Question

You are the Chief Operations Officer responsible for overall company operations in ATCHULO
Company Ltd, a large courier company in Ghana. Your company has 16 regional offices
(terminals) scattered around the country in each of the regional capitals and the main office (hub)
located in the capital city of the country. Your operations are strictly domestic. You do not accept
international shipments.
The day at each terminal begins with the arrival of packages from the hub. The packages are loaded
onto trucks for delivery to customers during morning hours. In the afternoon, the same trucks pick
up packages that are returned to the terminal in the late afternoon and then shipped to the hub where
shipments arrive from the terminals into the late evening and are sorted for delivery early the next
day for the terminals.

Each terminal in your company is treated as an investment centre and prepares individual income
statements each month. Each terminal receives 30% of the revenue from packages that it picks up
and 30% of the revenue from the packages it delivers. The remaining 40% of the revenue from
each transaction goes to the hub. Each terminal accumulates its own costs. All costs relating to
travel to and from the hub are charged to the hub. The revenue per package is based on size and
service type and not the distance the package travels. (There are two services: overnight and ground
delivery, which takes between 1 and 7 days, depending on the distance travelled).
All customer service is done through a central service group located in the hub. Customers access
this service centre through a toll-free telephone number. The most common calls to customer
service include requests for package pickup, requests to trace an overdue package, and requests
for billing information. The company has invested in complex and expensive package tracking
equipment that monitors the package’s trip through the system by scanning the bar code placed on
every package. The bar code is scanned when the package is picked up, enters the originating
terminal, leaves the originating terminal, arrives at the hub, leaves the hub, arrives at the
destination terminal, and is delivered to the customers. All scanning is done with handheld wands
that transmit the information to the regional and then the central computer.
The major staff functions in each terminal are administrative (accounting, clerical, and executive),
marketing (the sales staff), courier (the people who pick up and deliver the shipments and the
the equipment they use), and operations (the people and equipment who sort packages in the terminal).
This organisation takes customer service very seriously. The revenue for any package that fails to
meet the organisation’s service commitment to the customer is not assigned to the originating and
destination terminals.
All company employees receive a wage and a bonus based on the terminal’s economic value-added.
This system has promoted many debates about the sharing rules for revenues, the inherent inequity
of the existing system, and the appropriateness of the revenue share for the hub. Service problems
have arisen primarily relating to overdue packages. The terminals believe that most of the service
problems relate to wrong sorting in the hub, resulting in packages being sent to the wrong
terminals.
Required:
A) Explain why an investment centre is or not an appropriate organisational design in
ATCHULO Company Ltd.
B) Assuming that ATCHULO Company Ltd is committed to the current design, how would
you improve it?
C) Assuming that ATCHULO Company Ltd has decided that the investment centre model is
unacceptable, what model to performance evaluation would you recommend and why?

Answer 1

Answer A: An investment centre is not a suitable organisational design for ATCHULO Ltd.. The explanation being, that the speculation places are not free. A huge amount of their proficiency, expenses and execution rely upon the focal centre point which allots the bundles to them. Wrong arranging by the focal centre point prompts additional expenses and furthermore decreases salary of the terminals in spite of the way that work is finished by the task. A venture community is a specialty unit inside an element that has duty regarding its own pay, costs, and resources, and whose monetary results are relied upon all the three variables. The given model doesn't meet this rule.

An investment centre is a business unit where the profits produced is contrasted and capital conveyed. Venture focus bookkeeping is valuable to assess specialty unit or fragment which is autonomous and where there is huge speculation made.

Answer B: If ATCHULO co. Ltd. is committed to the current design then the following improvisations can be made:

• Salary per bundle should be founded on the separation it travels, as the size may be gigantic however the separation voyaged may be less when contrasted with the separation headed out to convey littler bundles.
• The expense of disappointment of the terminal to meet the duties to customer's and service issues due of wrong arranging by the centre point ought to be charged to the centre and not the terminal as the undertaking has been performed by them.
• The terminal should be offered autonomy to check the bundles before picking them from the centre point with the goal that wrong bundles are not picked.

Answer C: If ATCHULO Company Ltd has decided that the investment centre model is unacceptable, then the Company can adopt Profit centre accounting rather than investment accounting. Under profit centre accounting each regional centre and hub will be evaluated on net profit they make. The main office of every regional office should be turned into an investment centre, and the total costs and income should be allocated to them. This will promote responsibility regarding delivery and sorting of packages.

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