IMA Educational Case Journal
Volume 1, Issue 3
Aero Gear, Inc.: Performance Measurement, Cost Management, and Product Costing in a Lean Transition
Aero Gear, Inc. was undergoing a transition to lean business practices to improve its competitive position. Its accounting and reporting system had not changed in tandem with the changes taking place on the shop floor and its managers no longer trusted the measures they used to monitor productivity and product profitability. They were seeking measures that would help their employees improve operations as well as measures they could use to set goals, to motivate their employees, and to monitor the impact of ongoing improvement efforts. In this case, students are challenged to present alternative performance measurement systems that are consistent with lean business practices and a continuous improvement culture.
Keywords: lean accounting, lean culture, performance measures, product costing, value stream costing, and possibly accounting system change.
Delivering the Irving Promise
The case traces the challenges of implementing a performance measurement system in a 400 store convenience retail operation. The case first explores the overall design of the system. The firm differentiates itself from the competition based on cleanliness, level of service, and friendliness. The challenge is finding measures that link to the key success factors and making them simple for use by convenience store personnel. One of the main case issues is selecting the measures for the performance measurement system. There are numerous proposals and the design team must select those that are appropriate for the store. Further there is a debate on the numbers of measures and the data collection system. The third design issue is how to capture the data. The firm partners with a data management firm to conduct random customer surveys automatically generated from the store register. There is a debate about the size of the sample and the integrity of the data. The case walks the students through the process and the levels of design decisions that are made. The case provides the firms unique strategy map and the students are challenged to insure the measures fit the map.
Keywords: performance measures, balanced scorecard, linking measures to strategy, scorecard design.
Shahid Ansari, Paul Mulligan, Alfred J. Nanni, Jr.
Pelarsen produces a variety of wood windows ranging from simple standard to very complex architectural windows produced at the company's old and new plants. The older plants are traditional mass production plants that are labor intensive, have large inventories, and have a lot of spoilage. The newer plants use computer integrated robotics equipment, run a lean operation with small inventories, and have few quality issues. Doug Niedermeyer, manager of an older plant, is complaining that his plant’s poor profitability is caused by the lack of new robotics equipment and wants more high margin architectural window business. His claim is supported by plant profit projections based on the cost data from his plant's volume-based accounting system. However, a deeper analysis of his plant's production processes, capacity utilization, quality capability, inventory levels, and spoilage rates suggests that he can take many short-term actions to increase profits and that his real profitability problem may lie in the mismatch among his production processes, product mix, and cost structure.
Keywords: lean, capacity, production processes, product mix, and cost structure.
The case covers Kiva, a 501(c)(3) tax-exempt charity working in the microfinance industry. Through it, people lend money to the working poor of the Third World. Lenders select businesses from the website. They then receive periodic updates and can reclaim the paid back loans, donate the money, or lend the paid principal again. The dilemma faced by Kiva's leadership team is whether or not to pay lender’s interest.
Keywords: microfinance, not-for-profit organization, international small business and entrepreneurship, Silicon Valley, Internet lending.