Operational Performance Measures Appropriate for Today's Manufacturing Environment
AN
ASSIGNMENT
ON
“ THE OPERATIONAL PERFORMANCE MEASURES APPRORIATE FOR TODAY’S MANUFACTURING ENVIRONMENT’’
WRITTEN BY
SUBMITTED TO:
IN PARTIAL FULFILMENT OF THE COURSE REQUIREMENT - ADVANCED COST AND MANAGEMENT ACCOUNTING
(MBA 5102)
JANUARY 2013
Cost control is needed by business to plan the actual cost it might incur on the production of certain products. The budget is an overall costing system but sub division is needed if and when the company requires detailed cost structure of each of the departments. This will be very crucial for achieving the overall goal of the organisation. For manufacturing companies, the basic concern of the management is to have smooth operations with the least cost possible. Here, the existence of cost is measured by what tangible output each component of the cost produces. In recent times, activity based and standard costing have aided management in achieving cost control but today’s manufacturing environment have evolved.
Manufacturing companies today are now focusing on an increased number of performance measures. These measures can be categorized under the following:
1) Raw material and Scrap control
2) Inventory control
3) Machine Performance
4) Product Quality Level
5) Delivery
6) Level of Productivity and;
7) Innovation and Learning
RAW MATERIAL AND SCRAP CONTROL
Here, management will be concerned about the quality of the raw material in use and the length of lead time. Lead time refers to the latency (delay) between the initiation and execution of a process e.g. the length of time between placing an order and the receipts of the goods ordered. Also, management will take cognisance of the cost of scrap as well as the total cost of the raw material.
INVENTORY CONTROL
This is of paramount importance in achieving the benefits of the JIT philosophy. Just-in-Time is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying
ASSIGNMENT
ON
“ THE OPERATIONAL PERFORMANCE MEASURES APPRORIATE FOR TODAY’S MANUFACTURING ENVIRONMENT’’
WRITTEN BY
SUBMITTED TO:
IN PARTIAL FULFILMENT OF THE COURSE REQUIREMENT - ADVANCED COST AND MANAGEMENT ACCOUNTING
(MBA 5102)
JANUARY 2013
Cost control is needed by business to plan the actual cost it might incur on the production of certain products. The budget is an overall costing system but sub division is needed if and when the company requires detailed cost structure of each of the departments. This will be very crucial for achieving the overall goal of the organisation. For manufacturing companies, the basic concern of the management is to have smooth operations with the least cost possible. Here, the existence of cost is measured by what tangible output each component of the cost produces. In recent times, activity based and standard costing have aided management in achieving cost control but today’s manufacturing environment have evolved.
Manufacturing companies today are now focusing on an increased number of performance measures. These measures can be categorized under the following:
1) Raw material and Scrap control
2) Inventory control
3) Machine Performance
4) Product Quality Level
5) Delivery
6) Level of Productivity and;
7) Innovation and Learning
RAW MATERIAL AND SCRAP CONTROL
Here, management will be concerned about the quality of the raw material in use and the length of lead time. Lead time refers to the latency (delay) between the initiation and execution of a process e.g. the length of time between placing an order and the receipts of the goods ordered. Also, management will take cognisance of the cost of scrap as well as the total cost of the raw material.
INVENTORY CONTROL
This is of paramount importance in achieving the benefits of the JIT philosophy. Just-in-Time is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying