CASE ANALYSIS ON CUSTOM RONWORKING COMPANY - RONYS PROJECT 2014By: Clib James delos Reyes

INTRODUCTIONThe case in focus is of Custom Ronworking Company, owned and operated by spouses Ron Carpenter, being the Chairman and Chief Executive and Emelia Carpenter who is an aggressive businesswoman, effectively running the company. The company which is into furniture manufacturing was established in 1954 and it quickly gained reputation for its exquisitely designed furniture of hardwoods and indigenous softwoods. Eventually, it grows into producing custom furniture for order, wholesale and retail and throughout the years, it has also ventured into subcontracting for the installation and supply of counter-tops, cabinets and similar fixtures or millworks in the construction industry.CORPORATE AND FINANCIAL PROFILE Custom Ronworking Company run by spouses, Ron and Emelia Carpenter has its other key players in the persons of Kim Qualey, the Executive Vice President and John Carpenter as Director; Miles Faster, VP for Production; Spencer Moneysworth, VP for Finance and Administration; Molly Bussell, VP for Personnel; Bruce Sharpe, VP Sales and Estimating; and Kim Cashman as Controller; Ian Leadbetter, Project Manager; Randy Schemers, Principal Schemers and Plotters (S&P); Industrial Consultant, Alfred Fowler, Director of Expert Industrial Developers (EID); Industrial Property Developers and Contractors, Ivar Kontrak; Dave Rivett, EIDs Project Manager; I. Beam Construction Ltd., steel fabricator and installer, Bert Leakey; Classic Cladding Co.s Cladding and Roofing Contractor, Charlie Droppe; I. C. Rain Ltd.s Water-proofing Contractors, Amos Dent; Tinknockers Associatess Mechanical Contractor, Olaf Volta; Zapp Electric Co.s Electrical Contractor Eddie Forgot; Piecemeal Corporations Equipment Supplier, Win Easley; and other project management consultants . The company is located in Someplace, Davao City and it has approximately eight hundred fifty (850) employees consisting its production team. Its major shareholder is Emelia Holdings Ltd. In December 31, 2012 its total assets reached as high as Php181 million pesos with a registered sales of Php93, 250,000 and a net earnings of Php6, 540,000.00 pesos.THE COMPANYS KEY ISSUESThe companys dilemma arose when its Vice President for Sales and Estimating, Bruce Sharpe suggested for an expansion of their manufacturing business in a new location, some fifteen miles away from the residential area of Davao city. Sharpes idea was premised on the recent construction boom in the city, suggesting that this would definitely give their company the opportunity to flourish. Miles Faster, VP for Production quickly tossed up this idea to the companys Director, John Carpenter who in turn, presented this to his parents, Ron and Emelia Carpenter. But the companys VP for Finance, Spencer Moneysworth and Controller Kim Cashman disfavored the idea and argued that such plant expansion in a new location would just be too costly for them aside from the fact that it would disrupt companys production. Disagreement and divergence of opinions cropped up and this prompted the top executive, spouses Ron and Emelia Carpenter to call for a board meeting to resolve the issue. Eventually, after the long session and an ocular plant inspection, the parties agreed that they would go nowhere but rather undertake their expansion project just within their present site.With the birth of Ronys Project 2014, the companys top executives agreed that they would expand their production capacity equivalent to 25% of the existing floor area; install air-conditioning and a dust-free paint and finishing shop complete with additional compressor capacity; procure an equipment especially a semi-automatic woodworking production train which required the development and installation of software and hardware to run it; and the renovation of President and Executive Vice Presidents' office. The total cost estimate for the expansion project excluding office renovation, was roughly at Php17 million pesos to which the Chairman & CEO, Ron Carpenter approved as an absolute maximum for the whole project with the target timeframe of eighteen (18) months to become fully operational. However, even before the project could be started or completed, certain issues sprung up like the following:1. Expert Industrial Developments (EID) fixed-price quotation solicited by Finance, Spencer Moneysworth was Php3million pesos beyond the approved budget of Php17 million pesos and this has sent him canvassing for another price quotations elsewhere;2. But with further negotiations and with EIDs modified offer of undertaking the work based on a fully reimbursable contract, fixed-price quotation for sub-contracted works, and an hourly rate covering direct wages or salaries, payroll burden, head-office overhead and profit, Ronys was made to agree on these terms without being too cautious on uncertainties and the possible circumstances that might be brought by it.3. When faced with enormous paperworks as Schemers and Plotters (S&P) commenced their preliminary designs, Spencer Moneysworth, Ronys VP for Finance, hired Ian Leadbetter, a bright but inexperienced mechanical engineer to assist him. Even if they knew that Leadbetter lacked the needed project management training they still tapped him.4. Leadbetter, though he made good progress in the intitial phases of mechanical design especially in developing production line control software program was caught unprepared in the change of production train specification suggested by EID and this has caused him debilitated in managing the project as the software program needed to be rewritten. Indeed, this has resulted to errors which required increased debugging at start up.5. Moneysworth and Leadbetter did not mind reviewing and approving the procedures for specification and shop drawing submitted by either S&P or Piecemeal Corporation for the procurement of production train.6. The approval for the manufacturing drawing was delayed for weeks as Faster and Leadbetter went on vacation and this has caused the slip in delivery schedule, contributing to the outcome of a construction schedule conflict in tying-in the new services. 