Question

In conducting interviews and observing factory operations to implement an activity-based costing system, you determine that several activities are unnecessary or redundant. For example, warehouse personnel was inspecting purchased components as they were received at the loading dock. Later that day, the components were inspected again on the shop floor before being installed in the final product. Both of these activities caused costs to be incurred but were not adding value to the product. If you include this observation in your report, one or more employees who perform inspections will likely lose their jobs.

Required: As a plant employee, what is your responsibility to report your findings to superiors? Should you attempt to determine if the redundancy is justified? Explain. What is your responsibility to the employees whose jobs will likely be lost because of your report? What facts should you consider before making your decision to report or not?

Answer 1

1) In operations management controlling and designing process for optimum efficiency is very necessary. This also includes cutting undue costs and for that matter, companies usually undertake an internal audit. The internal audit examines all the processes and gives recommendations to redesign it. If an employee is in that team then it is his responsibility to examine the manufacturing process, risks involved and effective fraud detection and mitigating that.
In the end, that employee should avoid vague report and should specifically and clearly mention recommendations.

2) The internal audit team finds any redundancy then it is their duty to report that because of that redundancy is wasting resources of the company. It could be disastrous if the redundancy is big but even smaller one needs to be rectified.  
As stated in the question, if the two people are doing the same job then the company is actually wasting human as well as the monetary resource.

3) Management of private operation is run for making a profit and they have to take hard decisions. However, it is also true that management or for that matter the internal audit team needs to consider employee loyalty and social responsibility.
If the team is reporting redundancy and one of the employees may lose his job then the audit team should recommend shifting him with another department or providing him time for training or skillset development so that he could be transferred there.