Bland Manufacturing is a leader in custom saddles and tack. It was started by Don Bland in McPherson, Kansas. Drawing on his family heritage of cowboys and his education in leather tanning, he recognized a need for custom saddles. After making custom saddles for friends in his spare time, Don’s saddles soon became a hot item and he made the big decision to quit his job as a rodeo clown and open his own shop. In 1974, Don opened his first saddle and tack store, “That’s So Tacky.”

By 1981, he was producing over 2,000 custom saddles per year and the prospects for growth seemed endless. The rodeo circuit in the United States was really gaining in popularity and with his connections to professional cowboys, Don’s business was primed for success. As its popularity increased, the money for winnings went skyrocketing and the professionals looked for ways to differentiate themselves in the arena. Many of them soon found Bland Manufacturing and began to order custom saddles and accessories. As is the case with many small businesses, the word got out that Don was producing a superior product, and soon demand far outweighed supply.

In 1983, Don formed a partnership with his sons-in-law and trusted advisors, Todd Benson, and Lynn Willison. Each of these two partners infused thousands of dollars of capital into the business. They used the capital to build the initial manufacturing site in Wichita, Kansas. Todd took on the role of Vice President of Finances and Lynn took on the role of Vice President of Operations. They now had the capacity to produce over 5,000 saddles in a year. With this new capacity and the increasing demand for accessories, Bland Manufacturing soon hit $7.5 million in sales.

Since then the business has seen steady growth with its best year coming in 1999 when it had sales of $10.5 million. In 2001, they brought on their first-ever Vice President of Business Development, Hubie Shorb. Together, Todd, Lynn, and Hubie are the management team of Bland Manufacturing. With this increased focus on market development and sales, they estimate that the business can reasonably grow to $17.5 million with their current product offerings before the market will be saturated with their specialty products. Because they produce custom products, Hubie does not want to be the Wal-Mart of saddles and sabotage the uniqueness of their product. Therefore, in order to become more profitable, they have started to focus more on efficiencies in the manufacturing process.

Current situation

Although the future looks very promising, Don isn’t sure that the infrastructure is in place to be able to grow to $17.5 million. He is encouraged by the work that his VPs are doing, but he is noticing that their respective departments have a difficult time communicating information in a timely fashion. This usually ends up with one of them being angry with the other, which only compounds the problem, until Don steps in for a little conflict resolution. He knows these are common occurrences for growing businesses, but he would like to stay ahead of the curve. At this point, Don is firmly convinced that the proper human resources are in place to take the business to its goal, but he believes the piece he is missing is an accounting package that will also serve its internal information needs. That is why he has contracted you.

Upon starting this project, you immediately notice that Don has a very hands-off management style. He loves the work he does, but has one eye on the business and one eye on retirement. He can’t wait to jump in his RV and go to his cabin in Alaska to fish and hunt. It is clear that he is a peace-maker among the VPS, but he is concerned that as he makes his transition into retirement the business will suffer in the area of communication, as this is his primary role. Consequently, you have chosen to spend a considerable amount of time with the VPS to glean an understanding of their information needs and the future of Bland Manufacturing from their perspective. Before you do that, though, you stop by the accounting office to get a bird’s eye view of the current situation

The accounting office

Just five months ago, Todd, the VP of finances, hired a new accounting manager, Stephanie. To say that Stephanie is lost in this position would be an understatement. She is very sharp in accounting but feels pulled in many different directions by the VPs and their constant hunger for information that takes too long to produce.

She is also struggling to communicate effectively with the A/R and payroll clerk, Laurie, and the A/P clerk, Michelle. Both have been at Bland Manufacturing for years and have their own way of doing things, but that isn’t always right. Stephanie would like to retrain them but feels like the time and cost involved may outweigh the benefits under the current structure. If the opportunity for a new accounting system presented itself, she would jump at the chance to retrain and review the current structure of internal controls. She hasn’t found any evidence of fraud but feels a general sense of uncomfortableness as she thinks about the current situation.

Currently, Bland Manufacturing is utilizing Peachtree Accounting software to its absolute limit. They use a myriad of Excel spreadsheets to track orders, distribution, and anything to do with the manufacturing process. Peachtree is mainly used to track accounts payable, accounts receivable, and payroll. Stephanie tries to make weekly adjustments for inventory based on spreadsheets she receives from Lynn.

