Modern Management Techniques

Topics: Cost accounting, Theory of Constraints, Costs Pages: 12 (2523 words) Published: April 3, 2011
Modern Management Techniques

In context with Toyota Ltd

"The past 15 years have seen a series of new developments within Management Accounting to meet the ever changing needs of the organisation in the light of rapidly changing technologies".

Author: Kobby Darko-Ampem

Tutor: STEVE DUNGWORTH

16th December 2010



CONTENTS

Page

Introduction................................................................................... 2

Just In Time.................................................................................... 3

Activity Based Costing.................................................................... 5

Theory of Constraints...................................................................... 9

Bibliography.................................................................................... 12

Electronic Resources....................................................................... 12

Introduction

This report has been prepared to cover a project requirement for Decision Management within the grounds of ‘New Developments in Management’ and in response to the following; "The past 15 years have seen a series of new developments within management accounting to meet the ever changing needs of the organisation in the light of rapidly changing technologies".

The focus of this report will be on three relatively new developments including JIT (just in time), ABC (Activity Based Costing) and ToC (Theory of Constraints). Each development will be defined and then illustrated, before being examined in context with Toyota Ltd. The illustrations will be in the form of diagrams and if necessary, numerically discussed in reference to Toyota Ltd with an example working.

JIT

The JIT method was first implemented in the early 1970’s at the time of the industrial revolution within Japanese Firms.

The Just In Time method is an inventory based management system with the objective of having the sufficient quantity of finished goods desired by the company at the required time; thus, effectively eliminating or in most cases significantly reducing the need for the costly storage of inventories. JIT also requires a “continuous commitment to the pursuit of excellence in all phases in manufacturing systems, design and operations” (Collin Drury, Management and Cost Accounting 7th ED pp556).

This however, is only effective considering it does not negatively impact on customer supply. As well as this, JIT is most effective when implemented alongside what is know as Total Quality Management (TQM); whereby a company sets objectives to have zero errors and defects in every department of manufacture. An example of this can be observed with the methods by which Toyota inspects materials before and during the manufacture process; if a single fault is detected within a batch of materials/goods, the whole batch is rejected in order to reduce chances of any errors at a later stage within the manufacturing process. Ironically, occasions whereby hundreds of thousands of Toyota’s Hybrid motor-vehicles were recalled due to potentially fatal errors of the vehicles’ breaking systems, could well have been avoided with a better implemented Total Quality Management.

The aim of JIT is to achieve four main objectives, these are; •Elimination of Inventories – by receiving supplies needed just at the right time they are needed, the need for inventories is eliminated, thus, lowering cost of holding inventory. For example, instead of Toyota holding large amounts of inventories ready for the production line, they can arrange for delivery of only the relevant and required supplies just in time for the production process.

100% Punctual Deliveries – by forming a good relationship with suppliers and agreeing for them to deliver goods on a punctual basis (such as suppliers for raw...

Bibliography: Ronald J. Lewis (1993) Activity Based Costing for Marketing and Manufacturing
Quorum Books
Janet Brammer and Aubrey Penning (2009) Managing Performance & Resources
Osborne Books
Steven Spear (2010) Just In Time Practice at Toyota
Colin Drury (2008) Management and Cost Accounting 7th Edition
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