Sunday, April 30, 2017

April - Industrial Engineering Knowledge Revision Plan





April 1st Week (1 to 5 April)

Production/Manufacturing/Operations Management continued

Material Requirements Planning - Review Notes

Operations Scheduling - Review Notes


Financial Analysis - Review Notes

Operations Technology - Review Notes

Supply Chain Management



Understanding the Supply Chain
Supply Chain Performance: Achieving Strategic Fit

Supply Chain Drivers and Obstacles - Review Notes
Designing the Distribution Network in a Supply Chain


Facility Decisions: Network Design in the Supply Chain
Network Design in an Uncertain Environment

2nd Week

Demand Forecasting in a Supply Chain
Aggregate Planning in the Supply Chain - Review Notes

Planning Supply and Demand in the Supply Chain
Managing Economies of Scale in the Supply Chain

Managing Uncertainty in the Supply Chain: Safety Inventory
Determining Optimal Level of Product Availability

Sourcing Decisions in a Supply Chain
Transportation in the Supply Chain - Chopra and Meindl

Pricing and Revenue Management in the Supply Chain
Coordination in the Supply Chain - Review Notes

3rd Week

Information Technology and the Supply Chain
e-business and the Supply Chain


Financial Accounting

Accounting: The Language of Business
Measuring Income to Assess Performance - Review Notes

Recording Transactions - Review Notes
Accrual Accounting and Financial Statements - Revision

Statement of Cash Flows - Review Notes
Accounting for Sales - Review Notes

Inventories and Cost of Goods Sold - Review Notes
Long-Lived Assets and Depreciation - Review Notes

4th Week
Liabilities and Interest - Review Notes
Intercorporate Investments and Consolidations - Revision Notes

Financial Statement Analysis - Review Notes
Cost Measurement - Essential Activity of Industrial Engineering

Introduction to Cost Terms - Review Notes
Traditional Cost Objectives and Their Utility

Job Costing - Review Notes
Cost Allocation: Joint Products and By Products

Activity-Based Costing and Activity-Based Budgeting
Process Costing - Review Notes


One Year Industrial Engineering Knowledge Revision Plan

January - February - March - April - May - June

July - August - September - October - November - December



Updated 13 April 2017, 25 March 2016


Industrial engineering Principles, Methods Tools and Techniques

An explanation says principles are scientific theories or cause and effect relationships. They are of permanent nature until revised due to empirical studies and identification of new facts.

Methods are general approaches that use the scientific principle or principles for beneficial use. They are also of permanent nature.

Tools are contemporaneous ways of implementing methods.

Basic Principles of Industrial Engineering


Modified Principles of Scientific Management and Industrial Engineering


1. Develop science for each element of a man - machine system's work related to efficiency and productivity.
2. Engineer methods, processes and operations to use the laws related to the work of machines, man, materials and other resources.
3. Select or assign workmen based on predefined aptitudes for various types of man - machine work.
4. Train workmen, supervisors, and engineers in the new methods.
5. Incorporate suggestions of operators, supervisors and engineers in the methods redesign on a continuous basis.
6. Plan and manage productivity at system level.
(The above subsection - modified principles is added on 4 June 2016. Principles developed by Narayana Rao based on principles of scientific management by F.W. Taylor)

Principles of Industrial Engineering - Narayana Rao

The full paper by Prof. K.V.S.S. Narayana Rao is now available for downloading from IISE 2017 Annual Conference site in prepublished format. Presentation is also available now.

https://www.xcdsystem.com/iise/program/A20a5CK/index.cfm?pgid=863&speakerid=287052


Principles of Industrial Engineering related to various methods of industrial engineering are being assembled in these two articles

Principles of Human Effort Engineering

Principles of System Efficiency Engineering
______________________________________________________________________

 

Presently the following are given as techniques of industrial engineering (Industrial Engineering). There is a need to convert these things into principles, methods and tools framework

 

 

Methods and Techniques of Industrial Engineering


Human Effort Engineering - Techniques

4. Application of Ergonomics and Biomechanics
5. Fatigue Studies
6. Productivity/Safety/Comfort Device Design
7. Standardization of Operator Methods
8. Operator training
9. Incentive Systems
10. Job Evaluation
11. Learning effect capture
12.  Work Measurement - Time Study, PMTS

