Improvement Project- Science Construction PLC

Abstract

           

This paper will look at Science Construction PLC and its ability to create an improvement plan to avoid total collapse/ bankruptcy.  This paper will layout the case study, what the major problem was regarding financial metrics, what alternatives or solutions could have been used and why it is important to business.

Intro-             

             Science Construction PLC (SCPLC) in as organization that supplies development, provisions financing and services to highways, roads, tunnels and viaducts within Istanbul, Ankatam, Ismir, Bursa, and Kocaeli Metro areas (Erer, 2013).

            During the 2008 financial crisis the organization took a downturn since many organizations stopped making progress with rebuilding their infrastructures and focused on preservation during the crisis. This financial crisis was the biggest ever seen since the great depression and many organizations that were “too big to fail” needed to be bailed out by the governments (Amadeo, 2019). This then caused the governments to not spend money elsewhere including the highways & roads that SCPLC worked with. Even when the contractors would get business the organizations were too slow with repayment and thus costed SCPLC higher fees from their borrowers, thus creating a vicious circle.

            For this reason, the SCPLC started the bankruptcy process which also included an Improvement Project to get themselves out of bankruptcy.  The improvement projects are designed to allow organizations to use their own resources and abilities to re-structure themselves to then get out of bankruptcy (“Introduction to Business”, 2012).

            This paper will look at SCPLC and explain what were the main problems, the cause for the bankruptcy and problems, talk about alternatives that could be used, recommend a plan of action and lastly talk about why it is important to the study of business and concluded.          

Problem-        The main problem for SCPLC is loss of business and not receiving payments on time from the business that they have gotten. From a financial standpoint this loss of business would drive down sales and impact the overall net income ratio that shows the amount of profits made from sales (Heisinger & Hoyle, 2012). This has a major impact as the net income allows a company to stay afloat and help to plan for the future, hire more people and expand.

            Another major problem was SCPLC not being able to collect payments from their contracts on a timely basis. From a financial standpoint the organization has outstanding bills, and this could mess up the Overdue ratio. The overdue ratio can help an organization see what bills have not still been payed and thus could cost them money in the long run because they still need to pay back loans that may have been used to secure the contract (Heisinger & Hoyle, 2012).

 Root Cause(s) of the Problem-             Overall root of the problem was from the external environment, which was the financial crisis of 2008. This led many organizations to crumble, less money being put into the economy and organizations pulling back on expansions. This included many of the public organizations that SCPLC was working with and at the same time the public organizations were bailing out other organizations that were needed to avoid collapse. This is one thing that was also unknown we do not know how the governments that were mainly working on infostructure building (roads, highways ect.) were budgeting their money and if they were losing money to fund other areas.

Alternate Solutions-

1.     The case study mentioned that the organization create an improvement plan that could help the organization get themselves out of bankruptcy. Some of the amin points were-

a.           Increasing capital by getting additional money in set increments to help boost the cash flow as well as collecting receivables from the shareholders that currently collect money thus increasing the profits. These were setup with dates associated to make sure that they meet the requirements needed to pay off debt.

b.          Cutting costs by using their own transportation that would cut down costs by 21% per unit price on all raw materials (14 overall cost reduced to 11 thus 3/14 to get 21%) (Erer,2013). Cutting down the labor force, where jobs that were not needed were cut and employees that underproduced were put on temp leave.

c.           Budget control on all levels to help control where money is being spent. Close monitoring on the budget with quarterly review to make sure budgets are on course. If they are not on course, then re-structured to be on course for the future.

2.     I would suggest implementation that involves getting everyone in the organization involved and talking about the bankruptcy to help boost morale and be financially transparent. This approach would start with upper management and work its way through each level to get a couple buy in strategy. Once at lower levels I would create a very open communication channel that would promote expert training in positions to promote efficiency, creating clear expectations, tracking and monitoring of daily activities to help create trends that would notice problems quickly and thus mitigate the problems (“Avoid Motivational bankruptcy”, n.d).

SCPLC Action & Implementation- SCPLC will want to have carful considerations during the rollout and make sure that they are monitoring their actions within the organization and outside the organization because if they start to tilt in a negative direction it could cause them to crumble. Using the actions above can help SCPLC stay completely transparent within the organization which in turn should help to boost morale and thus create more efficiency. They can also incorporate six sigma and/or SPC (Static process control analysis) to better get an idea on which changes would have the better outcome. These analyze the current setup and help to derive an optimal solution that can help reduce waste, promote optimization and efficiency (Knowles “Quality Management”, 2011). 

Conclusion & Importance-

            Although SCPLC was impacted by an external environment they can use an internal approach and plan to help get them back on their feet and build themselves stronger than before. By completing the improvement project, they can get themselves out of the financial whole and once the economy comes back from the recession they will have a strong environment in place within the organization that will help them differentiate from the pack. While we have many unknown facts that could help us analyze deeper, there is enough to create a broad plan of attack.

            This case study is important as it shows that organizations need to be ready for the external environment. Then once something critical happens it shows that a strong response is needed and with the correct plans in place an organization can stay afloat even in a financial crisis.

Resources

Amadeo, K. (2019). What Caused the 2008 Financial Crisis and Could It Happen Again? Retrieved March 4, 2020, from https://www.thebalance.com/2008-financial-crisis-3305679

Avoid Motivational Bankruptcy: Six Tips for Motivating Your Staff. (n.d.). Retrieved from https://www.amanet.org/articles/avoid-motivational-bankruptcy-six-tips-for-motivating-your-staff/

Erer, M. (2013). The Improvement Project of Science Construction PLC. Journal of Business Case Studies, 9(1), 227-234.

Heisinger, K., & Hoyle, J. B.(2012). Accounting for Managers. Saylor Foundation. Creative Commons by-nc-sa 3.0. 

Introduction to Business (2012). Lardbucket.org.

Chapter 12 - The Role of Accounting in Business, Chapter 12, section 4 pp. 653-666.

Knowles, G. (2011). Quality management. Bookboon.com. Download the pdf.

Chapter 9 and Chapter 15.

Wool, M. (2017, September 26). How to Disclose Company Financials . . . Like a Boss. Retrieved from https://www.entrepreneur.com/article/300861