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

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
Life and Style
techApple has just launched its latest mobile operating software – so what should you do first?
News
A male driver reverses his Vauxhall Astra from a tow truck
newsThe 'extremely dangerous' attempt to avoid being impounded has been heavily criticised
PROMOTED VIDEO
Arts and Entertainment
Lionel Messi in action for Barcelona
filmWhat makes the little man tick?
Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
News
i100
Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Sport
Cesc Fabregas celebrates his first Chelsea goal
footballChelsea vs Schalke match report
Arts and Entertainment
Toby Jones (left) and Mackenzie Crook in BBC4’s new comedy The Detectorists
tvMackenzie Crook's 'Detectorists' makes hobby look 'dysfunctional'
Life and Style
fashion

Olympic diver has made his modelling debut for Adidas

News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trainee Recruitment Consultant Birmingham

    £18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

    Recruitment Consultant - Soho - IT, Pharma, Public Sector

    £20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...

    Sales Executive

    £20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week