Efficiency Improvement Techniques of Industrial engineering 

    Method Study
5. Statistical quality control , Statistical Process Control, Process Improvement using Statistical data
6. Statistical inventory control and ABC Classification Based Inventory Sytems
7. Six sigma
9. Variety reduction
10. Standardization
12. Activity based management
15. Learning effect capture and continuous improvement (Kaizen, Quality circles and suggestion schemes)
16. Standard costing and Kaizen Costing
17. 5S
______________________________________________________________________

Principle of Fair Day's Work


Developing an estimate of  fair day's work makes planning, directing and control of the work of a person systematic.

Method
Work Measurement: Various tasks are to be measured for the time taken to complete them by an average skilled or trained worker.

Tool
Stop watch time study, MTM, Standard data methods


Principles of Motion Economy

List of Principles of Motion Economy

Method
Motion analysis

Tools
Videotaping of work




Principles of Industrial Engineering




Taylor's Principles of Scientific Management


First. The development of a true science (of work or operation or task).
Second. The scientific selection of the workman.
Third. His scientific education and development.
Fourth. Intimate friendly cooperation between the management and the men.

Harrington Emerson's Principles of Efficiency


1. Clearly defined ideals.
2. Common sense
3. Competent counsel
4. Discipline
5. The fair deal
6. Reliable, immediate and adequate records
7. Despatching
8. Standards and schedules
9. Standardized conditions
10. Standardized operations
11. Written standard-practice instructions
12. Efficiency-reward


Gilbreth's Principles of Motion Economy


        Principles of Motion Economy - Some More Details
        Principles of Motion Economy - YouTube Videos

Principle: There should be a definite and fixed place for all tools and materials
Principle:  Layout must facilitate efficiency

Method: 5S

Tools: 5S audit


Principle: The hands should be relieved of all work that can be done more advantageously by a jig, a fixture, or a foot-operated device.
Method: Jig and Fixture design


ECRS Method


        Eliminate, Combine, Rearrange, Simplify - ECRS Method - Barnes

Miles' Principles of Value Engineering


Avoid generalities
Get all available costs
Use information from the best source
Blast create and refine
Use real creativity
Identify and overcome roadblocks
Use industry experts to extend specialized knowledge
Get a dollar sign on key tolerances
Utilize vendors’ available functional products
Utilize and pay for vendors’ skills and knowledge
Utilize specialty processes
Utilize applicable standards
Use the criterion, “would I spend my money this way?”

Principles of Ergonomics


1. Work in neutral postures
2. Reduce excessive forces
3. Keep everything in easy reach
4. Work at proper heights
5. Reduce excessive motions
6. Minimize fatigue and static load
7. Minimize pressure points
8. Provide clearance
9. Move exercise and stretch
10. Maintain a comfortable environment

     Good explanation with illustrations is available in  
     http://www.danmacleod.com/ErgoForYou/10_principles_of_ergonomics.htm

Principle of Difference in Productivity
    In group of workers, there can be a difference of 100% between the least productive worker and the most productive worker.

Principles relating Wage differentials (incentives - efficiency reward)  and Motivation
    The productive workers have to be recognized and compensated through higher wages in the form of incentives for the extra production. Otherwise, they lose the motivation and produce only an amount equal to low productive workers.

Principles of Engineering Economics
    Every investment or expenditure proposal of an industrial engineer must contribute to profits or return on the investment or expenditure exceeding the cost of capital.

Principles of System Optimization
     There are mathematical methods that help industrial engineers to set system parameters that result in minimum costs or maximum profits with the given data (cost and return figures and alternative values for variables)

Principles Statistics
      The mass of data can be understood by converting it into probability distribution. Important conclusions can be made from the data by converting it into bar diagram, histogram and other graphical aids.

Principles of Mathematical Modeling
       System parameter design problems can be solved by first converting the system description into mathematical expressions and equations.


