Contemporary Issues And The

Impact Of Technology On
Management Accounting
(Topic 1)

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 Lecture Outline

• Identify the impact of technology on MA

• Describe the modern production system –
CIM/CAD, Cellular manufacturing, FMS
• Discuss the inventory management systems
• Discuss the concept of ABM, TQM & Value
Chain

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MA in a Changing Environment

Organization must adapt to

changing environments &
MA must adapt to changing
organization.

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 MA in a Changing Environment-
Changing Technology
• Technology has changed the way we live.
• Organizations have been similarly influenced by
changing technology & will be continually
influenced by breakthroughs in the future.
• Probably the biggest impact of technology on
organizations => the proliferation 扩散
/explosion/multiplying of products & services
related to information.
• To be successful, organizations must recognize the
advantages of greater access to information.

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MA in a Changing Environment-
Changing Technology

Traditional mass production

Advanced Manufacturing
Technology (AMT)

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MA in a Changing Environment-Changing
Technology
AMT:
• CAD, CAM, CIM, JIT inventory systems.
• CAD, CAM, CIM, JIT affect one another and
jointly increase organizational effectiveness.
Computer-Integrated Manufacturing (CIM)
- is the term used to describe an org that has all its systems
linked by computer.

Computer-Assisted Design (CAD)

-is the use of computers in product development, analysis & design
modification to improve the quality & performance of the product.

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Computer-aided manufacturing (CAM)

-is the use of computer-based software tools that

assist engineers and machinists in manufacturing
or prototyping product components.

-Its primary purpose is to create a faster

production process and components with more
precise dimensions and material consistency,
which in some cases, uses only the required
amount of raw material (thus minimizing waste),
while simultaneously reducing energy
consumption.
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 Flexible Manufacturing System (FMS)
• A particular type of CAM is the FMS.
• FMS – a computerized network of automated
equipment that produces one or more groups of
parts or variations of a product in a flexible
manner.
• Uses robots & computer-controlled material-
handlings systems to link several stand alone
numerically controlled machines in switching from
one production run to another.
• Is a manufacturing system in which there is some
amount of flexibility that allows the system to react
in the case of changes, whether predicted or
unpredicted.
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 Flexible Manufacturing System (FMS)
• Most FMS systems comprise of three main systems:
– The work machines which are often automated
CNC machines are connected by a material
handling system to optimize parts flow.
– the central control computer which controls
material movements
– machine flow
• The main advantages of an FMS is its high flexibility
in managing manufacturing resources like time and
effort in order to manufacture a new product.
• The best application of an FMS is found in the
production of small sets of products like those from
a mass production.
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 Notes:

• Computer Numerical Control (CNC) machines are automated milling devices

that make industrial components without direct human assistance. They
use coded instructions that are sent to an internal computer, which allows
factories to fabricate parts accurately and quickly. There are many different
types of CNC machines, ranging from drills to plasma cutters 从钻头到等离
子切割机 , so they can be used to make a wide variety of parts. Though
most are used industrially in manufacturing, there are also hobby versions
业余版本 of most of the machines that can be used in private homes.

• Types of Machines
• The most common CNC machines are milling machines, lathes, and grinders
铣床、车床和磨床 . Milling machines automatically cut materials, including
metal, using a cutting spindle, which can move to different positions and
depths as directed by the computer instructions. Lathes use automated
tools that spin to shape material. They're commonly used to make very
detailed cuts in symmetrical pieces, like cones and cylinders.

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Cellular Manufacturing (Work Cells)
- A model for workplace design.
- Lean manufacturing.
- Are small groups of related manufacturing
processes organized in clusters to assemble parts
of finished products, often in ‘U’ shape.
- Major characteristics are:
 Related manufacturing processes organized
in clusters
 Operations moved together
 All production activities from raw materials
stage to finished goods stage in the same
cell
 Visual control is easy
- Flexibility to produce a high variety of low
demand products and maintaining the high
productivity of large scale production.

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Benefits and Cost of Cellular Manufacturing

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 EXAMPLE
• A firm that assembles air-handling products faced high
inventories and unpredictable delivery.
• They originally assembled units on a traditional line.
• Long setups and logistics required long production runs.
• Often, they pulled products from finished goods and rebuilt
them for custom orders.

