Lee Corporation manufactures various types of colour laser printers in a highly automated facility with high fixed costs. The market for laser printers is competitive. The various colour laser printers on the market are comparable in terms of features and price. Lee believes that satisfying customers with products of high quality at low costs is key to achieving its target profitability. For 2011, Lee plans to achieve higher quality and lower costs by improving yields and reducing defects in its manufacturing operations. Lee will train workers and encourage and empower them to take the necessary actions. Currently, a significant amount of Lee’s capacity is used to produce products that are defective and cannot be sold. Lee expects that higher yields will reduce the capacity that Lee needs to manufacture products. Lee does not anticipate that improving manufacturing will automatically lead to lower costs because Lee has high fixed costs. To reduce fixed costs per unit, Lee could lay off employees and sell equipment, or it could use the capacity to produce and sell more of its current products or improved models of its current products. Lee’s balanced scorecard (initiatives omitted) for the just-completed fiscal year 2011 follows:
| Objectives | Measures | Target Performance | Actual Performance |
| Financial Perspective | |||
| Increase shareholder value | Operating income changes from productivity improvements | $1,000,000 | $400,000 |
| Operating income changes from growth | $1,500,000 | $600,000 | |
| Customer Perspective | |||
| Increase market share | Market share in colour laser printers | 5% | 4.6% |
| Internal Business Process Perspective | |||
| Improve manufacturing quality | Yield | 82% | 85% |
| Reduce delivery time to customers | Order-delivery time | 25 days | 22 days |
| Learning and Growth Perspective | |||
| Develop process skills
|
Percentage of employees trained in process and quality management | 90% | 92% |
| Enhance information system capabilities | Percentage of manufacturing
processes with real-time feedback |
85% | 87% |
- Please explain whether Lee successful implemented its strategy in 2011.
- Review Lee’s balanced scorecard against design principles, for example:
- whether it explains and communicates the strategy; whether it measures what it is designed to achieve;
- whether it needs additional measures relating to customer perspectives and why, etc.
- Would you have included some metrics of employee satisfaction in the learning-and-growth perspective and new-product development in the internal business process perspective? That is, do you think employee satisfaction and development of new products are critical for Lee to implement its strategy? Why or why not? Explain briefly.
- What problems, if any, do you see in Lee improving quality and significantly downsizing to eliminate unused capacity?
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