AA24_DHM_ A case study on the LPQ Builders Company

Use the text below to answer the crossword.

A case study on the LPQ Builders Company

The LPQ Builders, founded in 1925, is a leader (7 across) in production and

distribution of building materials. Its main headquarter is in Bogota city and it also has
branch offices in Buenaventura, Cartagena and Armenia.

The company has a logistics ( 11 do w n ) for the marketing of its products that has been
structured based on Colombias geographical conditions. This network consists of
logistic platforms, logistic corridors and foreign trade transfer nodes that are used to
enforce compliance with its social concern.

In this new stage the LPQ Builders Company is (2 across) changes in its
organizational structure and functional areas by redefining them into 6 strategic
business units: administration, internationalization, human resource management,
production, marketing and finance, where all its processes are consolidated.
Therefore, from the general direction, dissemination and training processes are led on the
new strategic direction which is oriented towards the internationalization of the products
in order to encourage commitment to them.

This is why the general (13 across) asks the human management department
to conduct the training process for the business unit managers group, process
coordinators and administrative staff. This means to put off two training processes that
were scheduled for all the operational staff and that were part of an incentive process to
encourage the promotion of 20 operative posts in different business units of the
company. In order to be trained, it is required that the staff has approved their
professional education level; nevertheless, the human management department realizes
that there are 10 people in administrative posts that have not finished yet their
professional career. Under these circumstances, the company decides to do without
the services of five people from the administrative department who have less than
50% of their professional training.

On the other hand, LPQ Builders decides to implement

its internationalization processes facing competitive challenges with ( 2
d o w n ) markets. First of all, the company began to implement financial strategies to
minimize the impact of the exchange rate appreciation and to reduce their operating
revenues volatility. With the increasing competitiveness of Chinese low-price products,
the company aims to actions that increase productivity and acquires high-technology
for the packaging processes which can reduce production costs to three (3)
months, by approximately 8% and make more efficient deliveries to international
customers reducing shipping times in two days, due to the reduction of setup times of
orders. Under this new organizational revolution, the foreign trade manager passes
his resignation letter.
 Then, the LPQ Builders Company decides to hire a (1 down) with 10 years of
experience in international trade and specific processes in the construction
sector. This new manager joins the company and immediately hires a new level 1
customs agency which is responsible of executing import and export processes at the
company. At the hiring moment, clear instructions about production processes in
the company were not specified, this lack of information led to a wrong tariff
classification of imported products (gypsum and pantiles) and as a result, the company
must pay penalty customs for branch operations in Buenaventura.

Due to the (12 down) that export market requirements demand that a building company must
purchase metal cutting saws, the company starts a market research which provides three
possible countries that can be suppliers. The company decides immediately to select the
one that is geographically closer to Colombia, without conducting any analysis about
competitiveness, experience and supplier certification, but only considering that tools have a
subsidy which means that no tariff is paid thanks to the free trade agreement.

The new business unit manager of internationalization, in his eagerness to reduce the selling
(3 down) of finished products, hires a specialized company in international freight. This
company offers lower prices than the competition for volumes of handled cargo and transport
services from the three cities where the company has branches: Buenaventura, Cartagena
and Armenia, allowing LPQ Builders to reduce its land fleet and centralize it only for goods
transport from Bogota. This decision reduces monthly a 40% of (16 across) costs that in
December 2012 were $100.000.000 per month. It is well known that transport contract with an
international enterprise represents the 80% of the monthly value for the use of its own fleet, so,
the company decides to sell two of four vehicles of its national transport fleet, which is paid in
cash and equivalent to $ 500 million, a figure that is immediately invested in software acquisition
to improve the information systems of the company.

Nevertheless, the company does not use (6 across) for inventory control, which means that
several processes are done manually. There is no software in hold to control the
documentary management of shipments to domestic and international customers to verify the
rotation inventories, causing difficulties in the flow of information to the three branch offices of
the company, which is notably focused on the delivery of documented requests for customers in
the Atlantic (15 down) and some occasional customers from abroad. For that reason, applicative
software has been bough which is capable of doing the fully documentary management of
import and export stock procedures.
 Likewise, the international shipping company agrees to share the loss
percentages of returned orders by customers when there is (4 across) that returns are
due to improper goods handling during their traffic. This situation lets the LPQ Builders
Company to assume 50% of returned costs of imperfect orders that nowadays
represents a 5% of the total requested shipments in the international market and a
10 % of those requested in the national market. Monthly, the requested orders for
finished products are 1.000 tons for the international market and 400 tons for the
national one. It is also reported that a 4% of goods are returned for damage and
package break for orders sent internationally, because of the type of raw material used
for packaging (packed in low density polyethylene), that have been chosen by the
business unit of marketing, since it is a package that allows easy signs and label
printing required by the regulatory requirements of destination countries. This fact
represents a lower cost for the final product and allows the LPQ Builders Company to
have (7 down) prices in the international market.

