Agile Manufacturing Paul T Kidd ISBN 0-201-63163-6 (Hardbound) Publisher: Addison Wesley Price: See buy on-line link Publication Date: June 1994

 

 

Agile Manufacturing: Forging New Frontiers

Chapter 9 Introduction

In Chapter 4 we examined and highlighted the problems associated with our traditional management accounting paradigm. There are a number of important difficulties and methodological issues that have arisen in relation to our traditional management accounting methods, which we will need to address and resolve in Agile Manufacturing environments. These are:

1. Our investment decisions have been traditionally taken based only on financial appraisal;

2. The aim of most of our investments has been to reduce costs. Technologies tend to be justified using cost reduction even when the goal is increased flexibility or quality;

3. Our traditional management accounting methods encourage a cost driven approach in manufacturing and support the view that our people are a cost rather than an asset;

4. Overhead allocation based on the amount of productive capacity used in the manufacture of a product is often an inappropriate way to allocate overheads, especially when a significant amount of customised work is mixed in with standard work;

5. Our traditional management accounting methods do not highlight the true cost drivers in our enterprises;

6. The emphasis of our traditional management accounting methods is on financial performance measurement and control systems which can lead us to make erroneous conclusions about performance;

7. There are difficulties in justifying investments in FMS and CIM because these technologies lead to revenue generation which is difficult to quantify, and because the full benefits may not be realised until sometime after implementation.

The traditional management accounting and investment appraisal methods that we use today, are inadequate for dealing with the complexities of Agile Manufacturing. New methods, such as activity based costing, are being implemented by our manufacturing businesses, but there are a number of issues that need to be addressed. Our purpose in this chapter, is to consider these issues and to form the outline framework of a management accounting system suitable for Agile Manufacturing environments. We start by examining these issues.

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