The lean, mean brief

Japanese methods have created a new manufacturing environment - perhaps out of pace with accountants' techniques.

It is well known that - chiefly as a result of the influence of Japanese companies - British manufacturers are changing the habits of generations. But to what extent are the accountants working in these organisations adapting their working methods in order to fit in with such techniques as just-in-time (JIT) production?

That is the question that a study from the Institute of Chartered Accountants' research body sought to answer. By the researchers' own admission, the answer is not conclusive, but the findings are at least encouraging for members of the profession.

The report, "Accounting and the New Manufacturing", points out that "some people have accused accountants and their techniques of retarding manufacturing improvements", and says that in three of the four companies studied "accountants were actively involved in the advances being implemented". In the fourth case, the management accountant "was not involved but had not inhibited change".

But just in case it appeared that all was sweetness and light, the researchers - Christopher Cowton of Huddersfield University and Richard Vail of Trinity College, Dublin - add that in two cases the accountants reported having had difficulty in persuading their peers in other companies that they had no need to fear JIT.

Lacking in earth-shattering substance as its findings may be, the report is important because it carries on the examination of the role of management accounting that has been continuing for the past decade or so.

Pressure for adoption of such systems as activity-based costing (ABC) has been intense, while writers like Robert Kaplan have argued that management accounting has lost its relevance. Much of the blame has been laid at the door of academics - for conducting research at a distance far removed from practice and for teaching techniques that rely on an outdated view of manufacturing industry.

Kaplan, in particular, has argued that traditional costing systems, performance measures and approaches to investment appraisal are inappropriate in this "new manufacturing environment" and may have seriously retarded the revitalisation of western manufacturing industry. He argues for the abandonment of old practices that are no longer suitable and for the development and adoption of new measurements and techniques. He himself has been associated with the establishment of what is known as the "balanced scorecard" as a way of providing a better guide to the health of an organisation.

Cowton and Vail acknowledge that there are many elements to the new manufacturing approach - and so have devoted their energies to one of the best known, JIT.

Their questions of each of the four organisations - all anonymous and representing different sizes and types of plant - were divided into three main parts. First, planning JIT - were accountants involved and what role did financial measures play in its introduction? Second, product costing and production control - what sort of information was being produced by accountants? And third, a group of questions under the heading "Miscellaneous", including the likes of "How is the accounting function expected to develop?" and "What are the sources of initiatives for change in accounting?"

While finding that accountants in their studies were generally supportive of the moves towards new manufacturing methods, Cowton and Vail do acknowledge that "for all accountants, whether enthusiasts or not, the introduction of JIT does appear to entail some technical issues for accounting systems, the addressing of which will involve change, uncertainty and, possibly, resistance".

To examine these more closely, they look at three broad categories of accounting: labour, overhead and inventory.

In relation to the first, they point out that, while JIT may not be solely responsible for the move from direct to contracted-out labour, accounting for labour needs to reflect such changes in the way that it records it. At the same time, overheads have grown in importance. Sometimes, this has been a direct result of the decline in direct labour, ie when machines, with salaried employees overseeing them, have replaced workers.

Much more important, though, are changes involving inventory. Work in progress has traditionally been seen as an asset, but the JIT philosophy - carried to its extreme - would see it as "an evil to be eliminated", and hence a liability. There are, therefore, certain technical issues to be sorted out here.

But where does the report as a whole leave the management accounting profession?

According to the study's authors, the case studies "should serve to give some confidence about the ability of accountants to cope with, and indeed to support and promote, manufacturing change". But while some individual cases will give readers ideas and insights, Cowton and Vail stress that they do not provide a "simple blueprint for a uniform approach to accounting for JIT".

They accept that this might be disappointing for some, but emphasise that it also means that accountants are able - required, even - to make "their own considered, professional response to the technical and other challenges that JIT presents"n

`Accounting and the New manufacturing: a study of the implications of Just-in-Time Production' by Christopher Cowton and Richard Vail is available from Jacqui Modeste, The Research Board, The Institute of Chartered Accountants. Tel 0171-920 8508. Price pounds 15.

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

Arts and Entertainment
The eyes have it: Kate Bush
music
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
Al Pacino in ‘The Humbling’, as an ageing actor
filmHam among the brilliance as actor premieres two films at festival
News
Fifi Trixibelle Geldof with her mother, Paula Yates, in 1985
people
PROMOTED VIDEO
Sport
Mario Balotelli in action during his Liverpool debut
football ...but he can't get on the scoresheet in impressive debut
Environment
Pigeons have been found with traces of cocaine and painkillers in their system
environmentCan species be 'de-extincted'?
Arts and Entertainment
booksExclusive extract from Howard Jacobson’s acclaimed new novel
News
i100
Arts and Entertainment
A Pilgrim’s Progress is described by its publisher as “the one-and-only definitive record” of David Hockney's life and works
people
Sport
Loic Remy signs for Chelsea
footballBlues wrap up deal on the eve of the transfer window
News
i100
Arts and Entertainment
Art
Arts and Entertainment
Elizabeth McGovern as Cora, Countess of Grantham and Richard E Grant as Simon Bricker
TV
Life and Style
Instagram daredevils get thousands of followers
techMeet the daredevil photographers redefining urban exploration with death-defying stunts
Arts and Entertainment
Diana Beard, nicknamed by the press as 'Dirty Diana'
TVDaughter says contestant was manipulated 'to boost ratings'
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

    C# .NET Developer (PHP, Ruby, Open Source, Blogs)

    £40000 - £70000 per annum + Bonus+Benefits+Package: Harrington Starr: C# .NET ...

    Data Analyst/Developer (Good education, Data mining, modelling,

    £40000 - £70000 per annum + benefits+bonus+package: Harrington Starr: Data Ana...

    Law Costs

    Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

    Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

    £35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

    Day In a Page

    Alexander Fury: The designer names to look for at fashion week this season

    The big names to look for this fashion week

    This week, designers begin to show their spring 2015 collections in New York
    Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

    'I like Orwell's writing as much as the next talented mediocrity'

    Will Self takes aim at Orwell's rules for writing plain English
    Meet Afghanistan's middle-class paint-ballers

    Meet Afghanistan's middle-class paint-ballers

    Toy guns proving a popular diversion in a country flooded with the real thing
    Al Pacino wows Venice

    Al Pacino wows Venice

    Ham among the brilliance as actor premieres two films at festival
    Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

    Neil Lawson Baker interview

    ‘I’ve gained so much from art. It’s only right to give something back’.
    The other Mugabe who is lining up for the Zimbabwean presidency

    The other Mugabe who is lining up for the Zimbabwean presidency

    Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
    The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

    The model for a gadget launch

    Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
    Alice Roberts: She's done pretty well, for a boffin without a beard

    She's done pretty well, for a boffin without a beard

    Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
    Get well soon, Joan Rivers - an inspiration, whether she likes it or not

    Get well soon, Joan Rivers

    She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
    Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

    A fresh take on an old foe

    Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
    Fashion walks away from the celebrity runway show

    Fashion walks away from the celebrity runway show

    As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
    Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

    Meet the stars of TV's Wolf Hall...

    ... and it's not the cast of the Tudor trilogy
    Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

    Europe's biggest steampunk convention

    Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
    Don't swallow the tripe – a user's guide to weasel words

    Don't swallow the tripe – a user's guide to weasel words

    Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
    Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

    Daddy, who was Richard Attenborough?

    The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor