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Cost Accounting

Foundations and Evolutions


Kinney, Prather, Raiborn

Chapter 18
Emerging Management Practices
Learning Objectives (1 of 3)
• Explain how business process reengineering
affects the way that firms execute processes
• Describe the competitive forces that
encourage downsizing and restructuring
• Explain why operations are becoming more
diverse
Learning Objectives (2 of 3)
• Describe how diverse operations affect the
accounting system
• Describe the purpose of enterprise resource
planning (ERP) systems and explain the
benefits of adopting an ERP.
• Describe strategic alliances and the
different forms they take
Learning Objectives (3 of 3)
• Explain why firms engage in strategic
alliances
• Describe open-book management and how
it requires changes in accounting methods
and practices
• List three generic approaches used to
control environmental costs
Managing Change
• Recognize the importance of
organizational culture
• Adopt only those innovations that support
current strategies
• Do not try to implement innovations
during downsizing
• Dedicate as much time to managing the
human side of change as the technical
side
Managing Change
• Educate all employees about the change
• Use medium and long-term performance
measures to gauge success
• Generate useful and understandable
reports to illustrate the effects of change
• Make explicit agreements regarding when
old information systems should be turned
off once new one is in place
Business Process Reengineering
Examine processes to identify and then
eliminate, reduce, or replace functions and
processes that add little customer value to
products or services
• Handling or storing materials and components
• Issuing checks
• Packaging finished goods for shipment to customers
• Recording journal entries
• Developing an organizational strategic plan
Business Process Reengineering
• Associated with • Enabled by
– radical change – advanced
– employee layoffs technology
– outsourcing – pursuit of increased
– technology quality
acquisitions – increase in price
competition due to
globalization
Business Process Reengineering
• Define objectives of the project
• Identify processes to reengineer Creativity
• Determine how to measure success
• Identify technology levers (innovation,
increased quality, increased output, decreased
costs)
• Develop a prototype of the reengineered
process and then refine it
Downsizing
• Reduces costs and improves profits in
conjunction with substantial investments in
advanced technology
• Changes mix of inputs used to produce
outputs
• Increases emphasis on technology-based
conversion processes
• Reduces the emphasis on manual conversion
processes (reduces the labor requirement)
Why Diversify?
• Legal requirements
• Business initiatives to employ minorities
• Organizational self-interest
– diverse workforce connects to diverse markets
– increased diversity leads to lower employee turnover
– heterogeneous groups are more creative
– diverse employee pool yields more management talent
– need large employee pools for future workers
Enterprise Resource Planning (ERP)
• Automate and integrate business processes
• Share common data and practices across the
entire enterprise
• Produce and access information real-time
• Links the customer end of the supply chain
through production and delivery to the
supplier
Enterprise Resource Planning
• Financial professionals
– Help to select and install ERP software
– Analyze the data repository to support
management decisions
– Maintain the integrity of the data
Strategic Alliances
An agreement, involving two or more firms
with complementary core competencies, to
jointly contribute to the supply chain
• Joint ventures
• Equity investments
• Licensing arrangements
• Joint R&D arrangements
• Technology swaps
• Exclusive buyer/seller agreements
Strategic Alliances
Output produced reflects a joint effort between
(or among) independent firms and the
rewards of that effort are split between (or
among) the allied firms
• Blurs boundaries between supplier and
customer
• Typical strategic alliances
– Exploit partner knowledge
– Have partners with access to different markets
– Allow sharing of risks and rewards
Strategic Alliances and the
Finance Function
• When forming a strategic alliance, finance
professionals
– Assess risk
– Develop strategies for parent company
management
– Design the financial structure
– Develop management control systems
– Install accounting and other information
systems
Open-Book Management
Increasing a firm’s performance by
involving all workers and by ensuring
that all workers have access to the
operational and financial information
necessary to achieve performance
improvements
Open-Book Management
• Disclose financial information to all
employees
• Train employees to interpret and use
financial information
• Empower employees to make decisions
• Tie a portion of employee pay to Financial
the company’s bottom line Results
Open-Book Management
• Open-Book Management works best in the
following types of firms
– Small size
– Decentralized management
– History of employee empowerment
– Trust between employees and management
Financial
Results
Environmental Issues
• Measure business performance with regard
to environmental issues and management of
environmental costs
• Span the entire value chain
– amount of scrap and by-products produced
– materials used - are they recyclable?
– actions of suppliers who produce inputs
– customer habits in consuming and disposing of
products and packaging
Questions
• How does business process reengineering
affect the way that firms execute processes?
• What are the benefits of adopting an
enterprise resource planning system?
• Why do firms form strategic alliances?

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