case armco
Case assignment Armco, Inc.: Midwestern Steel Division
Case Analysis
What was wrong with the Midwestern Steel Division’s old system?
Within the division, The Kansas City Works was by far the largest entity. The manufacturing areas of the Kansas City Works were divided into five responsibility centers. Each responsibility center was comprised of one or more cost centers. The managers and superiors were evaluated in terms of cost control and safety. The key cost performance measure was a summary called Cos Above. The Cost Above were reported to the manufacturing managers on an Operating Statistics Report. This was done on the 15th day following each month end. So actions can only be taken afterwards. It’s better to be able to take actions as soon as possible.
The report provides a lot of information, but not all information is used. There is no goal for the information provided. A manager said that some of the items were quite small in dollar value. In the report you will find the difference between the actual data and the objective data. The difference is not explained. If you want to achieve the objective you must know the factors that caused difference.
There are two primary kinds of products that are produced: grinding media and carbon wire rod. In the report there is no information given about which product is made.
Data that is important is not highlighted. A manager want to see those data.
If you look at the man hours, you can see that there are less man hours over the period 1985- 1989. The cost per ton is also reduced over time, but only a small amount in contrary to the man hours.
The report did not contain any information about the quality of products. For example breakdown, items returned by customer, production quality standards etc.
If the old system was so bad, why did the operating managers seem to like it?
The old performance measurement system is used for many years. This means that every operating manager is used
Case Analysis
What was wrong with the Midwestern Steel Division’s old system?
Within the division, The Kansas City Works was by far the largest entity. The manufacturing areas of the Kansas City Works were divided into five responsibility centers. Each responsibility center was comprised of one or more cost centers. The managers and superiors were evaluated in terms of cost control and safety. The key cost performance measure was a summary called Cos Above. The Cost Above were reported to the manufacturing managers on an Operating Statistics Report. This was done on the 15th day following each month end. So actions can only be taken afterwards. It’s better to be able to take actions as soon as possible.
The report provides a lot of information, but not all information is used. There is no goal for the information provided. A manager said that some of the items were quite small in dollar value. In the report you will find the difference between the actual data and the objective data. The difference is not explained. If you want to achieve the objective you must know the factors that caused difference.
There are two primary kinds of products that are produced: grinding media and carbon wire rod. In the report there is no information given about which product is made.
Data that is important is not highlighted. A manager want to see those data.
If you look at the man hours, you can see that there are less man hours over the period 1985- 1989. The cost per ton is also reduced over time, but only a small amount in contrary to the man hours.
The report did not contain any information about the quality of products. For example breakdown, items returned by customer, production quality standards etc.
If the old system was so bad, why did the operating managers seem to like it?
The old performance measurement system is used for many years. This means that every operating manager is used