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; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

    £16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    Day In a Page

    The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

    They fled war in Syria...

    ...only to get stuck and sidetracked in Hungary
    From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

    Title sequences: From The Prisoner to Mad Men

    Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
    Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

    Giorgio Armani Beauty's foundations

    Sumptuous fabrics meet luscious cosmetics for this elegant look
    From stowaways to Operation Stack: Life in a transcontinental lorry cab

    Life from the inside of a trucker's cab

    From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
    Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

    Kelis interview

    The singer and sauce-maker on cooking for Pharrell
    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea