PES – IUP MBA SUMMER 2009

MANAGERIAL ACCOUNTING - 607

Article Critique

Case: A Tale of Two Factories

By: Sumit Kumar

Cohort ‘B’PES-IUP MBASummer 2009

To: Prof. Dr. Sekhar Anantharaman

IUP – Managerial Accounting - Faculty

Date: September 29, 2009.Place: Bangalore.

PES – IUP MBA SUMMER 2009

MANAGERIAL ACCOUNTING - 607

1. Identify the differences in the processes of the 2 factories, addressing labor relations, safety, amount of automation, methods, costs etc.?

Shanghai Litchfield, Mich.Process This plant has 275 people

working in 2 shifts each of 8 hours. In a year the firm produces about 400,000 exhaust systems. Plant depends on 57 suppliers out which 33 are local The factory provides exhaust to GM (charts) Volkswagen, Peugeot & to Chery, a local manufacturer.

There are 324 people working in 3 shifts. In a year they built 3 times more than Shanghai muffler systems. This plant is called “money machine”. Every day the work starts with 30mins production meeting with 30 representatives comprising of engineers, people from operation and human resource.

Labor Relation Relationship among the worker and supervisors is diplomatic in nature.

Each worker is smart enough and takes an active participation in production process and reduces the bottle neck to be more competitive in market.

Safety Work place is clean but dirty around the edges. Company wants to provide protective glasses, steel toed shoe, but hard to implement. Current workers wear jumpsuits in place.

They have the smarter approach towards safety as compared to Shanghai. In each meeting before production any defect found action is taken immediately.

Automation The plant automation is less to take the advantage of the cheap labor.

The plant is semi-automated and regular production techniques are implementing for the progress.

Methods Labor intensive Semi-automated as people there are more experienced and benefit oriented.

Costs The production cost labor represents just 1%.

The production cost labor represents about 12%.

PES – IUP MBA SUMMER 2009

MANAGERIAL ACCOUNTING - 607

2. Discuss the differences in life circumstances of the workers

Shanghai – Example Pu Chaunming married couple workers put up in a small one bedroom rental apartment, commute to work on bi-cycle. They cannot nourish their own children due to long and hectic working conditions. Earns about $1.56 an hour, but still think that their future is safe.

A bachelor 26yrs old Zhang Yiqi, who is self-possessed and ambitious, with a stylish hair cut, earns about $250 a month spends his free time seeing friends, working out and riding motorbike. He wishes to become a supervisor and happy with job.

Litchfield, Mich. –Example Dave Houghton married couple workers earns about $30 an hour followed by benefits, commute to work in cars, stay in self owned home and raise their own children. They have comfortable living and concerned on global competition, depend on management for job security.

A worker, Tonya Wilson who earns about $14.10 an hour, repair technician worries about the future and doesn’t feel job is safe.

3. How do the workers view the future differently?

Shanghai – Positive attitude towards future working has they are the world’s low cost assembler. This is going to be better for them. Litchfield, Mich. – Insecure about jobs and have to face competition as a survival strategy.

4. What has been happening with how much people have paid over the last few years in each location?

Shanghai – Earlier in this plant couple use to earn $1.56 an hour. Blue collar worker makes $210 for 160 hours a month. White collar worker earns $625 month. The wages was doubled in past six years, to $250 a month for a blue collar job.

Litchfield, Mich. – In this plant all the workers are highly paid a couple earns about $30 an hour. A repair technician earns about $14.10 per hour. Here worker get a regular quarterly bonus about $480 which is equal to seven month salary month pay of Shanghai workers.

PES – IUP MBA SUMMER 2009

MANAGERIAL ACCOUNTING - 607

5. If you had a crystal ball what do you think each site will look like in 10 years? That is, what changes will have occurred?

Shanghai – After 10 years the plant will have many changes has the worker lifestyle will increase, more investment will be done on machinery, and wages will increase.

Litchfield, Mich. – There might be more automated machinery, many work will be outsourced due to cheap labor in global. Many factories might close have cut thought global competition.