Preliminary Case Writing Methodology Step 1-Identify the events affecting the organization in the Introduction. Assume that we all work for the same company and you are running an executive meeting. Do not provide the background on the organization. Assume this information is known. Events are high level activities that will affect the risk profile of the organization. It can be external or internal to the organization. An event can arise due to external circumstances such as a new competitor entering the marketplace in which the company competes, a shift in the value of currency making exports more or less attractive. The risk profile of the company may also change due to internal circumstances such as the departure of a lead executive, an embezzlement, or a major computer system upgrade. Typically, in the case grading scheme for this course, we look for you to identify three or four events affecting the company. Step 2 - In the Analysis section of the case, provide an analysis of the activities in the firm relative to the management models you are learning in the course. Complete this analysis by pairing up your sentences. The first sentence should represent the deviation from or compliance to the management model you are referencing and the second sentence should identify the specific example from the case that is the evidence to support your initial statement. Use the grading rubric to determine how much evidence you require (how many pairs of sentences). For example: If the company is not appropriately segregating accounting duties you might write a sentence of the following nature: Sentence 1 - Segregation of accounting duties requires separation of custody of the assets, from authorization of the transaction. Sentence 2 - In this situation, the manager authorizing the loan was taking possession of the cash which left the company vulnerable to fraud. In the grading scheme, each properly supported pair of sentences is worth 2 marks (one mark for each sentence). Remember, we are grading your knowledge of the models as well as the appropriate application to the business scenario hence both the knowledge and application must be demonstrated in the response. Step 3 - At the Recommendation stage, make recommendations to reduce the risk to the organization. The recommendations should tie back to the events identified in step 1 and the analysis in step 2. No new issues should be identified at this point. Medi-Lab Incorporated Business Scenario: DME products are distributed primarily by national and local distributors, and other channels such as internet sales. The market is complex and highly fragmented making customer relationship management an imperative to success. The durable medical equipment market is worth 35 Bil- lion USD annually in the United States. Durable medical equipment (DME) is defined as instruments and products used for medical purposes that can withstand repeated uses. DME is used primarily to help improve the quality of life for patients with injuries or illnesses. The DME market is divided into six therapeutic segments: Medi-Lab is a Canadian company that has 95% of their $3 billion annual sales in the United States. They manufacture and distribute equipment in the Diabetes Supplies, Home Infu- sions, and Home respiratory therapy segments. Their custom- ers are comprised of retailers, hospitals and therapy clinics. Generally these organizations are serviced by Medi-Lab sales representatives. To support the home healthcare market they also provide internet sales. The internet pricing is carefully managed so it does not undercut the pricing of the brick and mortar retail distribution network. Home respiratory therapy Home infusions Diabetes supplies Patient positioning Patient mobility Other equipment The company employs 2,800 staff members, 2000 of which are located at the manufacturing sites, 500 are located a head office in Mississauga, and 300 are located across the that utilizes systems modules for sales, procurement, manu- facturing, financing, and HR/payroll. United States managing the customer relationships. The man- ufacturing operations are located in Mississauga, Montreal, and Calgary as these locations are close to the US border. Raw materials are located in warehouses at the manufactur- ing sites but finished products are produced on a just-in-time basis and are immediately shipped by air, rail or truck to US customers. Due to the complexity of the processes and the complexity of the customer base, the company must have up to date information about their operations to ensure cus- tomer demands are met on time and on budget. Medi-Lab produce their financial statements in accord- ance with IFRS and US GAAP. They report their results in US dollars on a monthly basis and they have a December 31st year end. Medi-Lab stocks are traded on the TSX and they utilize loans obtained from US banks to fund their operations. To help managed their operations they employ an ERP system Each region is a profit center. That is sales are attributed to the region and the associated costs of manufacturing are also attributed to these sites. This creates fierce competition between the manufacturing locations which helps to hold the line on costs. Bill Murray believes that competition is at the heart of good management. The bonuses of the Regional VP's is higher for the region that makes the most profit and the bo- nus' drop dramatically for the region that comes last. Bill Murray believes his process is effective as the Regional Vice