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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Production Methods v Craft v Mass v Lean
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Mass versus Lean -- Process Differences Mass 1Top down control of employees 2Supplier relationships arms length 3Limited relationships with customers 4Linear design process Lean 1Empowered workers 2Cooperative relationship with suppliers 3Customer focused organization 4Concurrent design of product and process
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Mass versus Lean -- Structure Differences Mass 1Inflexible single purpose equipment 2High setup time for equipment 3Simple tasks and low skilled labor Lean 1Flexible multi-use equipment 2Low setup time for equipment 3Complex tasks and skilled labor
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Mass Production Assumptions v Volume decreases cost v Product variety increases cost v Quality equals higher costs v Time to market increases costs
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Mass Production Environment v Stable Environment - Cost accumulation v Large inventory - Inventory focus v Labor specialization - Labor reporting v Top down control - Budget and standard costing v Manufacturing - Cost assignment issues v Single entity
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Lean Production Assumptions v Free product variety v Quality reduces costs v Time to market equals profitability
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Lean Production World v Competitive Environment - information share v Small inventory - availability v Flexible workers - decision data v Actual cost - timely data v Process v Value chain - life cycle
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Mass versus Lean -- Management Accounting Systems Mass 1Relationship of volume to cost 2Responsibility accounting - Unit focus 3Inventory driven - reporting & control 4Labor reporting Lean 1Relating “drivers” to cost 2Process accounting - Value Chain Focus 3No inventory reporting 4Indirect cost reporting
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Mass versus Lean -- Cost Strategy of a Mass Producer v Mass producers rely on economies of scale to: –Spread set up costs over larger number of units –Spread indivisible capital costs over larger number of units –Create learning effects to bring costs down –Lower their process complexity costs (Procurement, scheduling, deliveries)
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Mass versus Lean -- Cost Strategy of a Lean Producer v Design costs out before production v Reduce set-up costs by: –Mechanical redesign –Software based Numerically Controlled Machines v Invest in “divisible” capital equipment v Increase rate of learning by using: –Robotics –Skilled & trained work force v Manage complexity costs through: –Process redesign –Supplier partnerships –Cross-functional teams
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Technical Attributes Mass Decision Relevance 1Short run decisions 2Internal efficiency 3Single responsibility unit focus Process Understanding 1Not emphasized Lean Decision Relevance 1Long run cost structures 2External environment focus 3Cross functional and value chain focus Process Understanding 1Primary emphasis
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Behavioral Attributes Mass Assumptions 1Strong control of workers, suppliers 2Individual accountability 3Monetary motivation 4Accountant as control agent Lean Assumptions 1Empowered responsible workers, suppliers 2Team responsibility 3Multiple motivational factors 4Accountant as team player
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Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999. Mass versus Lean -- Cultural Attributes Mass Beliefs and Values 1Individual responsibility 2Competition and market efficiency 3Pro-capital and management 4Managerial power Lean Beliefs and Values 1Team responsibility 2Cooperation 3Work for common good 4Knowledge based power
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