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Cycle Time and Cost and Employment Consiquences

As the chief executive officer of a large corporation, you have decided after discussion with production and accounting personnel to implement activity based management concepts. Your goal is to reduce cycle time and, in turn cost. A primary way to accomplish this goal is to install highly automated equipment in your plant, which would then displace approximately 60 percent of your workforce. Your company is the major employer in the area of the country where it is located.

a. Discuss the pros and cons of installing the equipment from the perspective of your
(1) Stockholder, (2) employees, and (3) customers.
b. How would you explain to a worker that his or her job is a non value added activity?
c. What alternatives might you have that could accomplish the goal of reducing cycle time but not create economic havoc for the local area.

Solution Preview

Dear Student,

Relax, you have time and all will be well. Good luck!

McAllister 107075

With regard to the stockholders, the cost savings over time in eliminating 60% of the employees needs to be weighed against the capital outlay for the installation of the automated equipment. The initial cost will be reflected on the earnings for the quarter and stockholders will have to be shown how the future increases in revenues will counterbalance, and eventually outweigh the upfront cost. What must also be weighed is the cost of public opinion ...

Solution Summary

With regard to the stockholders, the cost savings over time in eliminating 60% of the employees needs to be weighed against the capital outlay for the installation of the automated equipment. The initial cost will be reflected on the earnings for the quarter and stockholders will have to be shown how the future increases in revenues will counterbalance, and eventually outweigh the upfront cost. What must also be weighed ...

$2.19