1. How much overhead cost would be saved by outsourcing the production of muffler-exhaust systems and oil pans if a. Overhead costs were entirely fixed costs? $0 would be saved….
Airgen plc has been formed from acquisition by major distributor of three manufacturing business (A Ltd, B Ltd, C Ltd) also known as Modern Sales plc. In recent time it was discovered that the Modern Sales plc was experiencing changing economic conditions which opened considerable export potential, unfortunately the Company did not have the staff or expertise to take advantages of the changing condition.
It is therefore that as part as the Lucas consultant team, I have been addressed to look into some issues arising the acquisition of Modern Sales plc and report back to my manager with some possible recommendations in order to tackle issues like the one described above. Airgen plc has given priority to reorganise the company structure and as the appointee from Lucas consultants I am to offer possible recommendation as to how the structure will operate.
Organisation structure can be defined as patterns of work roles and ways of administering the business, that are relatively stable, changes often occurs slowly, which enables the organisation to carry out its work in a systematic way. The organisations structure is very important it refers to the formal systems of task and reporting relationships that controls, co-ordinates and motivates employees so that they work together to achieve organisational goals. A poor structure will lead to failure to meet objectives.
As already advised by my line manager, I am aware that Aigen has established a joint research and development centre for the manufacturing units (A, B, D Ltd) these are: corporate planning, management services, finance function and group purchasing, all of which have been centralised at the Head Office of Airgen. “Centralisation is the extensity to which authority for decision making in the organisation is centralised so that it rests with top management” meaning that Head Office will keep tight control over important decisions made for on behalf or Airgen.
Airgen could have standardised procedures, so there is a set of way of doing things. (e. g. Group purchasing – this will help to cut costs)Senior managers may take decisions from the point of view of the business as a whole, not for their own benefit. (e. g. Corporate planning – if Airgen the three manufacturing business operate separately they may not work with Head Office overview, they may do things just to help their own department (business), which may harm the organisation.
Senior managers will have had more experience of making decisions – they may be able to make better decision for the company, act in good faith on behalf of the company. In time of loss (e. g. not having appropriate staff or expertise to carry out the job effectively will cause loss the business) the organisation may need strong leadership, which is often given form Head Office. The p of control concept will have implication for the shape of Airgen plc. There are two ps of control structures; this can be identified as flat hierarchy and tall hierarchy structures which shows the number of employees reporting to each supervisor.
If Airgen chooses to have a tall organisation structure, there will be fewer employees reporting to each manager and therefore the p of control of each of the managers is narrow, but the p of control of Airgen should not be too narrow so that the jobs are over supervised. On the other hand if Airgen chooses to have a flat structure the larger the number of subordinates reporting to one manager increases, so it will be more difficult for him/her to supervise and coordinate staff and work effectively and therefore the p of control of each of the managers is wide.
To find an appropriate structure for Airgen it will have to be one that does not put a work load on the manager that he/she may not be able to supervise adequately, making him/her spend too much time supervising and handling routine problems, and too little time on higher-level management functions/roles. Hopefully the manager should only have 10-12 subordinates reporting to him. Having the main departments centralised at Head Office will help subordinate managers to have the right p of control with his/her subordinates.
(e. g. a line manager for production A can have subordinates and will be able to keep a close look on his staff, offer appropriate training to those who need it and still be able to manage other issues on his managerial level) Lines of authority have joint Airgen plc (A, B, C Ltd) to create a hierarchical structure in which as one ascends the hierarchy, managerial positions become fewer but are associated with higher levels of responsibility e. g. at head office.