Armco Case

1152 Words Dec 17th, 2011 5 Pages
Team 4

Case #4 Armco, Inc.: Midwestern Steel Division

1. The old performance measurement system had the following problems: - It did not provide information on the product mix being produced. It provided data on total tonnage produced, but did not breakdown “what” was produced.

- The system compared “actual” to “objective” but did not provide data on what factors caused variance.

- Costs were not broken down by: o Fixed costs o Variable costs o Relevant Range

- Reports were generated on the 15th day following each month end. Therefore, time lag would not allow the managers to take immediate corrective actions.

- It did not measure Key
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- One thing that will catch the reader’s attention is the lateness of the statistical reports which are made available to the managers. These reports were available only after 15 days of the closing month. - AIMCO’s management forgot to ask the operations managers’ thoughts about which information was important and necessary to be included in the report.

- AIMCO management could have introduced the new system by telling operating managers that they will get faster, reliable, and important information in less time.

- Another thing that will catch the reader’s attention is when Bob Nenni observed that “when managers get too much data, they can easily get unfocused”. The new system is supposed to help managers focus on the five or six things that cause the 80% of costs, rather than worry about the 40 that cause 100%.

Here are some data gathered about the most important strengths and weaknesses from the old system:
|Strengths | |Weaknesses |
|1. The system is able to identify problems from different areas. | |1. Reports are delivered 15 days after the month has ended. |
|2. The system is able to give managers information about the | |2. The data was divided by local departments. |
|objective they were expected

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