On the other (14 down), the person in charge of checking the load before being unitized and
accommodated in the transport vehicle, is a specialized professional in good packaging
processes, but this person has little or no knowledge about exported products properties and
characteristics (building industry products). For this reason, the person in charge of this
process verifies that packaging fulfils waterproof and resistance requirements that these
products need during their transportation to the destination country.

The business area reported a large number of complaints and objections from clients located
in the Atlantic coast and that are assisted at the Cartagena branch office. 1% of returns from
the total invoiced orders have had place, finding some (1 across) with billing, since customers
receive incomplete documentation, a situation that causes discomfort when asking constantly to
the seller to verify the ordered amounts or the billing payment deadlines for which these
returns are made.

Concerning the supplies purchase, that are imported by the LPQ Builders Company, specially
for the pantiles, it is found that from 5 international suppliers that at present supply the company,
two of them deliver their tile orders without the required quality specifications, a fact that causes
the return of two out of ten orders monthly to each provider. In such conditions, the company
decides to punish these two suppliers applying the current contract (9 down) and increasing
the payment deadline of bills from 90 to 120 days until suppliers repair the mentioned delivery
hindrances. This means that monthly purchases of these suppliers that equal 1000 million pesos
are used by the company to cover delivery delayed orders to customers. However, loss
sales from domestic customers represent 5% of total
domestic sales and loss sales from international customers represent 1% of total
worldwide sales. The company receives monthly a total value of $ 10 billion pesos sales,
generating 2% of net profits per month and 6% per year.

As a (5 across), the general manager of the company calls an urgent meeting in Bogota, with the
strategic business unit managers, in order to find solutions to new company problems. The
meeting proceeds as follows:

First, the general manager explains the situation and asks his team to
suggest solutions for this case and according to this, each business unit manager
answers. The financial business unit manager says that in their area, processes have
been managed properly and they have warned when risky situations are detected.
To what the human business unit manager affirms that in their department by
a severe recruitment and selection processes, qualified staff is guaranteed; however,
he suggests the investment of resources in personnel training in order to
effectively venture in the international market. From the commercial business unit,
the marketing area, in the name of their business unit manager states that they have
(8 across) the objectives with the established plans and that they are at the 70% of the
target achievement, which is an excellent indicator so far, because the goal is meant to
be achieved in the following three months; they also report that the returns of 5% of
damage and broken products is the logistics coordinators responsibility. The marketing
business unit manager expresses that his work is made based on the received training
when entering the company; therefore his decision was coherent with the results he
wanted to show from his business unit, which means, to increase productivity, to reduce
production costs, and to make more efficient deliveries to his international customers as
well as reducing shipping times. The internationalization unit director indicates that he
has always been at the search of international suppliers that enables the costs
reduction as proposed in the company requirements at the beginning of the year and
that is why he has just asked to the board of directors to hire an international supplier
that he has already selected for the cutting saws; he also declares that his business unit
has reached its purpose since it has given support the Chinese market. The
logistics coordinator says that he has done receiving and sending goods processes
under the described conditions in the operating manuals and with the regulation required
by the international market for cargo handling and also states that he does not (10
across) why the effectiveness of his department is questioned and why those return
problems are questioned by the efficiently of the department while those obey to lack of
control of some other business units. This situation causes severe conflicts with
commercial and production business unit managers and has an impact on the physic
and mental health of the logistics coordinator, making necessary the intervention
of the occupational health department.
According to the different statements heard by the business unit managers, the general manager
asks them to send him urgently a management report on their business unit processes results at
the date, where results from each developed process is identified, objectives and organizational
plans, specifying in each case the level and percentage of the achieve goals by the use of
indicators that allow to visualize the information (17 across) by the managers in the meeting.

General information on the LPQ Builders Company case 1.

LPQ Builders human resource

A general manager
6 business unit managers.
10 area coordinators.
21 process leaders.
20 process assistants.
150 workers in storage roles, distribution, loading, unloading,
inventory, enrollment, tracking, shipping and receiving and filling out
documents, distributed in the brach offices as follows: 60 operators in
Buenaventura, 40 workers in Bogota, 30 workers in Cartagena and 20
workers in Cali.
100 workers distributed in marketing, sales, administrative, financial and
human development activities.
50 people in adminstrative management.

2. Suppliers

15 domestic suppliers.
5 international suppliers.
3 outsourcing companies that manage input imported processes for the
construction, distribution and international transportation of goods and the
fiscal and financial review of the organization respectively.

3. Customers in the international market

10 clients in the European Economic Community. 10

clients in the Andean area community.
15 clients in the Americas.
2 clients in Asia
4. Customers in the domestic market

50 clients in the Atlantic region.

50 clients in the Pacific region.
100 customers in the Andean region.
30 clients in the eastern plains region.
150 customers in the Bogots savannah.