Aarhus School of Business
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University of Aarhus
Scanned article
Anthony, Robert N. & Govindarajan, Vijay, (2006).
Chapter Case 4-6: Grand Jean Company.
In: Management control systems: 6., pp. 200-203,
McGraw-Hill/inwin,
8487_Anthony.pdt
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Redistribution of this article to third party is not permitted.Case 4-6
Grand Jean Company
the Grand Jean Com founded in the mid-19th & The frm
ket durability of its dominant product—blue denim jeans. Grand Jean had
ena market leader with “wash-and-wears” bell-bottom and flare jeans, and
modern easnal pants, By 1989 it was one of the world’s Largest clothing mm:
tfacturers, It offered a wide variety of dress and fashion jeans for both m
tnd boys and a complete line of pants for women. Tt enjoyed a reputation fo
reasonably priced, quality pants. The company sold 40 million pairs of pant
last year
Production
rs, Grand Jean
» had to begin to ration its pants to buy
he close of the production year. The company owned 25 manufacturing plant
The plants’ capacity’ varied, but the average output was about 20,000 pairs of
pants per week. With the exception of
only blue denim jeans, the plants produced various typ
Juction capacity by contracting with independent man:
‘oor three plants that usually produced
of pants. The firm
augmented its own
ufieturers. Currently, there were 20 sueh eontractors maki
blue denim jean year contractors produced onc
sald by (
| Jean’s pants (includi
Tom Wicks, vice president for production operations (see organization chart
in Exbibit 1), commented on the firm's use of outside contractors: “The major
y of these contractors hi rn with us for five years or more, Several of them
ed Grand Jean efficiently and reliably for « ) years. In v
gerness to get the pants made, we understandably link with some independe
Jon’t know what they are doing and are {orved of business aft
or so because their costs are too high. Usually from an ind
pendent's experience and per unit contract price whether or
‘Contract agreements are made by me and my staff, The or maxima
‘ willing ach type of pants is very we ished by ni
Ifa contractor impr able nal
ty pants, we will f nt ¢ i ht bid
4 r a8 4) h. Henec often stepped
of existing faciliBIT 1
Jean
izatio
ir k « 208
The Control System
Mr. Wicks continued: "We treat our 25 plants as expense centers. Operations at
each plant have been examined thoroughly by industrial and cost enginec
You know, time-and-motion studies and all. 'm quite proud of the standard
imes and costs we have in place, We have even developed learning curves that
long it will take produetion of given type of pants to reach the
urs allowed per pair after initial start-up or a product switch-over
the rate at which total produetion time per pair reaches standard for
ery basic style of pants we make. We use this information for budgeti
plants cost. The marketing staff estimates the quantity of pants of each type it
wuts produced cach year. Thait information is used to divide total production
mong the plants, ['possible, we like to put one plant to work for a whole year
on ane type of pants. That saves start-up and changeover costs. Since we ean
Hall we make, we try to keep our plants at peak efficieney, Unfortunately, th
narketing folks always manage to complicate production schedules withjonth b ‘i
We alsa lo wer thin a f 1
nunity relations been Are his empl i
any ave very cor about eto
A constitnted the Grand dea tom. A
U-to-5 seal eS was the rato, At year-end, Grand d p mat
rgement determined 3 bonus base rating the firm
ind profits for the year, The bonus base had been as high as $10,000. The pe
mance rating for each member of Grand Jean's m ment mal
ied by this bonus base to determine a given 1 Por exam
muinager with a 3-point rating would receive
Grand Jean's m ment group included many fina; I marketin
jalists. The casewriter noted that these person corp
ate headquart re consistently a ratings by th
upervisors than were plant managers. This differe nsistontl
The five marketing departments listed in Exhibit 1 unde joe presi
marketing are treated ag revenue centers. Mark orucasts are used
‘et sales unit and sales dollar targets, The performance of marketing depa
nent managers is measured on the basis of meeting these targets, To meet
wer tores and clothing d tors. For marketing department perf
i .ssment, the sales of each line of pant ned to th et
marketing department (i.0,, basic jeans, etc. |. Marketing department manauer
participated in the company’s b tem,
Evaluation of the System
Mia Pac cent business sc te, gave itor her opi
ons regarding Grand Joan's production operations an
weedures: “Mr. Wick the ecutives Pve ¢ i
ry intelligent bi sman. But I really don't appro
tation program, I accident na
di of produced over quota, He d mn
" 1 Th
ui f mpany that W_
hate t Resp omer Rxpenset 203
Aso, Mr: Wicks worked his way up the ranks ofthe company: He was. very
sol plant manager hinelfand lecls that everyone should run a plant the way
enti For example, in Me, Wicks plant there were IL workers for every su
visor or ember a the offie and administrative staff Since then, Me: Wieks
vr clevated this supervision ratio of T:1 to some sort Vindex of lead
Coship effeienes. Al plant m sim for wand, as result, usually under
plants Theve simply aren't enough people in the offices out there to generate
dlurd hours determined in these plants.and the older ones. The older sewing ma
Questions
|. How would you deseribe the goalls) of the company asa whole? Is this, or are
these. the same as the goals) of the company's marketing onganization and
tifturing plants and the marketing departments. What are the strengths
and weaknesse
sceause it would overcome some of the problems discovered by Mia Packard
mal the easewriter This plant manager commented, "/Myi competitor isthe
Jean asuny plant makes, And this outsider might also make pants for Grand
Jean's eompetitors, Because of the competitive market, only the best. man
| plants survive in this business. Therefore, like the outside comp:
snager t should have bottom line responsiblity and be rewarded accord
seanis 25 manufacturing plants? How would this approach affect the plan
Ml to retailers and distributor
ki :