BALANCED SCORECARD AT CRANFELD OFFICE EQUIPMENT
Consider Cranfeld Office Equipment, manufacturer of four different office chairs: Models A1, A2, B1, and D1. The A1, A2, and B1 models are standard office chairs, designed to provide comfort and style at a relatively low price. The D1 is a more expensive model that was developed only after extensive office ergonomic research.
The D1 model was developed after Don Alpert, the marketing manager, conducted a customer survey that indicated customers were asking for a better quality chair due to posture related problems, like back pain. He felt that there was a substantial market for this better quality product. In the same survey, customers also reported that they were not happy with the quality of the A1, A2, and B1 chair models. Problems with loose parts, poor workmanship, and faulty materials were reported.
In the past, Cranfeld has sourced materials and parts from the most cost effective suppliers. The company has also worked to speed up production efficiency and has increased its overall assembly line efficiency. However, the survey strongly indicated that the company needed to improve the quality of its products if it wanted to retain its current customers, get new customers, and vastly improve its company image.
Overall, Cranfeld has been experiencing declining profits due to increased international competition, with Cranfeld”s competitors offering better quality products. Its competitors are also better at managing costs, so Don and company president Sally Lee feel that they must also focus on cost control.
During 2012, Cranfeld established the following company goals and objectives:
Cost Control
- Develop stronger relationships with suppliers and implement just in time ordering where possible.
- Maintain a profit margin of 25% on all sales.
- Achieve a 5% cost reduction on manufactured products through just in time inventory management.
Sales
- Sell $100,000 worth of D1 chairs in 2013.
- Increase sales of A1, A2, and B1 chairs by 15% in 2013 over 2012.
Quality
- Buy better quality products from suppliers.
- Lower warranty and repair costs by 50% in 2013.
- Reduce quality costs by 40% from 2012.
- Improve the quality of A1, A2, and B1 chairs.
- Improve customers” perception of the quality of the company”s product.
Other
- Implement training programs for all employees to increase product quality and customer service focus.
- Increase employee satisfaction and retention.
- Explore customer requirements more closely and identify new products or desirable modifications of existing lines.
- Develop a good reputation over the long term as a manufacturer of quality office chairs.