Presidents really work hard to achieve their results in compar- ison to the budget. The organizational structure is shown be- low: A Car VP Western Region VP Central Region VP Eastern Region Manufacturi Sales Manufacturi Sales Manufacturi Sales and The company has been experi- encing issues with raw mate- rial inventory and this has Bill Murray worried. The inventory levels in the system do not appear to agree with the inventory in the warehouse in the Western Region. Manufacturing is ex- periencing shortages which is resulting in interrupted cus- tomer supply. When the Western manufacturing production planner specifies particular raw materials on the production orders, the site is substituting other raw materials to keep the manufacturing process in operation. These substituted raw materials are higher in price resulting in higher manufacturing costs in that specific region. Each manufacturing facility has its own procurement manager. The regional procurement managers have staff that also purchase for the sales and distribution teams in the spe- cific region. The Western procurement manager position has been vacant for four months and Sidney Sheppard is manag- ing the procurement team directly. He is responsible to ap- prove the purchase orders for raw materials. Sidney Sheppard has been trying to hire a new procurement manager but HR does not appear to be sending him appropriate candidates. He has rejected all candidates over the past six months. At one point, HR hired a candidate but the individual resigned from the position after only six weeks on the job. The com- pany does not have a policy of holding exit interviews so HR was not apprised of the reason for their departure. Sidney Sheppard indicated that the candidate was a bad fit for the team and did not get along with other employees in the area. Prior to the quarter end, the budget is adjusted for current market trends. On a go forward basis the actual results are compared to the adjusted budget. The CFO, Adnan Sohari has indicated this is an appropriate methodology, given the fluid and complex nature of the industry. The changes to the budget are approved by the Regional Vice Presidents. Each region also has their own accounting teams that re- port through the Regional Vice Presidents. These individuals have a dotted line to the CFO. There is no corporate control- lers or controllers at the manufacturing sites. The accounting team is responsible to produce all the managerial and finan- cial reports as well as manage all the data input and balance sheet account reconciliations. On a monthly basis the ac- counting team makes adjusting journal entries for accounting estimates such as allowance for doubtful accounts, and provi- sions for warranty claims based on recommendations by the regional vice presidents. The CFO does not approve these ad- justments but it is assumed they have the knowledge and au- thority to make these adjustments. There is no formal delega- tion of authority guideline. The CIO is responsible for all the computer systems in- cluding network maintenance, security, and maintenance of the ERP system. The sales module of the ERP system has been under constant development. All custom contracts developed by the sales department and forwarded to the IT department and they program the system to accommodate the new con- tracts. The system is tested by the IT department and then the changes are transported into the production system. This process of constant revisions is putting stress on the IT depart- ment so the CIO is considering outsourcing to a third party provider the management of data storage and network access The reports the accounting department produces com- pares actual results to budgeted results on a monthly and year to date basis and actual results to prior year actual results. maintenance and control. She was planning to keep the ERP maintenance in-house. The on-line sales portion of the busi- ness is also a stressor for Zhoulin Cheong. There is a monthly negotiation as to how the sales are allocated between the re- gions with Bill Murray making the final call. The constant revi- sions on the allocation process require IT resources to be ex- pended unnecessarily. the external auditors were requiring the accounting depart- ment to provide supporting documentation for all journal en- tries. Supporting documentation does not appear to be avail- able for the adjusting journal entries for warranty liabilities, adjustments to allowance for doubtful accounts, and nor do sales contracts appear to be signed and approved for several large custom sales contracts for which the sales module was programmed to handle. Due to the reporting requirements for the TSX, the com- pany must undergo an annual audit of both their IT system and their financial reports. These audited financial state- ments are also required by the bank to support the continua- tion of the bank loans. For the bank loans, the company also must meet several debt covenants. The company must main- tain a certain debt to equity ratio and they also must maintain their current ratio above a certain minimum level. In the last audit, the company failed the systems security test and now Using the case method taught in class, identify three events in the case (3 marks), analyse the case using the man- agement models below (be sure to make seven points (14 marks)), and recom- mend three steps Medi-Lab can employ to improve their efficiency and effective- ness (3 marks). Accept Share High Amount of Damage End of document