Principle of Cooperation

It should be stated here emphatically that there is nothing that can permanently bring about results from scientific management, and the economies that it is possible to effect by it, unless the organisation is supported by the hearty co-operation of the men. Without this there is no scientific management. - Gilbreth in Applied Motion Study, Book. Page No. 29-30


An Interesting Book published in 1921
What industrial engineering includes; for industrial executives; 101 things to do, 1001 results others secured
Author: Knoeppel, C.E., & co. (New York). Full book can be downloaded from Archive.Org




The Purpose, Philosophy, Principles and Methods of Industrial Engineering - Video Presentation by Prof. Narayana Rao K.V.S.S.

_________________


_________________



Related Article

Basic Concepts, Principles and Methods of Industrial Engineering

Original Knol - http://knol.google.com/k/narayana-rao/industrial-engineering-principles/ 2utb2lsm2k7a/ 2056


Updated 15 June 2016

One Year Industrial Engineering Knowledge Revision Plan






One Year Industrial Engineering Knowledge Revision Plan


January - February - March - April - May - June

July - August - September - October - November - December




Industrial engineering is staff service to managers. Industrial engineering is part of management activity. Managers have knowledge of industrial engineering and they know the potential of industrial engineering. Industrial engineers, industrial engineering profession and industrial engineering academic institutions and departments have to inform managers on a continuous basis the developments in industrial engineering and the increased potential of due to development of new methods, new techniques and tools.  Industrial engineers also have to know various management subjects so that they know their role in the management of the department for which they are given the responsibility for improving efficiency and productivity. In the initial months, management subjects are specified and then later the techniques of industrial engineering.

January


Principles of Management

February

Principles of Management

Marketing Management

March

Marketing Management

Operations Management

April

Operations Management

Supply Chain Management

Financial Accounting

Cost Accounting

May


Management Accounting

Organizational Behavior

June


Industrial Engineering - Introduction to  Basic Principles and Techniques

Engineering Economics

July

Scientific Management of Taylor  (17 articles)

12 Principles of Efficiency by Harrington Emerson

Value Engineering

August


Operation Analysis - Method Study - Methods Efficiency Engineering

September


Mathematics and Optimization

Application of Statistics for Cost Reduction and Productivity Improvement



October


Human Effort Engineering

Principles of Motion Economy - Motion Study

Ergonomics

Job Evaluation and Wage Incentives

Work Measurement 



November


Productivity Measurement

Work Measurement 

Cost Measurement

Productivity Management and Improvement


December


High Efficiency/Productivity Industrial Engineering - Minimum Inventory Systems
Comprehensive Applications Industrial Engineering - Recent Applications of Industrial Engineering - Recent Technology Developments


Updated  11 September 2016,  16 February  2016





Saturday, April 15, 2017

April - Industrial Engineering Knowledge Revision Plan with links







April 1st Week (1 to 5 April)

Production/Manufacturing/Operations Management continued

Material Requirements Planning - Review Notes

Operations Scheduling - Review Notes


Financial Analysis - Review Notes

Operations Technology - Review Notes

Supply Chain Management



Understanding the Supply Chain
Supply Chain Performance: Achieving Strategic Fit

Supply Chain Drivers and Obstacles - Review Notes
Designing the Distribution Network in a Supply Chain


Facility Decisions: Network Design in the Supply Chain
Network Design in an Uncertain Environment

2nd Week

Demand Forecasting in a Supply Chain
Aggregate Planning in the Supply Chain - Review Notes

Planning Supply and Demand in the Supply Chain
Managing Economies of Scale in the Supply Chain

Managing Uncertainty in the Supply Chain: Safety Inventory
Determining Optimal Level of Product Availability

Sourcing Decisions in a Supply Chain
Transportation in the Supply Chain - Chopra and Meindl

Pricing and Revenue Management in the Supply Chain
Coordination in the Supply Chain - Review Notes

3rd Week

Information Technology and the Supply Chain
e-business and the Supply Chain


Financial Accounting (Revision starts from 16 April)

Accounting: The Language of Business
http://nraomtr.blogspot.com/2011/12/accounting-language-of-business-review.html
Recording Transactions - Review Notes
http://nraomtr.blogspot.com/2011/12/recording-transactions-review-notes.html

