Management accounting within world class manufacturing

What is it about?

This case study of a U.K. chemical company examines a successful implementation of World Class Manufacturing (WCM) which included improving manufacturing, new quality programmes and computerized production controls including MRPII. Whilst these programmes were successful they failed to produce the turnaround sought. Followingadvice from consultants during a WCM workshop organized by government development agencies the company embarked on a benchmarking and strategic assessment exercise which diagnosed the company as unduly manufacturing oriented, poor on new product development and marketing, and insufficiently responsive to consumer needs. They adopted WCM principles embracing six broad objectives: customer responsiveness, employee involvement, quality, reduced lead-times, continuous improvement, and shop floor training for flexibility and problem solving skills. The implementation of WCM was successful. The budgetary control system run by the accounting department remained intact. Product costing systems were not changed to incorporate Activity-Based drivers, as predicted in the literature. However, there was a marked decline in the influence of the accounting department, partly due to the cost module within MRPII.

Featured Image

Why is it important?

The case indicates that financial improvement may lie more with programmes of employee development and involvement, and making the company more quality conscious, flexible and adaptive rather than in any redesign of costing systems, though such changes do significantly affect the role of management accountants.