ISEN 663 Engineering Management Control Systems - Midterm Exam sp2024

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ISEN 663 Engineering MCS 14 March 2024 ISEN 663 Engineering MCS - Mid-term Exam General Instructions 1. This take-home mid-term exam is due on MON 25MAR by 11:59p to the designated Canvas assignment drop. 2. To be done completely on your own; no assistance of any type from another person regardless of whether they are in the class or not; this condition applies during the entire exam open period. 3. Answer using your own *paper* or electronically; create and upload your submission to the associated midterm exam (assignment) drop. 4. By acceptance and submission of this exam you acknowledge that have you adhered completely to the Aggie Honor Code during the conduct of this exam. ANY attempt to corrupt the conduct of this exam will be sent to the Honor Council for adjudication. Do not initiate nor accept communication regarding any aspect of this course during the exam period. 5. The exam concludes at 11:59p CDT on 25MAR2024. Nothing will be accepted after that time. 6. All questions and concerns should be directed to me. 7. Grading will be based on your command of the method or technique coupled with the relevance of your rationale to the assigned case. NB: I do not want reproductions of the REFMODs – I am looking for well-designed artifacts engineered for the case. [100pts] ORG SYS analysis and design: form, fit, function, and control The exam will utilize the Kranworth case study (see the appendix) for context. The Kranworth Chair Corporation (KCC) is a “purposeful organization” with a variety of issues and concerns – but at its core the owners simply wish to remain economically viable. In fact, like Mainfreight, they seek to be a “100 - year” company. You have been called into Kranworth as an organizational engineering consultant due to your knowledge, skills, and abilities related to organizational system analysis and design. More specifically, you have been hired, in a consulting role, to answer several vexing questions that the owners of Kranworth have regarding the current state and future state of their firm. [NB: KCC stakeholders have heard from the MBAs – they now want to hear from the engineers.] To guide your consulting efforts, an outline has been developed (see the table below) of their “vexing” questions, your *required* task, and the format that you will deliver your responses in. NB: the case study will require some sanctioned inferences on your part. This is realistic. The point of the exam is to exercise your competence in the use of industry standard principles and practices (in the form of models and frameworks) to support the analysis and design of organizational systems – especially the purposeful organizations that reside at the heart of the free market economy. KCC needs your help.
ISEN 663 Engineering MCS 14 March 2024 KCC concern (vexing questions) Your task Format for the deliverable A few notes from me A (10pts): “The functional and divisional ORG charts are useful, but what would a matrixed approach look like? What would be the pros and cons of a matrixed- based approach for KCC?” Design a matrixed based ORG chart for KCC Matrixed based ORG chart with an appropriate level of detail (similar to what was provided in the case). A short discussion of the pros and cons of employing such a structure at KCC (a well-developed table is in order). I suggest using templates from Powerpoint, Visio, or word itself to improve the clarity of your ORG chart design. The pro/con discussion is intended to be a concise, cogent, but salient response to the KCC concern. We discussed many details in lecture. B (30pts): “We need some clarity into the division of responsibilities. Please provide us with a clear characterization of these functions and how they relate to one another.” Develop an IDEF0 model of the core activities performed by top management and the divisional management. IDEF0 model Critical: context, viewpoint, purpose; 3-6 rule; use of action verbs; etc. Full glossary! I highly suggest using a tool to develop the model. C (10pts): “We are concerned that the custom division needs clear congruence with our mission, vision, and values. We need a clear strategy and set of objectives … something on a single page will suffice.” Develop a 1-page theme based SM-BSC; Support with 1-page for BSC rationale SM-BSC (theme: custom division – customization viability) Discussion of BSC rationale Strategy map for vertical congruence; balanced scorecard with a minimum of three objectives, measures, targets, actions for each horizontal perspective. Discuss your rationale. D (10pts): “We have a major concern with our relevance in the future – the customer environment is changing. What should we be concerned with?” Use Porter’s Five For ces (PFF) Use LOC REFMOD – focus on the Interactive control lever PFF analysis diagram LOC, Interactive control lever analysis Use a PFF framework for representation. For the interactive control lever – use the REFMOD specification that we discussed in class. E (20pts): “Viability! – what will a divisional based VSM look like? We are especially concerned with the coordination between the divisions – how do we maintain balance?” Develop a VSM: SIF is KCC; Specify a plausible variety engineered channel between the S1s and S2. With a SIF: Custom division → develop the VSM diagram for that division. Identify and label the channels VSM diagrams including the requisite functions, Channels A-I, and for the required channel: VE (a depiction of the functions, the variety, and the requisite attenuators and amplifiers to ensure the LORV is achieved) Leverage the REFMOD; note that I am asking for two VSM diagrams. The second is a level of recursion inside the S1 related to the custom division. Only one channel needs to be engineered. VE should identify the variety and the eigen-variety for each function. F (20pts): Your recommendations – you spent a week on the KCC nickel. KCC want’s ORG viability; it’s show time. Develop a set of final recommendations to KCC for enhancing their desire for viability. 1-page, numbered list of recommendations and associative rationale discussion (should refer to artifacts from A-E by name) The analysis and design performed in A-E should provide a set of salient insights for KCC; summarize your findings and recommendations.
