Log in / Register
Home arrow Accounting arrow Job Costing: Managerial and Cost Accounting
< Prev   CONTENTS   Next >

6. Modern Management of Costs and Quality

Accountants have a reputation for being focused on cost control. Perhaps this reputation can be traced back to the 1843 book by Charles Dickens entitled A Christmas Carol. In that tale, Ebenezer Scrooge is a penny-pinching miser who cares nothing for the people around him. His sole purpose is making money, and his trusted but suffering accountant is Bob Cratchit who painstakingly tracks every penny. Fear not, Mr. Scrooge eventually sees the light when visited by the ghost of his former partner, but that's another story.

Today's accountants still focus on measuring and controlling the costs of a business. And, this pursuit sometimes earns them the scorn of their associates who may be more interested in engineering, product development, marketing, and other facets of the business. The accountants, and their numbers, are sometimes seen as profit obsessed and, therefore, limiting the potential to achieve other objectives.

But, modern managerial accounting techniques are causing a shift in this reputation. Technologically advanced information systems mean less time needs to be spent on data capture, and more time can be devoted to analyzing data and making sound business decisions. As you will see, modern evaluative techniques are looking beyond the bottom line.

6.1. Global Competition

One result of the rise in global competition has been a cross-pollination of best business practices. Interestingly, many profitable businesses come out of environments where profit is not the primary motivation. What has been learned from this is that business success can be driven by a fixation on issues such as quality, employee involvement, customer satisfaction, and the like; profit is the result not the objective. Let's focus on several contemporary trends where management accountants play an important implementation role.

6.2. Kaizen

Kaizen is a Japanese term used to describe a blitz like approach to study processes and install efficiency within an organization. This approach relies on frontline employee input for "quick fix" suggestions relating to business processes. Essentially, focus sessions are conducted in search of the obvious areas of operational improvement. These sessions are usually "observed" or "moderated" by members of the strategic finance/managerial accounting/industrial engineering teams. But, these "experts" are supposed to listen and learn, not suggest or lead the discussions. What is sought are simple and common sense solutions for issues that may not have even been seen as problems for the business. In one setting, for example, a production facility manufactured metal shelving to be used in refrigeration equipment. Essentially, the product required sheet metal to be stamped and shaped in a series of operations. The facility was cramped, and the product flowed down the three production lines like this:

The facility was cramped, and the product flowed down the three production lines like this:

The business was not profitable, and was acquired by an entrepreneur who immediately conducted a Kaizen session. The workers pointed out that they were bumping into each other and disrupting the manufacturing activity as they moved the work in process between the three production lines. The simple fix was to reverse the middle line as follows:

The simple fix was to reverse the middle line as follows:

This was a simple, and in retrospect obvious, corrective measure. The savings were huge from this and other Kaizen event fixes! The entrepreneur sold the business at a greatly increased price within just a few years after buying it. There are few businesses that cannot benefit by taking time to listen to employees in search of operational suggestions that make sense. The cost and efficiency savings can be enormous. These Kaizen sessions are also useful in helping employees understand business cost control and its importance to the entire business team.

Found a mistake? Please highlight the word and press Shift + Enter  
< Prev   CONTENTS   Next >
Business & Finance
Computer Science
Language & Literature
Political science