• We built twelve small (1-3 person) assembly workcells that

were always set up and ready.
• People worked in different cells each day and assembled to
customer order.
• Finished Goods Inventory dropped by 96%. Lead-time was 24
hours.
• Productivity improved by 20%-30%.
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 Robot
• More companies are using robots than
ever before.
• Robot – is a computer-programmed &
controlled machine that perform
repetitive activities.
• Benefits:
-Increased capacity
-Decreased time to manufacture a
part
-Reduced past-due orders.
• Cost saving – decreasing labor costs &
tooling costs.

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Enterprise Resource Planning System (ERP)
• ERP – packaged software programs:
– Automate & integrate the majority of their business
processes.
– Share common data & practices across the entire
enterprise.
– Produce & access info in a real-time environment.
• ERP’s key concept is a central depository for all
organization data so that they are accessible in real
time by & in an appropriate format for a decision
maker.

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Enterprise Resource Planning System (ERP)

• The benefits of ERP:

– Reduced overheads by elimination of duplication
– Improved customer service & better quality
– More timely management information

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 Modern Production System
• In sum, CIM, JIT, CAM,CAD give organizations the flexibility to
make a variety of products, as well as different models of the
same product, rapidly and cost-effectively.
• They break down the traditional barriers separating input,
conversion and output stages of production.
• In modern production system –
– input, conversion and output activities merge into one
another.
– decrease the need for costly inventory buffers to protect
conversion processes from disruptions.
– increase product reliability because they increase
automation and technical complexity.

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 CLOUD COMPUTING

A model for enabling ubiquitous convenient,

on-demand access to a shared pool of
computing resources (CIMA).

Can be anything from storage space, to

software, to full information systems
(hardware and software).

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 CLOUD COMPUTING
2 types of cloud:

1.Public cloud – sells services to anyone on

the internet. Eg Amazon, Google, Lazada

2.Private cloud – proprietary network or a

data center that supplies hosted services to
a limited number of people.

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 INDUSTRIAL REVOLUTION 4.0
(IR4.0)
- Industry 4.0 refers to a new phase in the Industrial Revolution that
focuses heavily on interconnectivity, automation, machine learning,
and real-time data.

- Started in Germany in 2011 as a strategic initiative to provide

advanced manufacturing solutions.

- Also known as the “Internet of Things” (IoT) or Smart Factory.

- IoT: Anything with an on-off switch that is connected to the

internet and/or other internet-enabled devices and create a social
network that enable machines to communicate with each other.
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 INDUSTRIAL REVOLUTION 4.0
(IR4.0)
Benefits of IR4.0:

-Building smart factories which are more efficient, productive and less
waste.

-Integration of ICT and automation technology allows business,

facilities and machines throughout the value chain to share data in real
time.

-Businesses can build more advanced and intelligent products,

produce more prototyping, experiment with new designs at lower cost,
improve communication within supply chain.
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 COMPONENTS OF IR4.0

- Big data and analytics

- Intelligent robotics
- Augmented reality
- Simulation
- Cyber-physical systems
- Cloud computing
- Additive manufacturing

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 IMPACT OF TECHNOLOGY ON
MANAGEMENT ACCOUNTING

1. Costing method – AMT results in drastic changes in

manufacturing process and cost structures. Traditional
manufacturing focuses more on direct labor, but in AMT,
direct labor is replaced with indirect labor. Costing method
may now be done in real-time basis, not based on
predetermined rates used in standard costing.

2. Performance measurement – Traditional PM systems (PMS)

are lack of relevance under AMT as it does not reflect and
inconsistent with strategic factors of quality and flexibility.

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 IMPACT OF TECHNOLOGY ON
MANAGEMENT ACCOUNTING
3. Role of management accountant – no more role of scorekeepers
and bean counters. But need to have the ability to:
a)Be aware of the impacts of technology on business processes.
b)Decision making, forecasting.
c)Knowledge in collecting, analyzing and reporting data and
information. Need to have multidisciplinary knowledge and cross-
functional focus.
d)Some accountants may become information system
administrators.

4. Inventory management – Methods of keeping inventory such as

FIFO, LIFO may become obsolete in JIT manufacturing.

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 CONCLUSION
Technology will not replace the accountants.
The core technical finance skills and ethics
remain critical, but accountants need to
combine the IT skills with creativity,
leadership, communication skills and
emotional intelligence.

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