Assignment No 05

Advance
Performance
Management
Submitted To: Sir Jalal Ahmed Khan

Muhammad Hanif
Q1: How does ERP assist in evaluating performance?

Depending on your organizational needs your ERP software should meet most or the following criteria

Operations Variables
Sales and profitability are the main operational variables for assessing the results. To what degree you
have reached the sales volume expected in your preparation and how changes in your sales volume are
reliable measures of company success relative to changes at your competitors. The profit margin of
percentage points is how much of any dollar gained from sales the company holds as income and is a
good measure of overall success.

Customer Relationship/Account Management

Make sure the CRM module helps users view customers through a wide range of custom views including
items, location, account sort, and more. An efficient CRM module will also at any time allow the access
to the required ERP information on any computer.

Accounts Payable Reporting

Good ERP systems will provide sufficient reporting to your AP team to make collections more efficient
and to make account ageing easier to assess.

Bank Reconciliation
Your future ERP system includes a Bank reconciliation feature to help align the organization's bank
statement balances with the volume of General Ledger cash accounts.

Benefits Administration
The ERP needs a framework for monitoring and recording benefits plan participation, including
premiums, rewards, income sharing and retirement plans.

CRP (Capacity Requirements Planning)

A CRP module inside your ERP is necessary if you need to assess the resources needed to fulfill the
output requirements.

MRP (Material Requirements Planning)

Some companies need production planning, scheduling and a framework for managing inventories. If
this is also a part of your requirements, check that this module includes the ERPs you are evaluating.

BOM (Bill of Materials)

Want to use inventory bills while making processing orders to create products? If so, be sure that this
function is integrated in whatever ERP you find.
Q2: What is understood by the loan management information system?

The Loan Management Program helps to simplify multi-lending portfolio servicing and management on a
single platform. The solution provides a comprehensive collection of customer and account centric
business operations that enable companies to be more agile and also offers customer service
capabilities at the front office. The program enables multi-currency, multi-organization and multi-lingual
features, and embraces a variety of investment options provided by today's industry. This approach
meets front desk and back office consumer specifications and integrates easily with third party systems.

KEY FEATURES:

Store and track key information

Capturing of information used for calculations or reports (e.g. name of loan, agreement date etc.).

Interest calculation options

Select for each loan whether the interest is subject to a fixed interest rate, simple or compounded and
the applicable day-count convention to be used in the calculations.

Automation of transactions

Creation of the calculated interest transactions is automated – There is no need for you to remember to
carry them out (at particular times)/type individual line entries separately.

Posting and integration with Sage Pastel Evolution

In order to use LMS, you must have Sage Evolution. However, transactions in LMS do not need to be
posted to Evolution. At any time you can post and check the loan record. LMS marks and keeps track of
all transactions in the loan record and provides a detailed report on it.

Multicurrency

Unlimited foreign currencies can be set up. LMS home currency corresponds to the Evolution home
currency.

Benefits

 Easily manage, calculate, track and maintain your lending products

 Easily calculate your loan interest and see where your payments are going.
 Enjoy the freedom of lending process automation, no need to type individual line entries
separately or to remember to carry out tasks.
 Simplify the lending lifecycle and get comprehensive, clear and flexible reports
 Seamless integration with Sage Evolution as an add-on

Q3: Why is human behavior management is being replaced by robotic implementation.

There are currently 2.25 million robots in use worldwide, a report by Oxford Economics suggested,
which also said the number has multiplied over the past two decades.

The report said the rise in robotic technology would boost economic growth together with productivity
and create new jobs in industries, but it also said this would cause millions of manufacturing jobs to be
lost to robots.

In the next 20 years, the report said, the global stock of robots would reach as many as 20 million by
2030, with 14 million in China only.

There is no doubt that robotic technology has contributed much to mankind in various fields of daily life.
However, there are plenty of studies that have said robots pose a threat to mankind.

Stephen Hawking, an English theoretical physicist, cosmologist, and author who died last year, was
concerned with the rise in robot automation.

“If machines produce everything we need, the outcome will depend on how things are distributed.
Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people
can end up miserably poor if the machine owners successfully lobby against wealth redistribution. So
far, the trend seems to be toward the second option, with technology driving ever-increasing
inequality,” Hawking said in a Reddit session in October 2015.

Many companies have deployed robotic systems in developing nations in order to achieve greater
efficiency and lower costs.
 CANTOR CASE
Case history:

Cantor Group (Cantor) is a publicly listed company with two branches in the small country of Deeland,
both engaged in the food and drink retailing. Cantor Cafes (Cafes) is the group's original operating
company and is chains of 115 café’s that are specialized in different coffee drinks but also serve some
basic food dishes. Cafes have been running successfully for 15 years and have hit the height of its growth
as the café market is now considered competitively saturated. More development can occur only when
the opportunity is provided to acquire lucrative new locations, but these opportunities are not projected
to be substantial in the coming years.