Accrual Accounting and Financial Statements - Revision
http://nraomtr.blogspot.com/2011/12/accrual-accounting-and-financial_08.html
Measuring Income to Assess Performance - Review Notes
http://nraomtr.blogspot.com/2011/12/measuring-income-to-assess-performance.html





Statement of Cash Flows - Review Notes
Accounting for Sales - Review Notes

Inventories and Cost of Goods Sold - Review Notes
Long-Lived Assets and Depreciation - Review Notes

4th Week
Liabilities and Interest - Review Notes
Intercorporate Investments and Consolidations - Revision Notes

Financial Statement Analysis - Review Notes
Cost Measurement - Essential Activity of Industrial Engineering

Introduction to Cost Terms - Review Notes
Traditional Cost Objectives and Their Utility

Job Costing - Review Notes
Cost Allocation: Joint Products and By Products

Activity-Based Costing and Activity-Based Budgeting
Process Costing - Review Notes


One Year Industrial Engineering Knowledge Revision Plan

January - February - March - April - May - June

July - August - September - October - November - December



Updated 13 April 2017, 25 March 2016



Friday, April 14, 2017

Industrial Engineering and Ergonomics by Christopher M. Schlick - Book Information

Visions, Concepts, Methods and Tools: Festschrift in Honor of Professor Holger Luczak

Springer 2009
710 Pages

http://books.google.com/books?id=IV0Vw4nNAAoC


Table of Contents


Editorial xi

Contributors xliii

Part 1 Sectors, Value Networks and Communities


1 Innovation Through New Technologies Hans-Jorg Bullinger Joachim Warschat 3

2 Production Technology in High-Wage Countries - From Ideas of Today to Products of Tomorrow Fritz Klocke 13

3 Innovation Champions - Or How to Achieve (Global) Competitiveness,  Klaus Henning Andrea Huson 31

4 The Convergence Theory and the Good ICT Society - Trends and Visions, Gunilla Bradley 43

5 Community Ergonomics and Globalization: A Conceptual Model of Social Awareness, Michael J. Smith Antoinette Derjani-Bayeh (Deceased) Pascale Carayon 57

6 "Car Mechatronic" - An Open Approach for Designing a New European Core Occupational Profile, Georg Spöttl 67

Part 2 Enterprises and Companies


7 Performance Measurement from an Macroergonomics Perspective, Klaus J. link Sven Seibert 91

8 Technology Management, Dieter Spath Karl-Christof Renz Sven Seidenstricker 105

9 Success with Customer Inspiring Products - Monitoring, Assessment and Design of Perceived Product Quality, Robert Schmitt Tilo Pfeifer 117

10 Pattern Languages to Create a Holistic Methodology for Product Development and to Derive Enterprise-Specific Engineering Guidelines Jörg Feldhnsen Frederik Bungert 131

11 Reference Models - A Basis for Designing Efficient Technical Services Günther Schah Volker Stick Gerhard Gudergan 143

12 Service Modelling and Engineering in the Telematics Industry - The View from the Perspective of a Toll Service Provider Johannes Springer Karl-GerhardFreyer 151

13 MedicoErgonomics - A Human Factors Engineering Approach for the Healthcare Sector Wolfgang Friesdorf Ingo Marsolek 165

14 The Impact ofErgonomics Ernst A.P. Koningsveld 177

15 Effect Chains - A Method for Analysing Qualitative Effects in Occupational Health and Safety at Work Martin Schmauder Hanka Hoffmann 197

16 Multi-Perspective IT Evaluation Tool for Shift Schedules Peter Knauth Patric C. Gauderer Kathrin Elmerich Dorothee Karl 211

17 Organizational Change and Occupational Health - Towards a Resource-Based Change Management Karlheinz Sonntag Alexandra Michel 221

18 Designing Organizational Oblivion Sebastiano Bagnara Roberto Montanari Simone Pozzi 233

Part 3 Cooperation in Work Groups

19 Goal Setting: Basic Findings and New Developments at the Team Level Jürgen Wegge Klaus-Helmut Schmidt Julia Hoch 245

20 Simulation of Collaborative Product Development Processes Using Agent-Based Modeling Xiaodong Zhang Yu Yang 255

21 Integrated Modeling of Work Processes and Decisions in Chemical Engineering Design Wolfgang Marquardt Manfred Thei?en 265

