CASE 11 - CORRAL RECYCLING

Corral Recycling is a new company that provides commercial paper recycling solutions to small and medium sized companies in virtually every sector of Ontario. Clients include many professional organizations, car leasing companies, retailers, insurance companies, government and quasi-government organization. Not all paper products can be simply dropped into a blue bin for recycling. Many paper products must be first shredded as they may contain confidential business, employee, or customer information.

Starting this mobile paper shredding service was straightforward. The main requirement was a five-ton truck, an industrial paper shredder, and a generator as a mobile power service. This type of mobile setup enabled Corral to shred paper right at the clients site and then take the shredded paper daily to recycling depots. The business required careful preparation or planning, as the investment to get the business rolling was substantial, and employees needed to be carefully trained and scheduled.

In just two years, Corral has gone from one outlet and two trucks to 14 branches and 39 trucks. All operations are in Ontario. A branch is nothing more than parking space for one or more trucks. This enables quick responses to clients who are not close to the Corrals office in Richmond Hill.

The organization consist of the president, who is also the chief executive officer. Her father is the chairman of the board of directors. In addition to her and her father, the board of directors consists of a lawyer from a legal firm in Aurora and an accountant who is the controller at a major Toronto-based Canadian retailer.

There are four vice-presidents reporting to the president. They are, respectively, responsible for sales, customer service, vehicle maintenance, and accounting / administration.

----> The vice-president of sales is responsible for the sales representatives who visit prospective clients, and inside sales representatives, who deal with the needs of existing clients via email and telephone. These employees work from the Richmond Hill office.

----> The vice-president of customer service is responsible for the customer service representatives. This is the largest unit in terms of employees, who are located across the province as well as at the Richmond Hill office. Customer service representatives are the driver who use the trucks to gather paper and, as required by the agreement, shred confidential papers. This vice-president is also responsible for scheduling the customer service representatives.

----> The vice-president of maintenance is responsible for the fleet of trucks and ensuring they are in proper operating condition. Responsibilities include truck scheduling and truck maintenance. The latter includes all of the Richmond Hill mechanics, who repair the trucks in the vicinity of Richmond Hill. This vice-president must also arrange for maintenance and repair contracts for trucks that cannot be easily services by the Richmond Hill mechanics.

----> The vice-president of finance and administration is responsible for all accoutring, treasury, and administrative activities. You have recently joined Corral as the vice-president of finance and administration. You are the chartered professional accountant, whereas the previous incumbent, the brother of the president, did not have formal accounting credentials.

Corral uses a QuickBooks program for processing the accounting information. The accounting records are accurate and require little in the way of adjustments to prepare the annual financial statements. However, they are of limited use for decision making as data are records of what has happened and not very relevant for making decisions for the future. Consequently, the president has not regularly reviewed the operating statement of units with the respective vice-president. The budgeting module of QuickBooks has not been used. The president is content with the accounting information, but she is not pleased with the dismal level of profits. She wants you to assist her with improving profitability.

You examine the activities of the other three vice-presidents and learn that trucks and customer service representatives vary in the extent to which they are busy or, in other words, utilized. For example, because the vice-president of customer service scheduled drivers and he vice-president of maintenance schedules trucks, there are times when drivers are scheduled without trucks, and at other times trucks are scheduled without drivers.

Another problem occurs when the vice-president of customer service schedules without consulting inside sales representatives. Without this information from clients via the inside sales representatives, client requests and circumstances get ignored.

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REQUIRED:

With the case approach, address the profitability concerns of the president.