INTRODUCTION TO CONTEMPORARYMANAGEMENT ACCOUNTINGEVOLUTION

Source: www.maaw.infoFour Stages in the Evolution of Management Accounting PracticeSTAGE 1STAGE 2STAGE 3STAGE 4Consortium of Advanced Mgt. Intl.E

AN OVERVIEW OF MANAGEMENT ACCOUNTING TOOLSCONT.

MANAGEMENT ACCOUNTING TOOLSBusiness Process Reengineering (BPR)

Benchmarking

Theory of Constraints (TOC)

Six Sigma

Etc.SIX SIGMA

Six SigmaA quality improvement and business strategy concept started by Motorola in 1987In statistical terms, the abbreviated form of 6 standard deviations from the meanTranslates to about 2 defects per billionHas taken the equivalent defect rate of 3.4 ppm, (or 4.5 sigmas)Refers now to a quality level equivalent to 3.4 defects per millionCONT.

Six Sigma contdMeans excellent processes, services, and administration Encourages leanness, simplicity, and doing things right the first timeDriven by the voice of the customerBELTS

Six Sigma Certification Belts 1. Champion - basic form; understands the theory of Six Sigma management, but does not yet have the quantitative skills to function as an active Six Sigma project team member. However, executives in Six Sigma organizations function as champions of Six Sigma projects.

2. Green Belt is the work horse who works on projects part-time (25%), either as a team member for complex projects, or as a project leader for simpler projects. CONT.

Six Sigma Certification Belts 3. Yellow Belter has passed the Green Belt certification examination but has not yet completed a Six Sigma project; full-time change agent who may not be an expert in the process under study. 4. Black belt is a full-time quality professional5. Brown Belt has passed the Black Belt certification examination but has not yet completed the second Six Sigma project. 6. Master Black Belt takes on a leadership role as keeper of the Six Sigma process, advisor to executives or business unit managers.

YOU TUBE

SIX SIGMAhttp://www.youtube.com/watch?v=LcamODKt-sQ

http://www.youtube.com/watch?v=H4vZN-cMJyY TOC

Theory of Constraints (TOC)A method used to continuously improve manufacturing and non-manufacturing activities

Constraint is the most critical limiting factor

TYPES

Theory of Constraints (TOC)Types of constraints:InternalLoose constraints when limited resources are not fully used by a product mix. Ex. 1st constraint is loose while the 2nd constraint is binding (dependent on production of 1st constraint)Binding constraints- if limited resources are fully used by a product mix

External (ex. Market demand)

CONT.

Theory of Constraints (TOC)Management should identify the constraints, and Manage them so that resources are used most efficientlyYOU TUBE

TOChttps://www.youtube.com/watch?v=mWh0cSsNmGY

MANAGING

Managing ConstraintsRelaxing constraints by expanding the capacity of a bottleneck operation

HOW?RELAXING

Relaxing ConstraintsTOC schedulingOutsourcing all or part of the bottleneck operationInvesting in additional production equipmentWorking overtime at the bottleneck operationRetraining employees and shifting them to the bottleneckEstimating any non-value-added activities at the bottleneck operation

CONT.

BenchmarkingPioneered by Xerox Corporation in 1979;Search for the most effective method of accomplishing a taskInvolves identifying the best practices, andComparing an organization's performance to those practices with the goal of improvement TYPES

Types of BenchmarkingInternal across units

ExternalCompetitive benchmarking via competitorsFunctional benchmarking- with firms in the same industry but not competingGeneric benchmarking- with non-competitors outside the firms industryCONT.

Five-Stage Generic ModelDeveloped by Spendolini (1992)Identify the internal areas or activities to benchmark.Obtain a long term commitment from senior management and develop a benchmarking team.Identify benchmarking partners.Collect and share information.Take action to meet or exceed the best practices.

E

Final Notes on BenchmarkingA tool to learn from others, and not a tool to win in business.

Not useful unless knowledge gained from it are put in action to benefit the company.

https://www.youtube.com/watch?v=R6tJpyaFiQc

BPR

Business Process ReengineeringComplete and radical redesign of organizational processes

To achieve drastic improvement of current performance in cost, service and speed

https://www.youtube.com/watch?v=_fQ3BydzMz8

END

End of Presentation

Benchmarking (group work)Instructions: Assume that you are a manufacturing firm. Use the following steps to identify your benchmarking exercise.Identify the internal areas or activities to benchmark.Obtain a long term commitment from senior management and develop a benchmarking team.Identify benchmarking partners.Collect and share information.Take action to meet or exceed the best practices.

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