Mainland rush hits controls, warns consultant
PRODUCTION controls are being left behind in the rush by mainland joint ventures to increase output and profits, a managing consultant at Price Waterhouse charges.
David Yeung said yesterday about half the ventures he reviewed were either shackling together incompatible management systems or using outmoded techniques.
In one case, a medium-sized catering company was losing hundreds of thousands of dollars - around 50 per cent of its total costs - from theft or loss of inventory.
In other cases, a director's company car was not recorded in its books, and credit was being granted to customers supposed to be paying cash on delivery.
Mr Yeung said: 'We keep seeing companies adopt rudimentary systems and processes initially and then, all too soon, they need to upgrade them to bring their operations into line with international standards.
'This creates unnecessary costs and also a slowdown of an operation which is just starting to gather momentum.' A typical scenario is a joint venture expending its energies on setting up production facilities and distribution channels at the expense of its internal management.
Mr Yeung said the types of details that were neglected ranged from information on the sale of particular product lines, financial management controls and comprehensive records of productions costs.
'They then have to move from the set-up stage to the catch-up operating stage.' He said the 'record-keeping' administrative methods of traditional mainland companies was out of date compared with Western standards.
'Joint ventures require integrated financial and management information systems to improve the operations' efficiency and controls.' Traditional record-keeping accounting systems in use on the mainland were no longer appropriate, he said.
'The first thing is to examine the current business processes and clean up the processes before automation. Ask yourselves if the processes are efficient, effective or have the required internal controls.
'Secondly, identify the companies information requirements, both current and future. ' This can range from identifying the company's corporate objectives and strategy through to integrating the different components into a cohesive operation.
'Although the initial costs may be higher, the longer term pay-back is tremendous. At the same time, management will need to consider whether the proposed system is compatible with the local culture and will need to implement an effective training programme from day one.'