Invasion of the through-putters

Roger Trapp looks at a new method of accounting that has emerged to deal with dramatic changes in manufacturing

To most people, the initials TA conjure up images of office workers playing soldiers at the weekend. But to a growing number of accountants working in manufacturing they stand for Throughput Accounting.

The concept - still in development - is the latest attempt to grapple with the changes that have resulted from the transformation of manufacturing in recent years.

The success of Japanese manufacturers led management thinkers and their consultants and clients to focus on such concepts as Just in Time, Total Quality Management and World Class Manufacturing. The combination of this trend, with advances in manufacturing technology and growing competition, created something of a crisis among not just general managers but also the financial specialists working alongside them.

There is no doubt that the stock of management accountants is on the rise. Their professional body, the Chartered Institute of Management Accountants, may have failed in its attempt to merge with the Institute of Chartered Accountants. But survey after survey finds increasing support for their qualification, while the rise to prominence of the likes of J Sainsbury 's finance director, Rosemary Thorne, is raising the institute's profile.

However, there is some dispute among their ranks about how best they can carry out their role, and so resolve the problems caused by the huge changes going on in industry.

Activity-Based Costing was one response to the growing feeling that existing accounting systems were inadequate, particularly in the areas of costing and control systems. Another was to rethink management's reliance on accounting as its central source of information - a reaction that put across the view that such behaviour was "like driving a car, looking in the rear- view mirror".

It called for a "balanced scorecard" approach, with non-financial performance measures being taken into account.

The arrival of "throughput" as a possible solution is down to the belief of a third group (working outside accountancy) that accounting is too important to be left to accountants.

It derives from Eli Goldratt's Theory of Constraints, in which the maximisation of throughput is seen as the most important factor in increasing profitability.

Under this approach, cost accounting - far from being the key to performance on the grounds that it identifies where the profit comes from - is seen as "enemy number one of productivity". This is because, according to the throughput proponents, local performance measures obscure the goal of the organisation.

This thinking is starting to gain a hold in business and in the Chartered Institute of Management Accountants, which has made throughput accounting a part of the syllabus.

Although it began about 20 years ago with Mr Goldratt's analysis of the management of production bottlenecks and the development of production scheduling software called Optimised Production Technology, it has been taken up in Britain by the management accountants David Galloway and David Waldron.

They call for a new language for manufacturing that would replace traditional concepts such as direct/indirect cost allocation, economic batch size and treating inventory as an asset. Instead, they say accounting should be concerned with such matters as the rate at which businesses make money and highlight return per bottleneck hour.

However, research recently published by Cima suggests that the consultants - lacking accountancy backgrounds - had become confused. At one point they even withdrew their approach in favour of "enemy number one" - activity- based costing.

But the research booklet, Accounting for Throughput, by David Dugdale and T Colwyn Jones of the University of the West of England, goes on to examine the introduction of the concept at one company - and comes to the conclusion that it can be effective. Throughput thinking, as developed as part of the Theory of Constraints - which aims to remove traditional information systems in favour of greater simplicity and variable or marginal accounting approaches - "appears to have considerable potential for transforming the management of manufacturing, especially over the short term," they write.

There are certain similarities with JIT and TQM philosophies that many British companies claim to have adopted, they say, though the throughput concept has a more specific and sequential approach.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind-the-scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
Winchester College Football (universally known as Winkies) is designed to make athletic skill all but irrelevant
Life...arcane public school games explained
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
i100(and it's got nothing to do with the Great British Bake Off)
Angelina Jolie with her father Jon Voight
peopleAsked whether he was upset not to be invited, he responded by saying he was busy with the Emmy Awards
Bill Kerr has died aged 92
peopleBill Kerr appeared in Hancock’s Half Hour and later worked alongside Spike Milligan and Peter Sellers
news It's not just the world that's a mess at the moment...
footballPremiership preview: All the talking points ahead of this weekend's matches
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
Mario Balotelli pictured in his Liverpool shirt for the first time
Life and Style
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Data Scientist (SQL,Data mining, data modelling, PHD, AI)

    £50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...

    SAS Business Analyst - Credit Risk - Retail Banking

    £450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

    Project Manager - Pensions

    £32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

    KYC Analyst, Birmingham - £200-£250 p/d

    £200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

    Day In a Page

    Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

    The phoney war is over

    Russian troops and armour pour into Ukraine
    Potatoes could be off the menu as crop pests threaten UK

    Potatoes could be off the menu as crop pests threaten UK

    The world’s entire food system is under attack - and Britain is most at risk, according to a new study
    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

    Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
    From Mozart to Orson Welles: Creative geniuses who peaked too soon

    Creative geniuses who peaked too soon

    After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
    Caught in the crossfire of a cyber Cold War

    Caught in the crossfire of a cyber Cold War

    Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

    Salomé: A head for seduction

    Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
    From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

    British Library celebrates all things Gothic

    Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
    The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

    Is the Hard Rock Café worth fighting for?

    The restaurant chain's owners are currently embroiled in a bitter legal dispute
    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

    In search of Caribbean soul food

    Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
    11 best face powders

    11 best face powders

    Sweep away shiny skin with our pick of the best pressed and loose powder bases
    England vs Norway: Roy Hodgson's hands tied by exploding top flight

    Roy Hodgson's hands tied by exploding top flight

    Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
    Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

    Di Maria and Ronaldo: A tale of two Manchester United No 7s

    They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
    Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

    Robert Fisk: No victory for Israel despite weeks of devastation

    Palestinians have won: they are still in Gaza, and Hamas is still there
    Mary Beard writes character reference for Twitter troll who called her a 'slut'

    Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

    The Cambridge University classicist even wrote the student a character reference
    America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

    America’s new apartheid

    Prosperous white districts are choosing to break away from black cities and go it alone