She also does the same for the operational note that Todd looks after, but feels like they access this note too much and, as a consequence, are paying way too much in interest. It seems almost weekly that Todd has her transfer funds from the note to the checking account. Fixed assets are an entirely different mess. She tries to track them in Peachtree but doesn’t receive enough communication from anyone to identify assets that have been scrapped or discarded. She knows they can improve their cash flow scenario but is waiting for the results of your study to address them.

All in all, Stephanie is very glad to see you and is anxious for your final recommendation. She would love for all business functions from the initial order to the procurement of materials, through the manufacturing process and eventual delivery and receipt of payment to be captured in the new system. She feels strongly that a system able to capture all of this information could greatly increase Todd’s ability to produce budgets, strong reports, and maybe even forecasts, which they have never attempted to do. It would also help her prove to Todd that she knows exactly what she is doing.

Business Development (Market Development and Sales)

Over the past three years, Hubie has spent a considerable amount of time uncovering the nuances of marketing a specialty product. Traditionally, they have had a heavy presence with the Professional Bull Riders Association and the National Finals Rodeo and have sold their products through catalog sales and specialty western stores. However, Hubie believes they are being too reactionary in producing new products and has been keeping his eye out for new product demand. Additionally, Hubie has hired five regional salespeople to canvass everything west of Ohio.

On top of maintaining current relationships, each regional salesperson has been given the task of identifying a prime place to open a storefront and to begin connecting with large ranches and high-end boarding stables in their respective regions. They will still continue to sell through specialty western shops and the catalog, but Hubie would like to see more personal contact with customers so he can get a better feel of customer demand and different products that may be in demand. To date, no new storefronts have been opened, but the relationships being built are producing increased demand.

As this side of the business had grown and changed, Hubie and Don have tried to put processes in place that will allow for much more growth. From your conversations with them, here are the processes in place right now. Orders come in from four directions; 1) Specialty stores, 2) catalog orders received over the phone, 3) catalog orders online and 4) from a regional sales rep. Orders are received from individuals and businesses. There are two types of orders; 1) for merchandise and accessories in stock, 2) for custom orders. All individuals are required to pay at the time of order. Businesses must also pay at the time of order unless they apply for credit.

All extensions of credit are reviewed and granted by Todd. Todd determines the credit limit for each customer. All credit customers are given 30-day terms, with a 1.5% monthly interest charge for every 30 days they are overdue. At the end of each week, Todd updates his approved list of credit customers, with their respective limits, and gives a copy to Laurie. Laurie enters the information into Peachtree and is in charge of keeping track of all accounts.

All of the orders are received by Laurie. Here is her process for orders of merchandise and accessories in stock. Once she receives an order, she first checks the status of the customer. If their account is current, then she proceeds with accepting payment. Payments are mainly received by check and credit card. Laurie has never processed any cash transactions. After receiving payment, or a promise to pay from a credit customer, she enters the sale into Peachtree and generates an invoice. She then prints three copies of the invoice. She keeps one copy for herself and hands the other two copies to Carter, Lynn’s new distribution manager. Carter then fulfills the order, attaches a copy of the invoice to the order, and sends it off. He keeps the other copy in his files and marks them as fulfilled.

Custom orders are a whole different ballgame. These orders are primarily placed by the regional sales reps. As normal, they are first received by Laurie and she goes through the process of making sure the customer’s account is current. Next, because they are custom orders, they must be quoted a price. All quotes are generated by Lynn based upon the specifications given by the sales rep. Because of the sheer volume of special orders, it usually takes Lynn 4-5 days to generate a quote. Lynn then takes a copy of his quote and hands it to Laurie. She files it in her “Not Yet Accepted” file and calls the customer to present the quote. Customers have 15 days to accept.

Once the customer has accepted the quote, they must pay 50% upfront, with the remaining 50% due upon receipt of the order. Orders are then given to Lynn for fulfillment. Upon completion, he hands them off to Carter for shipping. Upon shipment, Carter notifies Laurie and she generates the final invoice and sends it to the customer.

Required:

1. Put together a needs statement or goal for your analysis.
2. Next, you will be putting together:
   1. An organizational chart
   2. Job Descriptions for the management team (not including Don), Stephanie, Laurie, and Michelle
   3. A process map for sales, manufacturing, and A/R
   4. A list of weaknesses in the current processes
   5. If you could have another meeting with the management team or take another investigative tour, what information would you want to find out?
      1. Prepare a list of at least four additional questions.

Answer rating: 100% (QA)

1 The goal of this analysis is to determine the information needs of Bland Manufacturing and to recommend an accounting package that will serve its in... View the full answer