Solutions_Assignment10 - AF2110 Assignment10(suggested...

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AF2110 Assignment10 (suggested solutions) 1 Exercise 10-5 (45 minutes) 1. MPC’s previous manufacturing strategy was focused on high - volume production of a limited range of paper grades. The goal of this strategy was to keep the machines running constantly to maximize the number of tons produced. Changeovers were avoided because they lowered equipment utilization. Maximizing tons produced and minimizing changeovers helped spread the high fixed costs of paper manufacturing across more units of output. The new manufacturing strategy is focused on low-volume production of a wide range of products. The goals of this strategy are to increase the number of paper grades manufactured, decrease changeover times, and increase yields across non- standard grades. While MPC realizes that its new strategy will decrease its equipment utilization, it will still strive to optimize the utilization of its high fixed cost resources within the confines of flexible produc tion. In an economist’s terms the old strategy focused on economies of scale while the new strategy focuses on economies of scope. 2. Employees focus on improving those measures that are used to evaluate their performance. Therefore, strategically-aligned performance measures will channel employee effort towards improving those aspects of performance that are most important to obtaining strategic objectives. If a company changes its strategy but continues to evaluate employee performance using measures that do not support the new strategy, it will be motivating its employees to make decisions that promote the old strategy, not the new strategy. And if employees make decisions that promote the new strategy, their performance measures will suffer. Some performance measures that would be appropriate for MPC’s old strategy include: equipment utilization percentage, number of tons of paper produced, and cost per ton produced. These performance meas ures would not support MPC’s new strategy because they would discourage increasing the range of paper grades produced, increasing the number of changeovers performed, and decreasing the batch size produced per run.
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AF2110 Assignment10 (suggested solutions) 2 Exercise 10-5 (continued) 3. Students’ answers may differ in some details from this solution. Sales Contribution margin per ton Financial Time to fill an order Customer satisfaction with breadth of product offerings Number of new customers acquired Customer Average change- over time Number of different paper grades produced Average manufacturing Internal Business Process Number of employees trained to support the flexibility strategy Learning and Growth + + + + + + +
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AF2110 Assignment10 (suggested solutions) 3 Exercise 10-5 (continued) 4. The hypotheses underlying the balanced scorecard are indicated by the arrows in the diagram. Reading from the bottom of the balanced scorecard, the hypotheses are: ° If the number of employees trained to support the flexibility strategy increases, then the average changeover time will
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This note was uploaded on 10/20/2010 for the course AD abc123 taught by Professor Cat during the Summer '09 term at City University of Hong Kong.

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Solutions_Assignment10 - AF2110 Assignment10(suggested...

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