To take timely action in cases where negative
variances are cause for concern, periodic reviews of actual performance
(in quantifiable e.g., ‘rupee' terms) compared to budgeted figures needs
to be done.
Concerned departments should submit, whenever
possible, back-up notes, to support/ explain the variances. For example:
If a production manager has to achieve the production of 3000 pistons in
December 2000, and achieves only 1800, it represents a negative variance
of @ of 1200 in numerical terms, and 40 %!
-Management will want to know
why; if there are acceptable reasons, like supplier's strike, sudden change in
orders position (cancellations), generator breakdown etc. Then,
·Steps will be taken to
obviate/anticipate these in future.
- If reasons are vague, a deeper
probe will be called for till root cause is identified. Either way, production
plans will need, now, to be dovetailed into sales/cash flow/profitability
budgets.