The Cost Accounting as a Tool of Business Decision Making in Manufacturing Industry
Introduction
The accounting management in the modern organization can be associated with the increasing competitiveness among the firms. Through incorporating the environmental information of the organization into the accounting management, the accounting information system follows and hence allows the analysis in the related accounting transactions. Through assessing and evaluating the accounting information presented unto the Board of Directors and managers can be an effective tool in assisting them in creating sound decisions. The importance in crating the necessary decisions does not only apply in the ability of the managers but also to correct their actions or strategies that might affect the financial health of the organization.
Within the Manufacturing Firms Environment
In managing the operation in a competent industry, the business leaders understands the emergence of essential strategies wherein they can obtain the two main goals in creating businesses - to increase profits and minimize or maintain the costs involved. Targeting these two goals has been a mystery for the entrepreneurs most especially in the increasing level of competition. Within the manufacturing industry, the efficiency of the production lies in the effectiveness of the operation. Each process that contributes in creating a product should be designed according to the said objectives of the organizations.
Due to the continuous development in the manufacturing industry, the JIT philosophy introduced the principle of customer pull. This concept states the idea that the companies should not push their products to the customers; instead let the customers pull the products and services including the “value” and the associated link within the production chain (Manotas Duque & Cadavid, 2007). Since the aim of the modern generation in manufacturing industry leads to efficiency in the processes, the reduction in inventory levels and accompanied with the perfect timing of material, parts, and other supplies are ideal in the production processes. Therefore, the demands of production are now just in time, not weeks or even days before. This emphasis places pressure on suppliers throughout the entire system. They are all pressured to shorten the timing in order to meet the demands of the primary producer.
In emphasizing the agenda of cost efficiency in the organizations, the evolution of technological approach became evident in the practice such as the idea of cost accounting. Within the dimensions of computer integrated environment in manufacturing systems, there involves five interrelated objectives. First is the increase in the product quality; second is to shorten the time among the non-value added activities (e.g. setting the machineries); third is to reduce the inventory level and enhancing the pull based methods over the push-through approach; fourth is to develop the flexibility and feasibility in manufacturing systems; an fifth is to work fully integrated and coordinated in the production system through the centralized computer (Lewis, 1993).
For an instance, the strategies that the manufacturing organizations such as creating the sound decisions in comparing the push strategies to the pull-based strategy; the push strategy, where the manufacturer make outputs as long as there are materials, pull based approach make only what the customer needs. Instead of anticipating their customer needs, the pull approach is precise in the production because of the information based on the customer consumptions (Lewis, 1993). In addition, against the push strategy, there are smaller inventories that will help the leaders drive problem resolution. Due to the minimized time in production and consumption of materials, the wastes are also controlled and at minimized state and there is no need to be engaged in team meetings, trainings, additional staff, and so on that will only increase the pressure in the manufacturing processes. Furthermore, because the system is controlled, there is communication in between the management and suppliers and the received feedback from the customers.
Within the management, there is an increase of employee involvement, reduce the schedule complexities, and the importance of team leaders who are allowed to make decisions based on their judgment and experience. From the gained insight on the customer feedbacks, the leaders can provide the common system and applied in other manufacturing processes. This emphasizes the Lean concepts which involved the investigation of “things to do” once it is known which are the “things to achieve” (Manotas Duque & Cadavid, 2007).
References:
Lewis, R.J., (1993) Activity-Based Costing for Marketing and Manufacturing, Quorum Books: Westport, CT.
Manotas Duque, D.F., & Cadavid, L.R., (2007) Lean Manufacturing Measurement: The Relationships between Lean Activities and Lean Metrics, Estudios Gerenciales, 23(105) [Online] Available at: http://redalyc.uaemex.mx/pdf/212/21210504.pdf [Accessed 24 March 2011].
0 comments:
Post a Comment