THE COFFEE INDUSTRY

The basic ingredients of green coffee is coffee ,

the coffee beans are picked from the coffee tree.
There are two kinds of beans , ie Arabica and
Robusta Robusta has a more pungent aroma and
widely used for the manufacture of instant
coffee Brazilian coffee is the largest supplier , to
supply 20-30 % of coffee beans in the world .
Other Supplier : Colombia , Indonesia , Ivory
Coast , Mexico Coffee buyers there are 2 kinds :
Roaster & Brokers

Trend consumption

Coffee consumption has decreased since 1965. While the

general coffee consumption has decreased , gourmet coffee
has steadily increased . This condition is used by the
company - coffee beverage companies , one of which
Starbucks ( end of October 1994 generated $ 284 million of
sales)

Aloha Products

Aloha Products is a coffee -processing companies such as

Nestle and P & G . Aloha was founded in 1910 and
headquartered in Columbus , Ohio Have 3 factories in the
Midwest , where each plant is responsible profit and loss
respectively - each and bonus manager determined the
gross margin generated

Centralized operational system performed , mill as

profit centers

President

Purchasing
Department

Manufacturi
ng
Department

Sales
Department

Plant 1

Plant 2

Plant 3

This method lasted until the 1990s , until the plant

manager expressed his disappointment towards the
calculation
of
bonuses
and
operational
management

Im completely fed up. How am I

supposed to run a profitable plant
when I dont have any control over
the price of my input and none over
the volume, price or mix of my
output?
Lisa Anderson
Aloha Products Plant Manager

Case analysis
Evaluation of the current control
system , to the Department of
Manufacturing
,
Marketing
and
Purchasing at Aloha Products By
considering Competitive Strategy ,
Explain the changes , if any , that
should be done on the control system
of the third Deaprteemen

MCS

Controlling :
- Planning
- Coordinating
- Communicating
- Evaluating
- Deciding
- Influencing

Planning

Controlli
ng

BEFOR
E
DURIN
G

CONTROLLING

AFTER

Framework for Strategy

Implementation
Manageme
nt Control

STRATE
GY

Organizati
on
Structure

Implementat
ion
Mechanism

Culture

HRM

PERFORMA
NCE

Strategy
Formulation
Environmental
Analysis
Competitor
Customer
Supplier
Regulator
Social/Political

Internal Analysis
Technology
Manufacturing
Marketing
Distribution
Logistic

Opportunities and
Threats
Identify opportunities

Strenghts and
Weakness
Identify core
Fix internalcompetencies
competencies with
external opportunities
Firms Strategy

Internal
Analysis
President

Purchasing

Manufacturi
ng

Sales

Plant 1

Plant 2

Plant 3

Internal Analysis
Manufacturing
Manufacturing in the AP consists of three plants , which have each
manager and production process from production schedules ,
procurement budget to be set by HQ . Each plant is responsible for profit
and loss will affect nonus
Strength :
Has 3 Plant , large production capacity
Each plant having an individual plant manager
Weakness :

Plant manager does not have the authority to regulate its plant
operations .

No chance of plant managers to implement its evaluation on the

production process Because of centralized planning , it will cause a
shortage or excess inventory that will cause loss

 Sales
Sales is responsible for advertising and promotion , and also
create a budget that will be used by puchasing to procure . Sales
are also responsible for determining the price of any provision of
the coffee beans that ultimately determine the profit or loss from
a transaction
Strength :
Being in HQ so that advertising and promotion in the form of
corporate strategy.
Has the authority to conduct the survey on consumer and
determine market strategies

Weakness : Pricing is based on the contract of procurement purchasing any

cause each contract must be in analisasi one by one

Purchasing
Purchasing has the responsibility to carry out the procurement on the
production of materials bought through a broker to do the projection market
trends . Intimate relationships , high competency and experience is
indispensable in the coffee market . Purchasing will place an order with
projections 3-12 months , which will be divided into several contracts with
different time and a different cause shipping price.
Strength :
Good relationship with the broker.
Competence good employees .
Got coffee supply variations required.

