PES – IUP MBA

MANAGERIAL ACCOUNTING - 607

SUMMER 2009

Article Critique

Case: A Tale of Two Factories

By:
Sumit Kumar
Cohort ‘B’
PES-IUP MBA
Summer 2009

To:
Prof. Dr. Sekhar Anantharaman
IUP – Managerial Accounting - Faculty

Date: September 29, 2009.

Place: Bangalore.
PES – IUP MBA
MANAGERIAL ACCOUNTING - 607
SUMMER 2009
1. Identify the differences in the processes of the 2 factories, addressing labor relations,
safety, amount of automation, methods, costs etc.?
Shanghai
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.
Labor Relation  Relationship among the
worker and supervisors is
diplomatic in nature.
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.
Automation The plant automation is less to
take the advantage of the cheap
labor.
Methods Labor intensive
Costs The production cost labor
represents just 1%.
Litchfield, Mich.
 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.
 Each worker is smart enough
and takes an active
participation in production
process and reduces the bottle
neck to be more competitive in
market.
They have the smarter approach
towards safety as compared to
Shanghai. In each meeting before
production any defect found action is
taken immediately.
The plant is semi-automated and
regular production techniques are
implementing for the progress.
Semi-automated as people there are
more experienced and benefit
oriented.
The production cost labor represents
about 12%.
PES – IUP MBA
MANAGERIAL ACCOUNTING - 607
SUMMER 2009

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
MANAGERIAL ACCOUNTING - 607
SUMMER 2009

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.