The Role of the Computer
The computer should play a key role in many aspects of the financial management
of a company, yet the British seem to fail in its proper use, when compared to the
Japanese. One example of this is in stock control. It is said that much of the traditional
management accounting is obsolete from the point of view of the cost of holding stocks.
It seems the Japanese have successfully achieved lower average numbers of weeks for
stocks through their JIT (Just in Time) inventory procedure and other allied techniques,
whereas British performance in stock ratios has shown little improvement over the
What is known as the "Miroku System" explores sources of higher cost, such as inventory levels, and then proceeds to attack the problem, with a view to reducing those costs. There is strict adherence to inventory levels and ruthless implementation of the agreed strategy. This demands team effort between accountants and engineers: an interdependence in sharp contrast to their normal, independent roles as seen in the West. It is also crucial to reduce the throughput time: the length of time between the arrival of raw materials at the factory and shipment of the finished product. This is the single most important factor in improving factory productivity. Focusing on throughput time forces managers and engineers to reduce inventories, set-up times and lot sizes: it also encourages improved quality, improved factory layouts and better production schedules.
The JIT approach also removes a lot of misconceptions, and this results in a significant change in the role of the management accountant. This comes about because:
- The well-known concept of 'economy of scale' now has little relevance to the decision making process.
- The key factors are now flexibility, ease of use, ease of maintenance and the ability to match production to demand.
- The normal factors governing a company's decision to buy new plant often conflict with the JIT philosophy.
- JIT provided a smooth flow of work through the plant, but it has to be associated with total quality control.
All these have a strong influence on the work and duties of the management accountant. However, it now appears that both Japanese and Western management styles are in a process of change. The two dissimilar groups are learning from one another, and so moving closer together. Nevertheless, it is still asserted that computerized cost accounting systems, as used in the West, are producing highly distorted and dysfunctional information. Two of the most serious problems are said to be:
- Poor information about individual profit profitability.
- Inability to manage overhead costs.
It is also alleged that management accounting information is usually too late, too aggregated and too distorted to be relevant. The team approach, discussed below, together with consensus, as used in Japan, seems to avoid these problems. The three key factors in Japanese management, which contribute to their success, are said to be solidarity, homogeneity and commitment. Of course, this is primarily a management problem, but if the accountant is aware of these differences, the accounting role can be modified and made more valuable.
10. Williams, K. et al, Why take the stock out? Britain vs. Japan, Journal Operational and Production Management, UK, Vol. 9, No. 8, p. 89ff (15 pages).
11. Schmenner, R.W., The merit of making things fast, Sloan Management Review, Vol. 29, Fall 1988, pp. 11-17.
12. Maskell, B., Capital equipment in purchasing and just-in-time, Management Accounting, June 1987, pp. 12-14.
13. Johnson, H.T. and Kaplan, R.S., The rise and fall of management accounting, IEEE Engineering Management Review, Vol. 15, August 1987, pp. 36-44.