A famous international truck manufacturer (I’m not going to say the name but if you’re familiar with the industry, you’ll know who I’m talking about) was assessing their performance using performance metric Key Performance Indicators (KPIs). Each plant was evaluated and ranked based on their KPI performance. The assessment process included direct costs that could be connected directly with a plant and indirect corporate costs, which were allocated across all production facilities.

After reviewing the performance of all the plants, one of the plants was losing money in that their cost of operation (direct plus indirect costs) was greater than their revenue. The corporate decision was made to close the plant.

Closing ...

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