University:
Duke University
Course:
ACCOUNTG 591 | Managerial Accounting
Academic year:

2023
Views:

258

Pages:

2
Author:

Bukan D

Expanding Quality Metrics Nonfinancial Measures of Performance One immediate step for improving performance would have management accountants producing information on a much more timely basis for operating managers. Many companies prepare departmental accounting reports only monthly, to correspond to the cycle used to prepare financial statements within the firm. But the cycle for preparing financial statements has little relevance for measuring and monitoring quality improvement work on a continual basis. Management accountants can help companies attempting to continually reduce defect rates by supplying timely— daily, hourly, or even batch by batch-measures of performance. We can think about developing quality measures in three areas of operation: vendor performance, plant manufacturing performance, and customer acceptance. Vendor Performance Many companies have recently developed supplier rating systems. They identify which vendors have been certified for direct, on-floor delivery without inspection - and which vendors require inspection for incoming items. Quality measures, both the frequency of defects and the percentage of dollars defective, are computed and tracked for each vendor. In addition to such incoming quality measures, the company would track on time performance and price trends. Plant Manufacturing Performance In-house manufacturing performance would be measured by part-per-million chine defect rates, percentage yields, scrap, rework, and asced-uled machine downtimes. First-pass yields, the percentage of items completed without requiring any rework, are a particularly important quality measure. Some U.S. managers were shocked to learn that Japanese competitors were achieving scores above 90% on this measure when less than 15% of their own items became finished goods without any rework performed on them. Many quality improvements result from suggestions contributed by employees, especially shop-level workers. Visitors to Japanese factories frequently see wall charts that graph the number of employee suggestions made each month. In some factories, the number of employee suggestions is the primary measure for evaluating the plant manager's performance. Quality refers to more than just the physical production process. It extends to operations in general so that measures on safety (number of days between accidents), housekeeping, and adherence to delivery schedules (percentage of delivery commitments met each period) also provide indicators on the quality of operating processes. Measures on design quality could include the number of parts in a product, the percentage of common versus unique parts in a new product, and the number of subassembly or bill-of-materials levels required. Reductions in the incidence of Engineering Change Orders (ECOs) to items currently in production provide a trend indicator of the quality of product and process designs. Several Japanese companies have fewer ECOs each year than comparable U.S. companies have each month.