ISEN 663 Engineering MCS 14 March 2024 Appendix: Kranworth Case for Mid-term Exam Case Study for ISEN 663 Midterm Exam sp2024 Kranworth Chair Corporation In July 2003, Kevin Wentworth, CEO of Kranworth Chair Corporation (KCC), was considering a major reorganization – a divisionalization – of his company’s organization structure: Like many entrepreneurs, I have always been focused on top-line sales growth, and I have constantly been impressing on my managers to drive sales. My belief was that if you do that, everything else takes care of itself. Up until recently, I think our approach made sense. We had very little competition, and our margins were huge. Now things are changing. We’ve got some major competitors who are making headway. I think we needed to take a fresh management approach to find opportunities to do things better. Our new divisionalized organization structure should help us serve our customers better and maybe force us to eliminate certain markets or products that are not producing results. But I’m not sure it’s working very well. We’re seeing some finger pointing between the managers of the newly created divisions and the managers in charge of corporate departments. There is a lot of politics involved in defining the roles, responsibilities, … and rights, of each of the responsibility centers, and it’s not clear to me yet exactly where to draw the lines. The company In the early 1980s, Weston Krantz, an avid outdoors person, developed a new design for a lightweight, portable chair that could be stored in a bag and carried anywhere. Convinced that his design had commercial value, in 1987 Weston cofounded Kranworth Chair Corporation (KCC) with his longtime friend, Kevin Wentworth, who had an MBA degree and financial expertise. (The corporation’s name was a contraction of the founders’ names: Krantz and Wentworth.) KCC was headquartered in Denver, Colorado, in the foothills of the Rocky Mountains. KCC produced a broad line of high-quality and fashionable portable, folding chairs, which were branded as various models of the Fold-it! brand. In its early years, KCC sold its products exclusively to distributors. Since its inception, KCC had been organized functionally. In 2003, reporting to the cofounders were vice presidents in charge of sales, supply chain, and finance and administration, plus staff managers responsible for advertising and research and development ( Exhibit 1 ).
ISEN 663 Engineering MCS 14 March 2024 Exhibit 1 Kranworth Chair Corporation: 2003 organization structure Over the years, KCC expanded its product offerings. In 2003, it offered an extensive line of folding chairs. The chairs were produced in various sizes and models, including both adult and child chairs, single chairs and loveseats, and full- and beach-height chairs. Some chairs had additional features, such as cup holders, storage pockets, and trays. The chairs were produced at several price points, with varying fabrics, designs (e.g. single vs. double layer), and frame materials. KCC also offered some related products, such as folding tripod stools, ottomans, cots, and stadium seats. KCC also produced custom-designed products. It employed screen-printing artists and seamstresses who applied custom logos, graphics, and lettering to the nylon. KCC products were often seen at corporate trade shows and tailgate parties at sporting events. The company kept track of approximately 1,500 stock keeping units (SKUs) – finished products and various piece parts that the company sold – although about 85 – 90% of the sales stemmed from only about 40 of the SKUs. Gradually, KCC built sales by investing in more advertising and by adding other distribution channels. By 2003, it sold some products directly to major retail chains (Wal-Mart, K-Mart, Target), as well as other retailers (e.g. sporting goods stores) of various sizes. It sold to retailers using the KCC sales force, outside reps, and distributors. It also sold custom products directly to corporations and high school or university bookstores and athletic departments. The retail channels provided the highest sales volumes, but those sales were made at lower margins. In the 1990s, KCC moved its core manufacturing facilities to Mexico and China to take advantage of lower labor rates. Only some assembly (“kitting”) and customizing facilities were retained in the Denver location. In the company’s first decade of existence, KCC had little competition. Its chair designs were protected by more than 20 patents. Sales grew rapidly, and average margins were high, in the
ISEN 663 Engineering MCS 14 March 2024 range of 40 – 50%, although some margins were sacrificed in later years in order to generate sales from large retail chains. In 1999, KCC borrowed $30 million because the founders, particularly Kevin, wanted to take a significant amount of cash out of the company. Kevin had become interested in ranching, and he wanted to buy a significantly larger ranch. Ranching had become his passion, and he was spending less and less time at KCC. (For years Weston had spent only a small portion of his time at KCC as he traveled and pursued his various avocations.) The debt service on the loan reduced KCC managers’ margin for error. Cash flow w as tight, particularly at the slow time of the year – October to January. Starting in the late 1990s, some significant competitors, mostly from Asian countries, entered the market with comparable chair designs. Despite the fact that most customers perceived KCC as having superior designs and higher quality, and customer satisfaction was high, the higher competition and the worldwide recession of the early 2000s caused sales to flatten and profits to drop. The company’s management incentive plan did not pay out in either 2001 or 2002. In 2003, performance was slightly improved. KC C’s total revenues were projected to be approximately $70 million, up from $68 million in 2002, and profits were expected to be slightly positive. Motivation for divisionalization In 2002, Kevin began to think about changes that might stem from a change in organization structure. He thought that the KCC managers needed to focus more on the quality, and not just the quantity, of sales. To illustrate the point, he described an example in which KCC personnel had aggressively sought business from Target, the large retail chain. In order to develop this retail account, KCC designed a special chair model for Target and offered a special price with a lower gross margin. While Target did sell some Fold-it! chairs, they did not sell many. Part of the reason for the po or sales was that many of Target’s outlets did not display the Fold -it! chairs effectively. Instead of displaying them in the sporting goods department, they shelved them wherever they had room. Kevin explained, “I walked into a Target store in a suburb of Denver and found that our products were sitting on the bottom shelf horizontally in the back corner of the Automotive Department, where nobody could ever see them!” Because of the “growth at all costs” philosophy, KCC incurred significant product developm ent and marketing costs and ended up carrying a large amount of inventory; so, overall, the Target account, and some others like it, were very unprofitable. But to develop more focus on the quality of sales, KCC had to develop a stronger customer focus, to understand better customers’ needs and wants, and to improve customer service levels. Kevin also thought that divisionalization, if implemented properly, could help KCC improve its efficiency and asset utilization. He thought that with an improved customer focus, it was almost inevitable that the company could reduce its SKUs, possibly outsource more functions, and generally learn to serve customer needs better while tying up less capital.
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