The Cantor Group organizes its two companies in a similar way, as they are engaged in related business
fields. Cafes rent their premises on the open market with a five-year lease on a fixed rent payable
annually in advance, on normal commercial terms. Juicy, on the other hand, has made a single deal for
all of its properties with a major commercial landlord. Juicy decided that the rent for their sites reflects a
portion of the revenue generated at each location. Juicy claims it will continue its growth by purchasing
more sites under the same terms from this landlord.

Issues at hand:

• Shareholder wealth
• Good value food and drink
• Appealing environments for customers
• Target new audience

Problem:

Shareholder Wealth: Actually the study reports only on historical earnings. It does not have any
potential cash flows, economic value added, share price or dividends – all of which may imply
shareholder interest.

As such, the shareholder interest is not explicitly calculated in the study. This argument was also
illustrated by one of the major shareholders of Cantor who proposed the adoption of economic value
added (EVA) as the principal value measure of the firm.

Good value food and Drink: Comparing the gross profit of Cantor against the gross profit for the
industry as a whole may give some indication as to whether or not Cantor is providing good value.

The gross profit margin of Cantor is marginally higher than the industry average (74.2% vs. 72.8%), which
may mean that rates paid by Cantor are marginally higher than the industry average for its clients.
Appealing environments for customers: The value of Cantor's cafés or juice bars can hardly be
calculated from financial data alone. Revenue growth does, however, offer some indication of customer
loyalty, because consumers are unlikely to continue using Cantor's premises if they are too unattractive.

Target New Audience: Cantor's main group executive, as well as the boards of the two companies, uses
the same results report. Nevertheless, the Subsidiary Boards' knowledge specifications that vary from
the Group BOD’s.

Recommendation:

There are a number of shortcomings in Cantor's latest performance study – in particular, it does not
offer an indicator of how well the company is doing against the three dimensions of its current goal. The
study focuses on the competitiveness of Cantor rather than the interest of its shareholder, but moving
towards a value-based management approach and incorporating EVA as a success metric may help fix
this issue. Due to the different information requirements, it would also be useful to produce separate
reports for the main board and the boards of the subsidiaries.
 BEACH FOODS
Case history:

Beach Foods is a family company that has evolved steadily over its 100 year history. The business' aim is
to optimize the wealth of the family through its shareholdings. There are three divisions within Beach. It
produces a range of foods in two of its divisions: Beach Baby Foods and Beach Chocolate Foods. Each of
these divisions knows their own market, and prices are set accordingly. The third division (R&D) is
researching new products on the orders of the other divisions, and is considered essential to Beach's
survival and development. Beach board considered the effect of using a divisional structure.

Issues at hand:

Beach board considered the effect of using a divisional structure.

Problem statement:

There is controversy on board level about the right option of divisional output measure to be used in the
two divisions of manufacture. The company currently uses EVATM but two directors challenged its
worth, saying it was difficult to understand. Some directors have proposed using either residual income
(RI) or investment return (ROI) as alternatives. The board wishes for each division to use the same scale.
As well as assessing these different metrics qualitatively, the board wants an assessment of the effect of
a shift in performance measure on their understanding of the results of these divisions.
Financials:

CHERFUL
($Million) POSH ($Million) TOTAL ($Million)
Variable costs
Materials 90 120
Labor 60 80
Overheads 40 50
Distribution costs 45 45
Quality costs 20 30

Fixed costs
Administration costs 18 18 36
Distribution costs 16 16 32
Quality costs 6 6 12
Marketing costs 80 80 160

Other data
Revenue 448 308 756
Capital employed 326 250 576

Recommendation:

First of all, I assume that in this problem the controllable and uncontrollable ROI and RI should be
measured as this knowledge would be useful to management in evaluating the impacts of these
assumptions (using controllable and uncontrollable profits) in calculating the metrics for a division.

To your second issue, R&D costs are typically uncontrollable, but if the Baby Division has explicitly asked
for R&D and the transfer price has been generally accepted (thus the Baby Division has to pay R&D for
its $11 m services) then it is controllable and should be included in the measurement of controllable
income (ROI and RI).

The need to assess the performance of management as well as the performance of the division would
have caused you to consider controllability issues. For example, if Baby's managers are unable to
monitor the R&D expenses that are recharged to the organization, it is appropriate to include them in a
manager's performance evaluation.