Riordan Manufacturing Business Analysis

Riordan Manufacturing, Inc. Business Analysis Learning Team B BSA 500 University of phoenix Instructor Charlotte Bonner October 6, 2008 * Riordan Manufacturing, Inc. Business Analysis * ****INTRO GOES HERE DANA WILL economise IT AS WE NEAR COMPLETION History of Riordan Riordan Manufacturing Inc. is a leading globular manufacturer of malleable injection molding components. Some of the components that it manufactures include plastic bottles, fans of all sizes, heart valves, medical stents, and other custom plastic images. Riordan is concent regularise on high standards, long term customer relationships, innovation, and growth.The company was to begin with founded in 1991 by a professor of chemistry, Dr. Riordan, as an outlet for technical applications for the high tensile strength plastic substrates that Dr. Riordan had developed. Riordan Manufacturing is now a marcher of the Fortune 1000 imageprise, Riordan Industries. The company is headquartered in San Jose California, but too has facilities in Georgia, Michigan, and China. Current large projects include the design breaker point on an sophisticated bottle in the shape of a pyramid, and the proof of concept stage on a CardiCare heart valve.Information Technology (IT) infrastructure, serving 550 employees, consists of three Wide Area Nedeucerk (WAN) lines originating from the integrated headquarters in San Jose (125 employees) to the three manufacturing plants in Michigan (130 employees), Georgia (45 employees), and China (250 employees). Modules score Modules Riordan Manufacturings corporate office has integrated ERP software designed purposely for plastics, processors, and process and fictionalization manufacturers. During acquisition in Georgia and Michigan, the finance and method of chronicle softwares compatibility issue was non addressed.For this think, Georgia and Michigan subscribe applications which are not compatible with the current pecuniary body. The following is a list of exc ess staffs that should be committed to the account statement formation Inventory Modules The Inventory module forget service of process Riordan Manufacturing with the physical attention of their stock (until used up or sell). It give perform a sound cataloging procedure by assigning item numbers that the report system can process. addition steering Modules Asset Management pull up stakes help Riordan Manufacturing with physical maintenance, introduce of assets, and financial focus.Physical maintenance includes the asset location, condition, and the assignment of asset management to specific individuals. Cash Management Modules Cash Management go away help Riordan Manufacturing manage and control the cash cycle. It will ensure liquidity and nurture take in office. Benefits of this module include multi-currency capabilities, cash balancing, bank reconciliation, and cash forecasting. weave Applications Modules Web Applications will help Riordan Manufacturing in many way s. Customers and gross revenuepeople alike can enter influences with the web.This real-time web configuration will shorten the order cycle, and enhance customer satisfaction. Employees of Riordan will be able to use this specialty for expense describe, supply requisitions, and communication between employees. Multiple Currencies Modules Since Riordan has a conjunction venture with China, the Multiple Currency module will be of wide help. Financial transaction with China will be recorded in the sub- journals and converted into the functional currency by victimization current vary rate breeding. The transactions will be recorded and maintained in the accounting selective discipline.Riordans functional currency will be in US dollars. Payroll Modules The Payroll module will apply valet resource data to salaries and benefits and determine the amount of pay and how to get the expense to the employee. It will take into consideration national tax codes and worldwide regulations. T he system can also track and do calculations for data such as sick time, leave of absence, and vacation. Travel/Expense Reporting Modules Because Riordan has multiple offices inwardly the United States and a joint venture with China, travel budgets and expense reporting of trips can be documented into the travel/expense reporting module.Riordan employees and management can use this module to document information such as hail of plane tickets, vehicles, food, and supplies while employees are traveling. General Ledger Modules The accounting process begins with general ledgers. Therefore, this module will help organize Riordans financial reports from the first steps. This will chance upon information readily kind and more easily processed. Accounts payable/receivable Modules Like the general ledger module, this module will help organize Riordans accounts payable and receivable, which will better organize their balance sheet. administrations to be attached to the Accounting System Sales and Marketing All of the sales to past customers have been annotated using written methods. Riordan has requested that all past sales records, made up of diverse databases, paper files and microfiche be inputted into a Customer Relationship Management (CRM) system. The information recorded in these records is largely made up of information that can easily be entered into a CRM database for easy distribution and replication between departments. The CRM package will also benefit Riordan by providing the customers admittance to a front end server (extranet), to be able to cook accounts, check account status, pay bills and place orders.Having a single CRM database will add sales personnel or customer service representatives with the ability to quickly check customer accounting information without having to search through various paper work, microfiche and out of date or inadequate databases. Internally, employees will be able to keep track of various vendors who have a proven track record of discounts, reliable shipping and product innovation. In the past, individual sales employees have managed customer records, and no standard of data recording has been schematic.Operating in this manner doesnt allow for a viscous sales aggroup, which is going to be critical for the new team exchange approach being implemented by Riordan. A standardization and desegregation of customer records need to be implemented for the sales team to be more successful in the future. The CRM will consolidate the sales team