Agile Manufacturing:
Forging New
Frontiers
Paul T. Kidd
1994, ISBN 0-201-63163-6
9.1 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:
- Our investment decisions have been traditionally
taken based only on financial appraisal;
- 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;
- 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;
- 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;
- Our traditional management accounting
methods do not highlight the true cost drivers in our enterprises;
- 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;
- 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. |