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 …show more content…

Employees are already familiar with the system. | |4. The data is not clear and it is difficult to read and |
|4. Month to month trends. | |understand. |
| | |5. The system does not give the fixed and variable costs. |
| | |6. The system is not able to generate information weekly. |

3. The following is an evaluation of the new system and the way it was being implemented: - The new system proposes to focus on ten different measures. Each measure is directly related with the different areas, which is a plus.

- Even though the maintenance performance measures have not been clearly defined, it should not be left behind, because it is very important like the other different items in the design of the new system. It could be used to measure the quality of work and more importantly, it could measure how to save money or cut down on expenses.

- Having a very detailed performance measures are very important in a manufacturing site because of the labor that is being implemented.

- Also, it is a really good that with the new system, production managers were no longer held accountable for all the costs incurred. With this new method, they could not blame low level