22 Serious Gaming: The Impact of Pervasive Gaming in Business and Engineering Matthias Jarke Markns Klann Wolfgang Prinz 281

Part 4 Holistic Activities and Work Forms


23 Use of Design Equations for Analyzing User Requirements in Process Control Martin G. Helander Shuan Lo 295

24 Action Regulation Theory: Are the Characteristics of Well Designed Tasks Valid for Interactive Jobs as Well? - The Concept of Two-dimensional Task Identity in Interactive Work Winfried Hacker Marlen Melzer 311

25 Evaluation of the Quality of Job Design with the Action-Oriented Software Tool REBA- Recent Developments and Applications Peter Richter Uwe Debitz Andreas Pohlandt 321

26 How Can Creativity Be Promoted Within the Framework of Vocational Training and Further Education? Uwe Andreas Michelsen 335

Part 5 Workplaces


27 Complexity in Ergonomics Matthias Göbel 347

28 Principles, Methods arid Examples of Ergonomics Research and Work Design Helmut Strasser 363

29 Modular Concepts of Integrating Ergonomics into Production Processes Ralph Bruder Holger Rademacher Karlheinz Schaub Christophe Geiss 383

30 Methods for Measuring Mental Stress and Strain Martin Schütte 395

31 Ergonomics and Human Factors: Methodological Considerations About Evidence Based Design of Work Systems Kamiel Vanwonterghem 413

32 Comparison of Ergonomic Risk Assessment Methodology with an Example of a Repetitive Sawmill Board Edger Occupation Shrawan Kumar Troy Jones 427

33 Work Science and Aviation Safety Heinz Bartsch 441

34 Development of Theory and Practice in Ergonomics Vladimir M. Munipov 455

35 Accessibility in Infonnation Technology Ahmet E. Cakir 469

36 Ergonomics and Design Heiner Bubb Birgit Spanner-Ulmer 481

37 Design of Visual and Auditory Human-Machine Interfaces with User Participation and Knowledge Support Gunnar Johannsen 499

38 Human-Computer Interaction in Aerial Surveillance Tasks Ludger Schmidt Daniel Ley 511

39 Implicit Interaction in Multimodal Human-Machine Systems Matthias Rotting Thorsten Zander Sandra Tröosterer Jeronimo Dzaaclt 523

Part 6 Sensorimotor Control of Tools

40 Design and Evaluation of an Augmented Vision System for Self-Optimizing Assembly Cells Christopher M. Schlick Barbara Odenthal Marcel Ph. Mayer Jan A. Neuhöfer Morten Grandt Bernhard Kausch Susanne Mütze-Niewöhner 539

41 Visual Ergonomic Issues of LCD Displays - An Insight into Working Conditions and User Characteristics Martina Ziefle 561

42 Forty Years of Research on System Response Times - What Did We Learn from It? Wolfram Boucsein 575

43 Productivity Improvement with Snap-Fit Systems, Kurt Landau Uwe Landau Homed Salmanzadeh 595

44 Developing Seating Designs that Support Traditional Japanese Sitting Postures Kageyu Noro 609

45 Finger Fatigue: Blockings and Approximate Kinematic Invariances, Herbert Never 621

Part 7 Autonomous Organismic Systems


46 Neurobehavioral Tests as Evaluation of Neurotoxically Induced Impairments of Health Andreas Seeber 633

Supervised Theses 643

Publications of Professor Doktor-Ingenieur Holger Luczak 649

Index 691
Original knol - http://knol.google.com/k/narayana-rao/industrial-engineering-and-ergonomics/2utb2lsm2k7a/ 3194


I came across the google book again today (17 April 2017). The topics are interesting and I want to read some papers.

Updated 17 April 2017, 14 April 2012

Thursday, April 13, 2017

Cost Measurement - Essential Activity of Industrial Engineering




Cost Measurement and Analysis-A Necessary Part of Industrial Engineering Education & Training

Balbinder S. Deo and Doug Strong
Balbinder S. Deo, Assistant Professor, Department of Finance & Management Science,
College of Commerce, University of Saskatchewan, 25 Campus Drive, Saskatoon, SK,
Canada S7N 5A7.
Doug Strong, Professor in the Department of Industrial Engineering, University of Manitoba,
Winnipeg, Manitoba, Canada R3T 5V6.