Weakness :
The time difference between the procurement schedule and the actual
needs of causing excessive inventory .
The entire procurement process conducted himself so that accountability
is doubtful

Environmental Analysis
competitor
Factory major coffee producer. Retail coffee
seller.
Opportunities :
Market trend that puts the personal touch ( taste
, service , etc. ) Large factories are generally
mass product
Threats :
Large plant has a competitive price Variations
coffee much Technology , infrastructure , brand
equity , distibution and a good network

Environmental Analysis
Customer
Direct customer
Retail customers
Opportunities
Consumers need a personal touch.
Consumers need coffee with good quality and competitive
prices through efficiency of distribution and adv & promotion.
Threats
The tendency of consumers to make price as consideration
consume coffee.
The pattern of life of consumers who began to leave the
coffee on health grounds.

Supplier
Broker
Company on the spot market
Opportunities
Good relationship with the broker.
Good communication with other manufacturers
threats
Factors greatly affect the weather and pests of
coffee production.
Price , quantity , quality coffee beans are not sure.

FRAMEWORK RECOMMENDATIONS :
Basic Elements of Control System

Control Device

ASSESSOR
Comparison with
standard

EFFECTOR
Behavior
alteration if
needed

DETECTOR
What is
happening?

Entity

COMMUNIATION NETWORK

Framework for Change Control

System
Establish accountability and effective
communication across departments.
Creating key performance measures
to measure the achievement of each
department manager

Recommendations to the
Department of Manufacturing
problem :
As a profit center , the factory does not have control over the cost of raw coffee
beans .
analysis : The focus of attention of the manufacturing department is efficiency ;
how effectively they control the cost and processing coffee beans.
It is unfair to evaluate manufacturing as a profit center , when the reality does
not have control over the cost of production and sales .
recommendation :
Performance measurement of the manufacturing department should be
based on roasting , grinding , and packaging .
Conducted an assessment based on the controllable factors , yatu costs .
Manufacturing manager must ensure that the issuance costs do not exceed
the standards set .

Recommendations for Purchasing

Department
Problem
Costs charged to the purchasing department headquarters . Thus the purchasing
department can not be measured accountability
Analysis :
Focus attention on purchasing department should the actual cost of the contract.
Recommendation :
Accountability purchasing department is measured from the difference in cost
for each contract ditandandatangani with standard raw material costs of raw coffee
beans .
Contract costs associated with the purchase and sale on the spot market should
not be based on the price per bag . Standard rational costs of raw coffee beans
contract should be set . Standard charges could be based on the average spot
price during the last 6 months . We recommend the standard cost is updated each
quarter , to maintain the accuracy of standard costs of materials abku raw coffee
beans .
Restructuring the purchasing unit as an arm of the three factories . Purchasing
department should get a number of criteria and a proper supply of each plant . This
savings on the purchase of bulk purchasing .

Recommendations to the
Department of Marketing
Problem :
Marketing department is not responsible for the costs of issuance or accuracy of sales
forecasts / budjet they charge .
There is a significant deviation between the estimated costs and actual costs . Examples of
raw coffee beans tend to be more costly ( when should use a forward contract costs )
Analysis : The focus of attention is on the advertising department of marketing and promotion .

Recommendation :
The actual sales volume should be compared with the volume of sales that have been
estimated . This not only will make marketing more accountable department , also provide input
to the methodology of estimation of cost of sales and to continuous improvement . There is a
significant deviation between the estimated costs and actual costs . Examples of raw coffee
beans tend to be more costly ( when should use a forward contract costs ) analysis : The focus
of attention is on the advertising department of marketing and promotion . recommendation :
The actual sales volume should be compared with the volume of sales that have been
estimated . This not only will make marketing more accountable department , also provide input
to the methodology of estimation of cost of sales and to continuous improvement .

Final recommendations
Need to build inter- departmental goals congcruence . This
could take the form of effective communication . Thus the
expected purchases and sales will be more accurate .
To realize the goal congcruence and communication , each
department is also recommended to conduct a thorough
evaluation is based on measurements of the company . Can
the economic value added ( EVA ) .
With EVA , the manager focuses on the overall profitability
of the company .
With the same organizational structure , by simply changing
the way how each department is evaluated , undoubtedly
incentive plan of each department will be more accurate ,
and describe the control mechanism of each department