A Controller’s Challenge

Background
“Would you come over to Mr. Patterson’s office right away?” Jim Woodruff was a bit puzzled about the summons from the president’s office; no meeting was scheduled and Bill Patterson’s style was not an impromptu one. Organizer and calculator in hand, Jim left for the meeting wondering what the subject might be and how he might mentally prepare for whatever discussion was about to take place.

Jim was the recently appointed as the controller of Advanced Parts Manufacturing Company, a division of a Fortune 500 company. He had started his career as an auditor in public accounting before joining the parent company’s corporate headquarters accounting staff. After a few years in headquarters, he was promoted to Advanced Manufacturing management team to replace its retiring controller. He came with a strong technical background gained through his experience in auditing and accounting. After about a year, he had become a valued member of the Advanced Manufacturing management team. He had played an important role in the financial decisions associated with a recent capacity expansion and had made major improvements to the management reporting and planning systems. He was working on reducing the division’s investment in inventory through consignment arrangements with suppliers.

The Problem
Bill Patterson greeted Jim as he entered his office. “Jim, we have a challenge that I hope you can help us with. We need another million in profit this year because of low sales by the consolidated company. When you reviewed our division’s 11-month actual results last week, we were little better than our forecast. Is there any more we can do?” Jim paused for a moment to think.

Advanced Manufacturing was a parts supplier to the automotive sector and was enjoying slow but steady growth under Patterson, who had been aggressive in pursuing increased