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Lee, J. Y. and J. K. Winch. 1998. From push to pull: Management's control system modification for manufacturing change. Advances in Management Accounting (6): 75-92.

Summary by Chris Hourigan
Master of Accountancy Program
University of South Florida, Summer 2002

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This paper addresses the common problem with many U.S. companies that want to change from their traditional push system of manufacturing to a more efficient Just-In-Time (JIT) pull system. The main problem with this change is having an internal control system in place that facilitates JIT. Most authors that have come before, described solutions for a narrow set of outcomes or tried in vain to control every aspect of the manufacturing process. Lee and Winch point out that "true optimization of an overall internal control system is an impossible task, due to the complexity and uncertainty of the business environment in which the system functions," but designing a system that can change with the will of the managers and the environment is the goal. The authors think that their system, in which they apply, "the value engineering methodology of target cost management to management’s modification of control system for manufacturing change from a push system to a pull system," shows good promise.

The authors build upon a previous study in which Value Engineering recommendations meet the cost and value targets of management, engineers, and consumers. Since Value Engineering has proven itself to be very versatile, the goal was to implement this prior to the conversion to a JIT system. This would eliminate the problems caused by existing methodology for internal control. Existing methodology had three problems associated with it. First, the system is too rigid; it cannot support change. It tries to minimize the cost of an internal control system subject to minimum error reduction goals. This addresses only one aspect of an internal control system. If the manufacturing process were changed to favor a different goal, such as a financial goal, the system would break down. Second, there is no structure in place to substitute operations objective-oriented functions with financial objective-oriented functions of internal control. Third, is continuous improvement (kaizen). The nature of the design precludes the optimization of this concept.

Value engineering is very different from traditional approaches in that value engineering encourages continuous improvement, which is designed to reduce costs. "The basic concept behind value engineering is that products and services have functions to perform and the values of the products and services are measured by the ratio of the functions to their costs." This means, that we can tell before hand whether or not to produce a product or an improvement of a product. This step in itself reduces costs.

What the authors have done is to produce a user-friendly design of implementing value engineering into an internal control system in order to facilitate a JIT manufacturing process. Unlike most models, which are rigid, their model can be adjusted at various stages with different levels of input and still be fully functional. Their model is just at the beginning and therefore will need actual business input with actual working practice to see if it is possible on a large scale, but as the authors state, " it gives promise."

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