7. When the main construction got full swing eight months later, it was discovered that there was a need to add another five (5) feet to the length of the new building brought about by the change in production train specification. This was discovered when holding-down bolts for the new train were laid out on site, long after the perimeter foundations had been put in place.8. Catalogue descriptions and specifications for other equipment needed in the project were not similarly received and reviewed until after the foundations had been established. 9. A strained relations on site emerged when Ian Leadbetter, Ronys Project Manager, dealt directly with Amos Dent of Tinknockers Associates to complain and to correct the misinstallation of the mechanical equipment instead of discussing it with the main contractor, EIDs Project Manager Ivar Kontrak.10. Another problem involving the paint shop cropped up when the local inspection authority insisted that the surplus paint disposal arrangements be upgraded to meet the latest environmental standards.11. Even if the time drew near for the plant to get into full operation, Ronys VP for Finance Spencer Moneysworth and Project Manager Ian Leadbetter failed to prepare and to plan for the projects completion like owners inspection and acceptance of the building, testing, dry-running, and effecting production start-up for the production train.12. The duo also failed to have EID secure the building occupancy certificate.13. The tie-in of power and other utility connections set for the annual two-week maintenance shut-down was delayed for two weeks due to late delivery of production train.14. There was a tremendous loss for the supposed several weeks of production.15. Customer delivery dates were missed.16. General contractors cancelled their contracts and looked for other millwork manufacturers to place their orders.17. Finished goods inventories were depleted and other sales opportunities for Ronys were wasted.18. Ronys suffered heavy financial losses and project overrun was evident when its actual expenditures exceeded the budget even if the project was only 85% complete.19. Ronys Controller Kim Cashman struggled to secure for an additional line of credit to further finance the project and they found themselves throwing money in an effort to get the operational.20. Construction activities in the region, during Ronys plant upgrading was also noticed to have fallen dramatically and this resulted to the decline in the general demand for Ronys products even if its marketing executives sprung an expensive marketing strategies to regain customers loyalty.CONCLUSIONSIn as much as key issues or problems involving Ronys Project 20014 have been exhaustively identified, it is but fitting to come up with the following conclusions and recommendations, to wit:1. Ronys bigwigs rush of contracting with Experts Industrial Development (EID) was from the very start, faulty. They should have searched for a better contractor who could offer a better price, services, and terms and conditions that would truly suit to the companys budget and most especially its interest. 2. Ronys VP for Finance and Administration, Spencer Moneysworth immediately jumped into a deal with EID even without clearing out grey areas like in its overall potential or capability to undertake the project, its project resources and equipment, manpower and its terms in subcontracting the other aspects of the project. They could have ironed out all these and clarified everything before finally entering into a deal with EID.3. Moneysworths hiring of the inexperienced Ian Leadbetter as his assistant or Project Manager combined with EIDs incompetence in handling the projects design brought a great debacle to Ronys Project 2014. Somebody whos more experienced and more competent would have done miracle to Ronys.4. Moneysworth and Leadbetter incompetence or inefficiency were best shown in their act of not reviewing and approving the procedures for specification submitted by either S&P or Piecemeal Corporation for the procurement of production train and in fact this has resulted to further delay of the project.5. The discovery of the erroneous length of the new building caused by the change in the specification of the production train eight (8) months later was something very ridiculous. They could have prevented this to happen had all of them been too careful and professional to handle or undertake the project at hand.6. Ronys bigwigs seemed to very irresponsible and reckless in handling or monitoring their project for how it occurred that the contractor proceeded in laying out the foundations without reviewing and approving the papers that born all the projects specifications. The latter should have prevailed over the former.7. Strained relations in the construction site would not have happened had Ronys Project Manager Ian Leadbetter been professional and matured enough to dealing with the EID people regarding the erroneous installation or misplacement of the project equipment he notice in the construction site.8. The many issues involving preparations for the plan to get operational would not have been problems at all had Ronys top executives been cautious and diligent enough to work out for things needed for the projects completion.9. Production delays, depleted finished goods inventories, cancelled customers contracts, increased financing credits, and heavy financial losses suffered by Ronys would not have been possible had its top executives, especially from its Chairman and President, down to the Project Manager been competent and cautious enough in their decision-making.10. Finally, they could have considered all the possibilities and ready enough for uncertainties including changes in their plans and in the latest economic trends and development that would affect their business. 11.