increase in expenditure. The figure would surpass the company’s average expenditure by a wide margin. Secondly, the company would incur extra costs that are associated with the hiring of experts to maintain the new system on a regular basis. The report also showed the initial phases of the system’s operation would be marred with some inefficiency because of unfamiliarity and resistance to change. However, the taskforce observed that the new system would eventually shore up the company’s profit by nearly 98% in the fourth year.
Expected Rise in Profits
Redundancy is another problem that the management would have to contend with once the new program rolls out. According to the report, about 25% of the staff would be rendered redundant because of the unique merits of the new system. The system is designed with multiple automated systems that would replace many manual processes within all the departments. The chief executive had pledged that there would be no layoffs of staff despite the challenges that the organization had faced in the previous financial years. Therefore, the taskforce suggested the reduction of certain benefits and allowances as a way of enhancing the balance sheet. Expectedly, the reduction or removal of the allowances would be grossly unpopular among the employees and affect their levels of motivation. One recommendation that gained favour within the ranks of the management is the introduction of the voluntary early retirement scheme, which would entail a range of benefits for the willing employees.
Overall, system would necessitate multiple changes to improve the efficiency of processes. Many of the changes would entail short-term inconveniences but the long-term consequence would be a significant rise in profit margins. Although the actual financial changes of the program remain indeterminate, the chief executive and the board of directors favoured the idea of initiating the changes at the earliest convenience. The management team shared the view that the new system would give Mangrove Logistics a significant competitive advantage over the traditional competitors.
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