Saturday, October 13, 2012

Financial Industrial Engineering - Scope

IE is strategic. That is why even today Taylor is part of all management text books. But the contribution of IEs after Taylor era is not significant.

Cost is strategic. Cost provides you the competitive advantage. Porter clearly stated it.
But what is the contribution of IEs to this strategic dimension? You can't find any from the published material. Either IEs are not contributing much or they are not making it visible.

IEs have a role in New product/service design. Target costing brought this role into much more focus. Once again I do not see any IE contributions in published material in this initiative. IEs are not contributing significantly in their core strategic area of importance to the organization. Bottom line improvement given a budgeted top line is extremely important strategic function every period and if IEs contribute to it by providing well laid out plans understood by managers, they will be appreciated, recognized and will be given board positions. IEs have to contribute significantly to the management of the Total cost of the enterprise and this may be called Total cost industrial engineering. You may make it a component of the Financial industrial engineering. Engineering economic appraisal can also become part of the financial industrial engineering. Engineering economic appraisal is techno-economic evaluation of the engineering proposals from the industrial engineering point of view - that is efficiency point of view.

It is the contribution of IE department to the bottom line in every period and in every project and in every new product and service that gives brand value to the profession. Financial Industrial Engineering has to be the contribution of IE function expressed in financial terms and the subject must have the tools to make IEs understand the scope for their activities, and to state the results of their activities in financial terms.

There is separately Financial System Industrial Engineering, which is application of IE tools and expertise to the financial and accounting system of the organization.

My comment in Linkedin Group of IIE

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