Milan Sanitation Department Harvard Case Solution & Analysis


According to the report of financial Control board, on an average day over half of the vehicles it was responsible for servicing were out of service, which means the extra amount of overtime pay for the driver were assigned on the remaining vehicles. It is estimated that they are paying more than €16 million euro cost for it.

Coordination amongst the co-worker and management also needs improvement to fill gaps between the labor and management which helps to diagnose the issues regarding each segment of shops such as brakes and engine that suffer loss and low profit.

Q1. What are the strengths and weaknesses of the system that Mr. Sponza developed for the central repair facility?


The strength of Mr. Sponza is that he is rebuilding the entire system of management to reduce the cost regarding labor and make a strategy to produce quality results regarding profit and outcome. For that he divided departments into eight profit centers. The purpose of the committee is to improve the quality of work and increase the productivity and also all committee members are supposed to meet with the manager to provide some sort of information regarding more improvement in the system. Another strength is the coordination amongst the labor and the management that helps in filling the gaps regarding improvement in different centers and in different context. According to Mr. Sponza’s estimation, he avoided $16 million of costs such as overtime during new system place that is another achievement and strength of the new system.

Weakness in the engine shop is that it faces difficulty in measuring output and one reason for that is shop’s credit for rebuilding engines was the same as their cost of buying new engines. Productive factor which is less than one indicates that the city could purchase new engine to spend on rebuilding them. The low productivity factor for Brakes also suggests that there is something wrong with the center. The department should identify the factors that is negative influence to brakes center, the center is not effectively contributed towards profit. The Management needs more involvement in the centers to diagnose the main reason for the brakes department, for that the management needs to communicate with the labor force.

Another strength of center repair facility is that labor force feels encouraged and motivated towards their work, they do not feel any extra burden regarding their overall repairing services as previously they experienced, this was because the labor was supposed to work for their individual center so that they could meet their skills and get an experience according to their designation and specialty.

One added strength of Mr. Sponza is that, all departments have profit centers and these are those centers which are responsible to show profits for each sector. Engines have low productivity that shows some weakness having 0.65 productivity factor as compare to other profit centers that need some sort of strategy and planning to improve it. All profit centers reported an annualized profit except Engine Shop that has a loss of €451000 and Engine shop needs more planning to make it profitable. The Productive factor for transmission and Exhaust system are 2.43 and 2.05 respectively giving tremendous efficiency of productive factors and their contribution towards profit is also much better and high as compared to other shop centers.

The new System assures the quality production that will lead to more customers and attract new customers to avail the services of Milan Sanitation.

Q2. Records on performance by individuals or on costs for individual jobs were discontinued. Do you agree with this policy?

I agree with this policy because the reason for the low productivity figure becomes apparent, the meeting that Mr. Sponza conveyed between labor/management committee and the entire shops workforce decided that employee would longer need to list the actual time it took to do a job. After the decision has been made the overall performance of union labor increased and the policy had been changed that is made by the profit center in which the management would no longer focus on work standards that are applied to particular jobs and individuals. Individuals records regarding time spent on jobs will no longer be required...........................

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Opening the case for the use of "profit centers" in the public sector organization, or, more generally, to perform measurements in a situation in which the output can not be measured by income. The fact that the situation is quite easy to visualize and understand. Students who are considering how poorly managed municipalities may be surprised by this situation. "Hide
by David W. Young, Robert N. Anthony Source: The Crimson Group 3 pages. Publication Date: June 30, 2012. Prod. #: TCG217-PDF-ENG

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