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WELCOME AND GOOD MORNING. Competition is global, production times are shorter, the saleable life of product is shrinking, profit margins are smaller and consumer tolerance for poor quality is low. - PowerPoint PPT Presentation
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WELCOME WELCOME ANDANDGOOD MORNINGGOOD MORNING
The Business Reality ShiftThe Business Reality Shift
• Competition is global, production times are shorter, the saleable life of product is shrinking, profit margins are smaller and consumer tolerance for poor quality is low.
• Action must be swift and powerful and focussed on identifying three things-where the firm needs to be if it is to be successful,what needs to be done in order to get there and how it is going to make this transformation.
What drives business today ?What drives business today ?
Technological changes• Computing speed
• Information acquisition and dissemination
• Internet technologies
Globalisation• Global cost advantages
• Continuous reengineering
• Time based deliveries (JIT)
Customer driven• TQM
• Value chain analysis
DIRECTION OF THE Mgmnt Accounting
Business environment of 21st centuryBusiness environment of 21st centuryVALUE CREATING STRATEGIES/PROCESSES• Mass customization through a good design• Instant production driven by pull of customer
demand and ability to build on customer ideas.• Network of producers through strategic alliances.• Supplier privy to strategy.• Delayered management hierarchies• Trust , Reliability and core competencies• Information technology as a major enabler• Global markets and world class practices
BUSINESSMODELS CREATEVALUE
MISSION STATEMENT
VISION STATEMENT
VALUES STAEMENT
OBJECTIVES
STRATEGIES
PROCESS BASED ORGANISATION
COMPONENTSOF A
BUSINESS MODEL
IT ENABLED
TIME SLICES IN MA EVOLUTIONTIME SLICES IN MA EVOLUTION
Prior to 1825Eye ball control
Simple cost data on production
Between 1825 to 1925
Scale advantages
Capacity centric MA concepts
Process cost per unit
IE based standard costing
Between 1925 to 1975External reporting, Regulations, Income taxes, Levies, etc
TIME SLICES IN MA EVOLUTIONTIME SLICES IN MA EVOLUTION
After 1975
Value revolution
Life cycle concept
Strategy evaluation and control
Brand management
Distribution and channel management
Service sector evolution
Enterprise Risk Management
Environmental Strategies
A Battle on Two FrontsA Battle on Two Fronts
(1) Strategy
choose the right ones …..
… and align the cost structure
(2) Efficiency & Utilization
take waste and unused capacity
out of the organization
ROI
Val
ue c
reat
ion
Management Accounting
Operational
MA
StrategicMA
DIMENSIONS OF CHANGE IN MADIMENSIONS OF CHANGE IN MA
• OWNERSHIP
• CONTENT
• FREQUENCY OF USAGE
• LIFE CYCLE ORIENTATION
• PROCESS ORIENTATION
• NEW TOOLS AND TECHNIQUES
• INTEGRATION WITH IT
DIMENSIONS OF CHANGE IN MADIMENSIONS OF CHANGE IN MA
OWNERSHIP
• No more vested with costing/finance
• Company wide process
• Major role by non finance teams
• Innovations led by non finance
• Management Accountant has to be a facilitator with business orientation.
DIMENSIONS OF CHANGE IN MADIMENSIONS OF CHANGE IN MA
CONTENT
• Strategic Vs Operational focus
• Non Cost related information
• Cycle time related
• Quality related
• Statistics oriented such as SD, Six Sigma
DIMENSIONS OF CHANGE IN MADIMENSIONS OF CHANGE IN MA
FREQUENCY OF USAGE
• On line
( torque sensing CNC to avoid tool damage)
• Hourly variations ( Japanese cost practice)
• Weekly reviews
• Monthly Cycle
• Quarterly strategic information
• Life Cycle phased information
DIMENSIONS OF CHANGE IN MADIMENSIONS OF CHANGE IN MA
LIFE CYCLE ORIENTATION
• Operation focus is no more production focussed.
• Design stage costing
• Post sale service costing
• Amortising over life cycle volumes
• Switch over costs in segments
DIMENSIONS OF CHANGE IN MADIMENSIONS OF CHANGE IN MA
PROCESS ORIENTATION
• Cost centre and departmental costs losing relevance to process view.
• Cross functional views
• Process based organisation structures
• Business Vs Manufacturing process
• Process based cost/time/quality measures
DIMENSIONS OF CHANGE IN MADIMENSIONS OF CHANGE IN MA
NEW TOOLS AND TECHNIQUES
• Strategic Management Accounting tools
• Operational tools
STRATEGIC TOOLS
Balanced Scorecard, Strategic Cost management, Target Cost Analysis, Customer Profitability and Customer value Measurement.
