There are four parts to the question below…
TNT Manufacturing makes chemicals for contract manufacturers. The founders, John Turner and Austin Taylor sell three product lines:
– Maintenance chemicals such as lubricants and cleansers
– Caustics, or chemicals that are used in the etching process
– Plating chemicals, such as brass and chrome
They have three field and seven inside salespeople that sell to distributors across the eastern seaboard. The distributors then sell to contract manufacturers, job shops and others.
The company has seen steady growth for the past decade. Although the sales increased by 24% in the previous year, the company has only turned a profit of a couple of hundred dollars. The hired a CFO, Cathy Coker, and asked her to look at what was wrong. She said that there was a lot wrong, and compared their accounting system to balancing a checkbook.
They need to look into making cuts in order to turn a profit. It doesn’t help that they offer a 10% discount when someone buys a full tank car. Although their gross margin is 30%, they haven’t figured in fixed costs. In addition, their number of days to getting paid increased from 22 to 37, and that costs them money too.
Is all growth good growth? Of course not. But Turner and Taylor don’t really have a system to know which is good and which is not. Construct a set of questions to ask Turner and Taylor to help them identify measures to select good growth opportunities. Would these questions and measures change if TNT sold directly to users, rather than through distributors? Why or why not?
In the first column of a table, list a set of measures that Turner and Taylor should consider in order to create a Balanced Scorecard. Then in the second column, identify the source of information for each measure. Be sure to group measures by area of the Scorecard.
“The Balanced Scorecard concept suggests that there are four key areas for input-output analysis. These are financial, customer, internal business processes, and learning and growth.” (Dwyer, p.444)
If you were tasked to build a dashboard for Turner and Taylor, what are the five “needles of interest” or critical measures that they should watch every day?
What is the relationship between the Balanced Scorecard and the dashboard you created?