Some Important Points made in the paper.


One of the basic duties of Industrial Engineering professionals is to make improvements in operations, and systems of operations, to reduce the cost of operations.

Two assumptions play a major role in promoting the use of physical measures of productivity.


1. There exists an inverse relationship between physical measures of productivity and cost.
2. Increasing the physical productivity of resources used in production operations can reduce the cost of production of a manufactured product or service.

These relationships may hold true provided reduction in the physical quantity of one resource in one operation does not increase the consumption of other resources in the same operation and / or in other operations of the production system. Gain in the physical productivity of one resource may cause loss in others. For example, increase in the productivity of labor by employing high production capacity machines may cause loss in the productivity of machinery employed
or vice versa. In a similar fashion, within a production system, gain in physical productivity measure of one functional area may cause loss in productivity of other related functional areas.

Improvement in productivity at the firm level, not just at the functional level, can be helpful in reducing the cost of production.


Cost Measurement in Engineering Profession - An Historical Perspective

Increasing sales and reducing cost of production by productive use of resources in operations can achieve increase in profit. The use of cost as a measure of productivity is not new among engineering professionals. Literature describing the history of engineering provides significant evidence of its use and promotion among engineers by the pioneers of the profession.

Henry C. Metcalf (1885), as a superintendent of ordnance depots,  realized the importance of cost measurement and analysis in manufacturing.   He proposed to measure costs to the minutest detail possible within the organization to measure the efficiency of manufacturing and administration operations and also to create plan of cost of operations by knowing the detailed elements of cost involved for each operation performed on a product during manufacturing process. He published his thoughts in a book titled “The Cost of Manufactures and the administration of Workshops, Public and Private” in 1885, for providing guidance to other engineering professionals in the field.


Henry Towne (1886), another engineering professional, wrote a paper titled ‘Engineer as an Economist’ for one of the meetings of The American Society of Mechanical Engineers. According to him, determination of cost was one of the important duties of an engineer. To achieve this end he proposed the establishment of a separate shop accounting section at each workshop level to collect cost related information to meet the cost information needs of engineering professionals.

Hugo Diemer (1910), is the first faculty member  of Industrial Engineering subject at Pennsylvania State College, quoted F.W. Taylor's  appeal to engineering professionals to take up the responsibility of cost related data collection and analysis as part of profession.

Charles Buxton Going  published a book titled, "Principles of Industrial Engineering" in 1911.
He called industrial engineering, “New branch of engineering grown out of the rise of, and enormous expansion of the manufacturing system.” This branch of engineering, according to him, “Has drawn upon mechanical engineering, economics, sociology, psychology, philosophy and
accountancy to form a distinct body of science of its own”. In this definition of industrial engineering, inclusion of the subjects of economics and accountancy testify to the fact that the cost measurement and analysis was regarded as part of industrial engineering theory and practice at that time.

Howell, in his presentation at the 1995 International Industrial Engineering Conference, advised industrial engineers to reclaim their traditional industrial engineering responsibilities, such as, measurements of labor costs, manufacturing methods, and productivity improvement, along with other responsibilities so that their demand in industry, job title and functional identity remains intact. According to him, cost estimation should be one of the areas for which an industrial engineer should also be responsible and accountable.

Recent Developments

Recent studies by Barnes (1991), Dhavale (1992), and Eaglesham (1998), found in the Industrial Engineering literature on Activity Based Costing technique, broadly point out that some industrial engineers take interest in cost measurement.

Lenz and Neitzel (1995)  developed their own methodology to develop a cost simulation model. In this model, they have used a cost equation that consists of eight components, such as station cost; labor cost; overhead cost; inventory cost; automation cost; capacity cost; material cost; and
indirect cost. In this type of modeling, they claimed, all performance measures can be translated into costs by applying cost equations to the results of factory model.

Deo (2001)14 developed an Operation Based Costing model to measure cost of each resource in each operation, and the cost of each operation in a production system. In this model, an operation is considered as the basic unit of production system. The structure of the model matches the typical structure of an operation.

