Aero Gear, Inc.: Performance Measurement, Cost Management and Product Costing in a Lean Transition

Aero Gear, Inc. was undergoing a transition to lean business practices to improve its competitive position. Its accounting and reporting system had not changed in tandem with the changes taking place on the shop floor and its managers no longer trusted the measures they used to monitor productivity and product profitability. They were seeking measures that would help their employees improve operations as well as measures they could use to set goals, to motivate their employees, and to monitor the impact of ongoing improvement efforts. In this case, students are challenged to present alternative performance measurement systems that are consistent with lean business practices and a continuous improvement culture.