Overall method Rigorous procedures for reporting and monitoring Set up a complete Budget framework Budget broken down per responsibility - e.g. buyers give prices, production gives productivity once a year = > budget put together –expected levels are put proposed by each area –full report compiled (p/l for the year ahead) –negotiated with top management –final budget –used to measure up everything that happens

General Indicators - monitoring the business Focus on 3 key indicators compared with budget makes it easier to analyse responsibilities: –volume V (Vb for budget and Va for actuals) –price P –formula F total variance = Va Pa Fa - Vb Pb Fb volume variance = Va Pb Fb - Vb Pb Fb = (Va-Vb) Pb Fb Price variance = Va Pa Fa - Va Pb Fa = (Pa - Pb) Va Fa Formula variance = Va Pb Fa - Va Pb Fb = (Fa - Fb) Va Pb Applies to the cost side E.g. Pb Fb note that total = tot var

Analysing the general indicators Volume variance : –breakdown per product / market / week –also per rep? –source: budget / weekly sales – who? Sales Director and reps + regional supervisors + MD –colour maps showing areas / markets –threshold values determine colour –volume and £ figure

Analysing the general indicators Price variance: – breakdown per RM / component + labour (for each category) [focus on most expensive] –buyers / production director + supervisors +personnel director –source: budget figures + account payable / payroll –Monthly probably enough (changes don’t occur that often) –tables for detail + exception reporting using shape of RM that is causing the variance to be negative

Analysing the general indicators Formula variance: –per product / per RM + labout –source: stock out sheets + production sheets (sales too late) + personnel hours –some figures cannot be known exactly => use surrogate or estimate –target: foremen, production staff and director –gauges, colour map of the factory, colour coded £ signs