Management Accounting Quarterly, the refereed online journal of the Institute for Management Accountants (IMA), published an article by Maharishi University of Management Ph.D. student Manjunath Rao and Maharishi University of Management Associate Professor, Andrew Bargerstock in their Fall 2011 issue.
The article explores the system of Lean Management (which Maharishi University of Management has started to employ in many departments), a hot topic in the sustainability/green business world. Lean Management focuses on adding value to customers while streamlining operations and eliminating waste; it grew out of the success principles used by the remarkably successful Toyota Motor Corporation. The published article is titled “Exploring the Role of Standard Costing in Lean Manufacturing Enterprises: A Structuration Theory Approach,” and presents the theory and research plan for Manjunath Rao’s dissertation.
According to Dr. Bargerstock, Rao’s dissertation adviser, “Manjunath’s research has garnered significant attention by experts in the field of lean accounting. In June 2011, Manjunath gave a poster presentation of his research plan at the annual conference for the IMA. In September, 2011, he was named as one of two Ph.D. students nationally who were recognized as Lean Accounting Students of the Year at the Lean Accounting Summit in Orlando, FL. In December, Manjunath received a research grant award of $4,000 from the IMA. And now, he is recognized again by the IMA with the publication of this article. We are very pleased with the progress of Manjunath’s dissertation.”
Video introduction to lean manufacturing
As is expected from a great PHD dissertation, the topic gets complicated very quickly, but let’s see if I can make it semi-accessible:
Traditional way of accounting:
Standard costing and variance analysis (SCVA) is taught worldwide as the traditional method for controlling costs in manufacturing operations. This control is maintained by setting up a target average cost and quantity for key categories of inputs: material, labor and overhead, and monitoring the average input costs and quantities of these categories, over the entire production process. Reports are typically generated each month that summarize and compare actual costs to the targeted costs. Differences (variances) are investigated to determine root causes of unexpected results.
By contrast, in a lean manufacturing company work, cell teams (typically 6-10 people who perform a few sequential tasks) develop the relevant data they need to control quality and costs in real time (as compared to monthly reports with SCVA). From the perspective of Lean Management, work cell metrics are superior to SCVA reports and therefore SCVA reports have no place in mature lean companies.
Effect of dissertation research:
Surprisingly, there has been no significant research study that has tested the lean accounting theory that mature manufacturers will eliminate SCVA. Rao’s research will gather such information via survey and he will also collect data to understand why companies are retaining SCVA.
|Anna Bruen is a MUM alumnus who graduated with a degree in Sustainable Living. Anna is the resident blogger here at MUM. To learn more about Anna take a look at her introduction post.|