It is observed by the authors  that cost measurement and analysis is slowly becoming one of the basic requirements for various job openings related to industrial and manufacturing engineering area.  Education and training of industrial engineers in cost measurement and analysis, can give them an extra advantage in raising productivity and reducing cost in industrial organizations. Industral engineering schools and departments need to introduce the subject as a necessary part of industrial engineering education and training for future generation of industrial engineers.

Role of Costing and Cost Accounting in the Organization


Cost accounting is a separate accounting discipline and in many countries, statutory cost accounting bodies exist that regulate this field. Industrial engineers have to work in close cooperation with this discipline to make sure that costs are measured with a view to providing appropriate cost information to industrial engineering department and to the company regarding unit costs of components and finished products made by the company. The output of the industrial engineering department has to be captured by the cost figures reported by the cost accounting department.


Purposes of Accounting Systems

Accounting is a major means of helping managers of an organization, equity investors of an organization, potential equity investors, creditors and bond holders of an organization, potential creditors and bond holders of an organization, suppliers and customers of an organization and other stake holders to take decisions.

Accounting provides information for three major purposes:

1. External reporting: These reports are used investors, creditors, government authorities, and other outside parties.

2. Routine internal reporting: These reports which are periodically generated are used by managers of the company for their internal decisions.

3. Nonroutine internal reporting: This information or reports are generated to support projects and other decisions that come up as the need arises from them.
While the reports are prepared in different formats and basic data is manipulated or summarized in various ways to facilitate decision making, there is one data base maintained by the accounting system that contains data in the form debits and credits to various accounts maintained in the accounting system. Accountants combine these data items in various ways to provide information to internal or external users.


Distinction Between Financial Accounting, Cost Accounting and Management Accounting

Horngren’s distinction between them is interesting.

Management accounting as a discipline focuses on accounting information that facilitates decision making by managers of the organization. If focuses on routine and nonroutine accounting reports.

Financial accounting measures and records business transactions and provides financial statements that are based on generally accepted accounting principles (GAAP). Executive compensation is tied to profit figures reported in the financial statements and equity share valuation is also based to a large extent on these financial statements.
Cost accounting provides information to facilitate both management accounting and financial accounting. Its focus is measuring and reporting financial and nonfinancial information that is related to the cost of acquiring or consuming resources by an organization.


Cost Management

Cost management is an activity of managers related to planning and control of costs. Managers have to take decisions regarding use of materials, processes, product designs and have to plan costs or expenses to support the operating plan for their department or section. All these activities come under cost management. Information from accounting systems help managers in cost management activities. But the cost accounting system and the reports it generates is not the cost management system. Accounting system can be interpreted as a part of cost management system of an organization.

Cost management is not cost reduction alone. It is much broader. Organization increase advertising expenditure to increase sales, increase research and development expenditures to promote new products. Here the concerned managers are deliberately incurring additional costs in a period (compared to the previous period) as they expect profits from such decisions or expenditures. Cost management system has to ensure that a cost is incurred with the expectation of profit.

The Role of Management Accounting

The role of management accounting is also described as problem solving, score keeping and attention directing.

Problem solving: The role of accounting in problem solving is to provide information useful in evaluating alternatives.

Scorekeeping: Scorekeeping records the results of various actions of the managers and helps in assessing whether the results expected from the various actions are realized or not.

Attention directing: The scorekeeping function in combination with expected results, and comparative analysis of scores of various companies, divisions and departments, comparative analysis of present period scores or results with previous periods show opportunities of focusing attention of managers to improve things.

Value Chain
Value chain is a visualization of complete business as a sequence of activities in which usefulness is added to the products or services produced and sold by an organization. Management accountants provide decision support for managers in each activity of value chain.

Design of Management Accounting System

The design of management accounting system has to take into consideration the decision needs of the managers. Also it has to take into consideration the new themes and challenges that managers face currently.

Horngren identified four such themes in the tenth edition of his book.

1. Customer focus: The challenge for managers it invest sufficient resources to enhance customer satisfaction. But every action of the organization has to result enhanced profitability or maintained profitability for the organization.

