Theory of Constraints Handbook - James Cox Iii [239]
Basic measures and processes of ongoing improvement that focus attention on indentifying local actions resulting in organizational improvement are presented. Elements essential for other measures encountered in production operations, projects, and services such as buffer management, quality measures, service response times, and the like are presented along with hands-on solutions for structuring and implementing them. Traditional measures create actions in one function or department that cause conflict with other functions or departments. Cross-organization conflicts that can be created by measures and the resolution of these conflicts are also discussed.
The last two chapters chapters describe the Process of Ongoing Improvement (POOGI) and the requisite auditing function and provide two detailed holistic case studies. Achieving POOGI in any organization not only requires a reliable focusing mechanism (to identify where and what to change and when and what not to change), but also a holistic decision support mechanism (to judge the system-wide or global impact of changes). Then, a fast and reliable feedback mechanism is needed for auditing progress/compliance or for identifying other important system performance gaps or variations.
CHAPTER 13
Traditional Measures in Finance and Accounting, Problems, Literature Review, and TOC Measures
Charlene Spoede Budd
Introduction
This chapter is a basic introduction to Throughput Accounting (TA). To provide historical perspective, the chapter provides a brief review of both the business environment and the development of cost accounting methodologies.
Accounting personnel usually are among the last people to be educated in Theory of Constraints (TOC) concepts. We are constantly amazed at the reported successful TOC implementations that have not educated accounting and finance people at all. Yet operations people expect that they can overcome resistance to their improvement plans. One very successful TOC implementation champion, strongly supported by the CEO, lamented that he could not understand why the accounting department had hired additional personnel to track the cost of each individual operation when he had established a seamless flow line. The accountants were doing what they had been taught to do. Without an understanding of TOC concepts, when they had sufficient information, they would begin questioning the cost of certain operations, reporting local efficiencies, and providing other misleading information such as unit costs.
I hope that this chapter will develop an appreciation of accounting and finance personnel—what they can do for you and what they can do against you—and provide a strong argument for educating accounting and finance personnel along with those in operations. TOC initiatives need collaborative partners rather than colleagues who constantly construct a maze of barriers. For accountants who have a suspicion that traditional accounting methodologies produce internal data containing weaknesses for decision makers, this chapter will point out where the weaknesses exist. To accomplish this ambitious goal, the chapter will:
Copyright © 2010 by Charlene Spoede Budd.
Briefly describe the history of traditional cost accounting and explain why it no longer provides the information needed to support the improvement initiatives made possible by TOC.
Survey, classify, and describe the limitations of the profession’s various accepted (published) solutions to replace traditional internal measurement systems.
Discuss the breadth of TA and its impact on