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Elkay Plumbing Products Division

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Submitted By omiga2u
Words 1262
Pages 6
Summary:
Background: Elkay was the American largest manufacturer of stainless steel residential sinks which extended its scope into various kinds of products with only a few competitors. Its Plumbing Products Division produced different level and priced sinks in three plants separately based on different process requirements and characters of products and further invented itself to become the industry’s innovator. Elkay’s main market included North America and selected international markets. In 2007, Elkay’s main outlet market begun to collapse; prices of raw materials increased sharply; Chinese competitors began to encroach on its low-end and threaten its relationships with key customers together with its pricing pressure from retailers and fabricators. All these factors severely undermined Elkay’s profitability. Since Elkay kept using a traditional standard costing system and analyzed its customer P&Ls within it, managers didn’t take well actions toward the decline in profit for they knew information provided by this system were actually inaccurate and meaningless. Due to Hrudicka’s tireless efforts and successes from two pilot projects, PPD implemented the new Discrete Product Costing by adopting the time-driven ABC system eventually. However, in may 2008, after received report about SKU profitability provided by the new system, the vice president of sales contemplated about taking action towards unprofitable customers. (为20000个顾客提供6000 SKUs products)
Problem and issue: The problem that faced by Elkay’s PPD is the severe decline in profit. Issues underlying these problems are stated below: (1) In the past, Elkay’s traditional standard costing system simply ignored its products diversity and cost structure; it did not reflect its actual resources consumed by products; gave inaccurate information about product costs and customer profitability by wrongly allocated

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