OPERATIONAL TOOLS
Cost of Quality, Kaizen Costing, Parametric Cost Control
Activity Based Costing and Budgeting, Activity Management
Vendor Cost Analysis, Statistical Quality and Cost Control,
Six sigma costing, Service Process Costing, Non Financial Performance Measures, Benchmarking, Process Mapping.
THE ABOVE TO BE IT SUPPORTED OR EVEN WEB BASED
STRATEGIC AND OPERATIONAL TOOLS
DIMENSIONS OF CHANGE IN MADIMENSIONS OF CHANGE IN MA
INTEGRATION WITH IT
• No more close to the chest of few policy
• Need for disseminated information.
• Data warehousing and mining tools
• Data analyser and decision making tools
• Work flow alerts and On line controls
• Legacy and transactional systems
• ERP,CRM and SCM integration
MA PRACTICES OF SHINGO WINNERSMA PRACTICES OF SHINGO WINNERS
• Accounting itself under self scrutiny• Methods of efficiency evaluation reengineered• Introduced time based measures• Measurement of cost at bottleneck operation in cellular
manufacturing.• Management accounting supported continuous
improvement• Elimination of waste in accounting processes.• MA becoming internal business consultants• Empowered structure based management accounting• Knowledge of core business
Legacy Pangs of the service sector MALegacy Pangs of the service sector MA
• Historically insignificant use of MA
• Were operating in non competitive markets
• Local competition and not national/global.
• Operating environment did not require customer driven processes.
• MA literature itself not rich on service sector in the past.
Fundamental shifts in service sectorFundamental shifts in service sector
• Privatisation galore.• IT AND ITES as a major focus • Unbundling of power sector.• Pay and use and withdrawal of free meals.• Sectoral cross subsidisation anomalies.• Competition in transportation sector, innovation
in health care, growth pangs in telecommunication.
• Retail financing in finance sector
MA developments in service sectorMA developments in service sector
• Power generating companies seek Deming awards on quality. ( Florida Power & Light Co)
• Research on ABC application in power sector by CPRI in US and CERC in India.
• Extensive use of ABC by health care sector in UK
• Attempts on ABC by banks and telecom in India.
• Cost accounting record rules in telecom
• CAM I publication on ABM in service processes as a breakthrough project.
MA Content for Service sectorMA Content for Service sector
• Measurement of Quality, Cost and Time.
• Time as a critical dimension more important in MA focus.
• Cost of processes needs focus and the most appropriate tool is Activity Based Costing.
• Process mapping is fundamental.
• Measurement of customer satisfaction
• Extensive use of IT is prerequisite.
Mindset impediments for Reforms and Mindset impediments for Reforms and Revolution in MA fieldRevolution in MA field
• FINANCIAL ACCOUNTANTS ALSO DOMINATING MA DISCIPLINE
• COMPLIANCE/TAXATION COMES FIRST
• TREASURY MANAGEMENT MINDSET
• LACK OF AWARENESS IN TOP MANAGEMENT OF DEVELOPMENTS IN MA FIELD AND THEIR SIGNIFICANCE
• LACK OF PRIDE IN MA THEMSELVES AND SEEKING MORE AVENUES TO COMPETE WITH CHARTERED ACCOUNTANTS
• PROFESSIONAL DEVELOPMENT FOCUS MORE ON STATUTORY AREAS AS A WAY TO MOVE FORWARD
• LACK OF AUTHORITATIVE PUBLICATIONS ON MA AND CEDED THE INITIATIVE TO OTHER BODIES.
STRATEGYREALIZATION
CUSTOMERS,MARKETS
SUPPLY CHAINMANAGEMENT
PRODUCTS, CHANNELS & CUSTOMERS
ACTIVITIES(ABC/M)
RESOURCES
SHAREHOLDERWEALTH
[VBM]
PERFORMANCEMEASUREMENT
SCORECARDS
PROCESSMANAGEMENT
Generalledger
PROJECTACCOUNTING,
PROGRAMMANAGEMENT
STRATEGY DEFINITIONMETHODOLOGIES
KEY PERFORMANCE INDICATORS (KPIs) versus ACTUALS
PROFITABILITYANALYSIS
DEMAND STRATEGY
Expenses
TIME
SUPPLY / INVEST STRATEGY
PRODUCT &SERVICES
DEMANDVOLUME & MIX
FORECAST
MAXIMIZE
MINIMIZE
OPERATIONAL PERFORMANCE- PRODUCTIVITY & EFFICIENCY- BENCHMARKING - UTILIZATION/YIELD- TOTAL QUALITY MANAGEMENT (Cost of Quality)
UNUSED(AVAILABLE)CAPACITY
Assetmanagement
ACTIVITYDRIVERS
REVENUES
$$s hours
Business ModelBusiness ModelFOR A MA ACCNFOR A MA ACCN
MAXIMIZEAlignment of cost
structure to strategy
What-if Planning?
THANK YOU