Technovation 25 (2005) 523–533 www.elsevier.com/locate/technovation
Performance measurement and costing system in new enterprise A. Gunasekarana,*, H. James Williamsb, Ronald E. McGaugheyc
Department of Business Administration, University of Illinois at Springﬁeld, One University Plaza, Springﬁeld, IL 62703-5407, USA b School of Business, North Carolina Central University, Durham, NC 27707, USA c Department of Management Information Systems, The University of Central Arkansas, Conway, AR 72035-0001, USA
Abstract In this paper, we describe a framework for measuring costs and performance in new forms of business organization that are evolving to meet the competitive challenges of the 21st century. A literature review on cost management and performance measures in advanced manufacturing and service organizations provides the basis for our framework. The framework emphasizes measurement of costs and performance in the virtual enterprise and along the supply chain to enhance competitiveness in global markets. Investing in knowledge capital and information technology plays an important role in improving organizational competitiveness in the 21st century, yet the measurement of performance in these important areas is at best, imprecise. Managing and controlling costs and performance in new forms of organization poses challenges. We hope this article will encourage research that will help practitioners meet the challenges of performance measurement in the 21st century. q 2003 Elsevier Ltd. All rights reserved. Keywords: Cost accounting system; Performance measures; Virtual enterprise; Supply chain; New enterprise
1. Introduction In the 21st century, ﬁrms need not just operate in different countries, they must develop global strategies to coordinate their operations at all phases of the value-adding chain (D’Amours et al., 1999). Coordination of the supply chain has become strategically important as new forms of organization, such as virtual enterprises, global manufacturing and logistics networks, and other company-to-company alliances, evolve. The Japanese are often praised for the way they use information sharing to improve supply chain competitiveness. Information exchange has become a key component in their manufacturing strategies (Dyer and Ouchi, 1993). Companies in all sectors are examining ways to reduce costs, shorten product development times and manage risks. The transactions between companies in supply chains are characterized by adding value up through the chain and incurring costs (and consequent payments) down the chain. Supply chain management aims to reduce costs, risks and leadtimes associated with these transactions, thus releasing value. There is limited research on supply chain management in the low-volume Engineer to Order (ETO) sector. This is in stark contrast to the extensive literature on high-volume sectors, * Corresponding author. Tel.: þ 1-217-206-7927; fax: þ1-217-206-7543. E-mail address: firstname.lastname@example.org (A. Gunasekaran). 0166-4972/$ - see front matter q 2003 Elsevier Ltd. All rights reserved. doi:10.1016/j.technovation.2003.09.010
particularly the automotive sector (Hicks et al., 2000). Performance measurement is critical to the success of any “for-proﬁt” organization because it creates understanding, molds behavior, and improves competitiveness. World-class ﬁrms recognize the central role measurement plays in their success and are often compulsive about their performance measurement efforts (Fawcett and Cooper, 1998). Manufacturers are looking to their suppliers, with increasing frequency, for modules and systems, not just components. This is particularly true in the automotive industry where the industry’s procurement and engineering activities provide lessons about selling modules and systems applicable to virtually any other manufacturing industry (Henke, 2000). Briers and Chua (2001) sought to illustrate how an organization’s accounting system could be changed by a...
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Dr. H. James Williams is Dean of the School of Business, at North Carolina Central University, located in Durham, North Carolina. He earned the following degrees: B.S. Degree in Accounting, at North Carolina Central University (1977); a M.B.A. Degree in Accounting at the University of Wisconsin (Madison) (1979); a Ph.D. Degree in Accounting, at the University of Georgia (Athens) (1982); and J.D. and LL.M. (Taxation) Degrees, at Georgetown University Law Center (1988 and 1990, respectively). Dean Williams is also a Certiﬁed Public Accountant and a Certiﬁed Management Accountant, with a wealth of practical experiences, having worked in the public accounting profession and in the legal profession (as a corporate and tax lawyer). Currently, in addition to his responsibilities as Dean, Dr. Williams is very active in the community, serving on a number of corporate and community boards.
Dr. Angappa Gunasekaran is a Professor of Business Administration in the College of Business and Management at the University of Illinois-Springﬁeld. Prior to joining the UIS, Dr. Gunasekaran was on the faculty of the Charlton College of Business, University of Massachusetts (Dartmouth) since 1998. He has held academic positions at Brunel University (UK), Monash University (Australia), the University of Vassa (Finland), the University of Madras (India), and the University of Toronto, Laval University, and Concordia University (Canada). Dr. Gunasekaran has a PhD in Industrial Engineering and Operations Research from the Indian Institute of Technology (Bombay). He has over 150 articles published in 40 different peer-reviewed journals. He has presented and published about 50 papers in conferences and given a number of invited talks in more than 20 countries. Dr. Gunasekaran is on the Editorial Board of 20 refereed journals. He is involved with several national and international collaborative projects that are funded by private and government agencies. Dr. Gunasekaran has organized several international conferences in the emerging areas of operations management and information systems. He has edited books that include, “Agile Manufacturing: The 21st Century Competitive Strategy” and “Knowledge and Information Technology Management: Human and Social Perspectives”. Dr. Gunasekaran is the Editor of Benchmarking: An International Journal, Associate Editor of the Integrated Manufacturing Systems: The international Journal of Manufacturing Technology Management and the Regional Editor of the Supply Chain Management: An International Journal. Dr. Gunasekaran has received Thomas J. Higginson Award for Excellence in Teaching within the Charlton College of Business. He has edited several special issues for well known journals. Dr. Gunasekaran is currently interested in researching benchmarking, e-commerce, performance measures, logistics and supply chain management. He has been serving on over 25 committees at the department, college and university level committees that include the university curriculum committee, general education committee, and faculty evaluation committee. Recently, Dr. Gunasekaran has received an outstanding paper award from Managerial Auditing Journal for the year 2002.
Dr. Ronald E. McCaughey (Ph.D., Auburn University) is an Associate Professor of Information Systems at the University of Central Arkansas. His research appears in the Journal of Systems Management, Information and Management, International Journal of Production Economics, International Journal of Computer Integrated Manufacturing, the Journal of Information Technology Management and in other journals and conference proceedings. He is the Internet Editor for the Benchmarking: an International Journal and serves on the editorial board of other journals. He has practical experience in industry. His current research interests include manufacturing strategy, Benchmarking, E-Commerce, and the use of computers by the elderly.
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