2. Key Success Factors: These are nonfinancial factors which have an effect on the economic viability of the organization.

Cost, quality, time and innovation are important key success factors. Management accounting systems need to have provisions for tracking the performance of the organization and its divisions as well as competitors on these success factors.

3. Continuous improvement: Continuous improvement or kaizen is a popular theme. Innovation related to this area in costing is kaizen costing .

4. Value Chain and Supply Chain Analysis: Value chain as a strategic framework for analysis of competitive advantage was promoted by Michael Porter. Management accountants have to become familiar with the framework and provide information to implement the framework by strategic planners.
The term supply chain describes the flow of goods, services and information from cradle (the mines sources of raw materials) to grave (where discarded products or dumped), regardless of whether those activities occur in the same organization or many organizations.

Key Guidelines for Management Accounting System Design

Cost Benefit Approach: In the system design resource allocation decisions are to be made. Examples would be software to buy and associates to employ. A cost-benefit approach should be used for all such decisions. Resources should be spent only when there is profit to the organization due to that expenditure. Each incremental addition to the accounting system must be supported by incremental profit to the organization.

Behavioral and Technical Considerations: Management has human dimension and it has to focus on how to help individuals to do their jobs better. Managing people involves discussion of managers with his associates on improving performance. The behavioral responses of people to reports highlighting their underperformance have to be understood. Management accounting should lead to cordial relations and climate.
Different Costs for Different Purposes: It is to be noted that there are several cost concepts and cost measures can be created for each of these concepts. Cost accountants have to careful to provide appropriate cost to the managers. The accounting system has to have some precautions to make sure that the accountant understands the decision situation of a manager and provides appropriate cost measures.

Professional Ethics

Like other professionals, accountants also face ethical dilemmas. They need ethical guidelines. Institute of Management Accountants (IMA), USA published guidance note on ethics to be followed by management accountants.

Competence, confidentiality, integrity and objectivity are important themes of the guidance note.

References

Horngren, Charles T., George Foster, and Srikant Datar, Cost Accounting: Managerial Emphasis, Tenth Edition, Prentice Hall, Inc., Upper Saddle River, New Jersey, USA, 2000

Cost Accounting - Horngren et al., Book Information and Review


Monday, April 10, 2017

Process Industrial Engineering - Article Index



Process Industrial Engineering - Process Efficiency Improvement


Process Industrial Engineering - Introduction

First Week

1. The Function of Methods Efficiency Engineering
2. Approach to Operation Analysis as a Step in Methods Efficiency Engineering

3. Scope and Limitations of Methods Efficiency Engineering
    Operation Analysis Sheet

    Using the Operation Analysis Sheet
    Analysis of Purpose of Operation

    Analysis of All Operations of a Process as a Step of Each Operation Analysis
    Analysis of Tolerances and Inspection Standards

    Analysis of Material in Operation Analysis
    Tool Related Operation Analysis


Second Week

    Material Handling Analysis in Operations
    Operation Analysis of Setups

    Operation Analysis - Man and Machine Activity Charts
    Operation Analysis - Plant Layout Analysis

    Operation Analysis - Analysis of Working Conditions and Method
    Operation Analysis - Common Possibilities for Operation Improvement

    Operation Analysis - Check List
    Method Study

   Principles of Methods Efficiency Engineering
   Method Study - Information Collection and Recording - Chapter Contents


Third Week

Process Analysis - Questions/Check List
Installing Proposed Methods

Eliminate, Combine, Rearrange, Simplify - ECRS Method - Barnes
Inspection Methods Efficiency Engineering

Systems Installation - Installing Proposed Methods
Plant Layout Analysis

Industrial Engineering of Flow Production Lines - Thought Before Taiichi Ohno and Shigeo Shingo
Manufacturing System Losses Idenfied in TPM Literature

Fourth Week

Industrial Engineering - Foundation of Toyota Production System
Toyota Production System Industrial Engineering - Shigeo Shingo

Introducing and Implementing the Toyota Production System - Shiego Shingo

















One Year Industrial Engineering Knowledge Revision Plan

January - February - March - April - May - June

July - August - September - October - November - December