into one unit rather than individuals servicing specific accounts. Customer relations will be proficient referable to the ability of multiple sales personnel being able to acquire and update account information rather than a single person maintaining individual account records. non to mention when a sales person is not available due to health, personal issues or vacation, another employee will be able to provide information and support. The CRM will then b e connected to the Finance & Accounting System. Human Resources Riordan Manufacturings Human Resources system should be connected to its accounting system because the Human Resources department handles the employees salaries, benefits, employee recognition programs and training programs. These programs do not bring in revenue, however, they are considered constitutes for the company.Accurate bookkeeping of these activities and internalisation of the figures into the accounting equation is crucial to painting an accurate financial experience of Riordan. Operations The Operations system should also be connected to the accounting system since it outlines inventory, supply and production. Inventory is part of a companys assets, which is a core part of the accounting equation. In determining its financial state, Riordan needs to have knowledge of its inventory, how much it be to obtain, how it is used and the monetary grade of operating, or manufacturing products with that inventory .Just like assets are a core part of the accounting process, Operations is a core part of Riordans process. sound Legal systems need to be connected to the accounting system in order to maintain legal watch over the system. One face of how Legal could benefit from a connection to the accounting system is that it would be able to monitor inventory and approve where Riordan products are being sent. This would take a shit sure export laws and restrictions are being met.Legal can also interact with Human Resources, Finance, Sales, and Operations over the accounting system to make sure that all aspects of the legal requirements for corporate accounting are followed. Reports and policies could be put in place by Legal in the system to ensure integrity and ethics. Information Technology IT has many reasons to be connected to the accounting system. Ordering, policy implementation, monitoring, and support are just a hardly a(prenominal) of the aspects of business that would benefit from t he Information Technology system being connected to the accounting system.Monitoring, policies, and support are a huge reason for IT to be connected. Accounting is one of the most important aspects to running a business. IT needs to carefully monitor and support validity and integrity within an accounting system as well as ensure proper policies, established in conjunction with legal, are in place. Income Statement Analysis In reviewing the Income Statement for Riordan Manufacturing, thither are some concerns on cost expenses that managers will need to adjust. Even though the sales revenue from 2004 to 2005 has ontogenesisd 10. % from $46 million to $50 million, a combination of direct cost of goods sold and operating expenses has caused the net profit to decrease during the same period. The direct cost of goods sold increased 12. 2% from $37. 5 million to $42 million. A possible cause for this increase may be that Riordan may have abundance of inventory on hand as a top of orderi ng above the ordering point. Despite the high increase in cost of goods sold, the gross margin still increased, but by merely 2. 6% from $8. 6 million to $8. 8 million. In addition to the 12. % increase in cost of goods sold, the operating expenses also incurred by Riordan Manufacturing increased 8% from $5. 3 million to $5. 7 million. These two big increases in cost incurred compared to the small increase in the gross margin proved to be too much, resulting in a decrease in profit onwards interest and tax expenses. The profit forrader taxes and interest expenses decreased 6. 3% from $3. 2 million to $3 million. In addition to the negative figures, there are some positive figures to bring into the mix. Despite the profit before taxes and interest expense fall by 6. %, the net profit hardly decreased by 1. 7% from $2 million to $1. 95 million. The reason for the smaller decrease in the net profit was a 13. 5% decrease in non-operating expenses including tax and interest expenses from $1. 3 million to $1. 1 million. The main focus to increase profits from 2005 to 2006 would be looking into decreasing the cost of goods sold and some of the operating expenses while continuing the contract in decreasing the non-operating expenses or at least keeping the cost manageable. What the company is doing wrongRiordans Inventory accounts for a large dish out of its current assets (54%). On the surface this may represent a impuissance however the company has an inventory turn of 5. 35 (cost of goods sold each family/inventory) which means the company goes though its inventory 5. 35 times per year or every 68 days. Riordans products are not biodegradable and enjoy a very long shelf life so this turnover rate of relatively good. This relatively high turnover rate allows for it to maintain relatively low cash balances as it can piece cash quickly from sale of inventory.This is reflected in the high balance of the accounts receivable. In addition, the company continues to carry a significant long term debt without a noticeable attempt to lessen that debt. Analysis of shareholder fairness shows that the value of the companys shares is greater than the total shareholders equity, a sign of deficit. The debt to equity ratio is fairly high at 56%, this a likely sign of weakness as well. While the company has maintained a gross margin of over 8. 5 million for the past two years, its operating expenses have increased during the same period affecting its profit margin.This is a sign that Riordan is not doing well in keeping its costs low to be more profitable. The opportunities would be to focus on increase sales at the same decreasing general and administrative costs. To action this, the company needs to invest in IT systems. Eliminating incompatible systems and consolidating information at its headquarter will help in reducing administrative costs. References Riordan Manufacturing. 2004. University of Phoenix. Accessed family 2008 from https//ecampus . phoenix. edu/secure/aapd/CIST/VOP/Business/Riordan/Internet/IndexPort. htm