Frago

Fargo

March 22, 2010

Executive Summary

This report outlines the situation analysis and recommendations for Fargo Publishing Company to identify the higher labor costs and low efficient production processes. It also provides the suggestions about data collection, processing procedure and controls. The company serves the elementary and middle school textbook market, and its profits are decreasing.

Establishing and executing a job time recording procedure through the production operations is essential to the labor cost data collection. Adopting new information technology into timekeeping and payroll system to improve accuracy and efficiency of all processes is also recommended. Controls of payroll data updating, payroll disbursement and reporting procedure are recommended based on the current situation.

1. Introduction

Fargo publishing company serves the elementary and middle school textbook market. Its printing area is divided into eight production centers that employ approximately 250 hourly workers. Due to state budget cuts to education, price competition in the elementary and middle school textbook publishing business has increase steadily over the past decade. Although Fargo has been able to maintain its market share, profits have decreased. Labor costs and processes are thought to be the primary cause for the decrease in profits, but management lacks enough information to identify where the higher labor costs and process inefficiencies originate.

The purpose of this report is to analyze the company’s current timekeeping and payroll system in order to identify problems, and to make recommendations for Fargo’s management. First, the report focuses on the current situation analysis that identifies the problems. Second, it provides recommendations including measures to reduce labor costs, improvement of data collection, processing procedures, and controls. Finally, it offers a mini case question to readers.

2. Analysis

Fargo’s current timekeeping...