Aloha Products

Aloha Products

Case Context CONTROL

Aloha Products is a United States-based coffee-processor company that has been providing non-specialty and low-priced coffee for over a hundred years. It purchases the raw materials or what buyers and sellers refer to as "green coffee" from brokers and trade firms, processes the coffee and sells the final product to customers. Large companies such as Nestle and P&G directly import the unprocessed or green coffee beans from coffee plantations in tropical countries such as Brazil and Colombia while companies with smaller levels of business such as such as Aloha buy the green coffee beans from brokers or trade firms.

Aloha Products is managed by the owners and its headquarters is located in Ohio, United States. It has three plants located in Midwestern United States, each plant being responsible for its own profit and loss. Each plant's performance is measured by each plant manager's gross margin generated per plant. The raw materials or green coffee beans are handled by the company's purchasing unit that is located in New York City. Each plant receives a production schedule that is determined from the center and receives raw materials as well as pay in accordance with the production requirements of each plant.

This method has been done until in the 1990s, when the plant managers started to speak out on their dissatisfaction on the computation of their bonuses since they do not have authority to determine the prices of raw materials, production schedules and output prices from the manufacturer. External factors such as the steady decline in American's consumption of coffee from 1965 to 1990 affected the sales and profits of coffee processors as well.

Because of this, the company president hired a consulting firm to evaluate the current control systems in the three major departments: Plant Operations,