Case Study of Siemens Electronic Motor Works

In: Business and Management

Submitted By davidjccy
Words 997
Pages 4
Background of Siemens Corporation, focused on EMW
Siemens Corporation, one of the world largest corporations, specializes in electrical and electronic products. Electronic Motor Works (EMW) is a part of Energy and Automation group, which is one of 7 major groups of Siemens Corporation. It had a wide range of production which contained 200 different types of motors and produced approximately 230,000 motors annually. The standard A/C motors took 80% volume of sale and the rest 20% was from customized motors. Due to an intense competition with a relatively lower price for the standard A/C motors from eastern countries, EMW was losing the advantages. The reason for this situation was high labor rates and inefficient costing system. EMW used to applies the traditional costing system; it functioned very efficiently till the management changed the strategy and moved the core products to customized A/C motors. After changing strategy, for the purpose of enhancing production efficiency, EMW’s production process was upgraded to highly automated equipment with controlled machines, flexible machining centers and robotically fed production processes.
Problems and issues identified
Main problem caused by changing strategy because of less competitive is that the traditional cost system is unable to illustrate the relationship between the support related overhead costs (non-manufacturing costs) and the change in product mix. Since EMW moved the focus from common A/C motors to customized A/C motors, the allocation of non-manufacturing overhead costs changed significantly.
Analysis of the reasons for problems
Firstly, the old cost system is basically a simple traditional costing system. The material costs and labor costs are directly allocated to products, which respectively take 29% and 10% of total cost. Overhead costs are categorized to manufacturing overhead and…...

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