Management And Accounting Web

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

Japanese Management Main Page | JIT Main Page | TOC Main Page

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."


Related summaries:

Crusoe, J., G. Schmelzle, T. Buttross. 1999. Auditing JIT Implementations. Journal of Cost Management (December): 23-26. (Summary).

Baggaley, B. and B. Maskell. 2003. Value stream management for lean companies, Part I. Journal of Cost Management (March/April): 23-27. (Summary).

Baggaley, B. and B. Maskell. 2003. Value stream management for lean companies, Part II. Journal of Cost Management (May/June): 24-30. (Summary).

Borthick, A. F., P. L. Bowen, and M. C. Sullivan. 1998. Controlling JIT II: Making the system monitor itself. Journal of Cost Management (July/August): 33-41. (Summary).

Carr, L. P. and C. D. Ittner. 1992. Measuring the cost of ownership. Journal of Cost Management (Fall): 42-51. (Summary).

Carr, L. P., W. C. Lawler and J. K. Shank. 2002. Reconfiguring the value chain: Levi's personal pair. Journal of Cost Management (November/December): 9-17. (Summary).

Castellano, J. F. and R. Burrows. 2011. Relevance lost: The practice/classroom gap. Management Accounting Quarterly (Winter): 41-48. (Summary).

Clinton, B. D., and H. Ko-Cheng. 1997. JIT and the balanced scorecard: Linking manufacturing control to management control. Management Accounting (September): 18-24. (Summary).

Davenport, T. H. and J. Glaser. 2002. Just-in-time delivery comes to knowledge management. Harvard Business Review (July): 107-111. (Summary).

Deluzio, M. C. 1993. Management accounting in a just-in-time environment. Journal of Cost Management (Winter): 6-15. (Summary).

Deluzio, M. C. 1993. The tools of just-in-time. Journal of Cost Management (Summer): 13-20. (Summary).

Foster, G. and C. T. Horngren. 1987. Cost accounting and cost management in a JIT environment. Management Accounting (June): 19-25. (Summary).

Fullerton, R. R. 2003. Performance measurement and reward systems in JIT and non-JIT firms. Cost Management (November/December): 40-47. (Summary).

Fullerton, R. R. and C. S. McWatters. 2002. The role of performance measures and incentive systems in relation to the degree of JIT implementation. Accounting, Organizations and Society 27(8): 711-735. (Summary).

Goodson, R. E. 2002. Read a plant - fast. Harvard Business Review (May): 105-113. (How the rapid plant assessment (RPA) process can tell you if a factory is truly lean in as little as 30 minutes. The process includes two tools: The RPA rating sheet includes 11 categories for assessing leanness, and the RPA questionnaire includes 20 yes or no questions). (Summary).

Kalagnanam, S. S. and R. M. Lindsay. 1998. The use of organic models of control in JIT firms: Generalising Woodward's findings to modern manufacturing practices. Accounting, Organizations and Society 24(1): 1-30. (Summary).

Lessner, J. 1989. Performance measurement in a just-in-time environment: Can traditional performance measurements still be used? Journal of Cost Management (Fall): 23-28. (Summary).

Martin, J. R. Not dated. Lean concepts and terms. Management And Accounting Web.

Martin, J. R. Not dated. Just-in-Time Systems Attitude and Practice Elements. Management And Accounting Web.

Martin, J. R. Not dated. Profit Beyond Measure graphics and notes. Management And Accounting Web.

Martin, J. R. Not dated. What is lean accounting? Management And Accounting Web.

McIlhattan, R. D. 1987. How cost management systems can support the JIT philosophy. Management Accounting (September): 20-26. (Summary).

O'Brien, J. and K. Sivaramakrishnan. 1994. Accounting for JIT: A cycle time-based approach. Journal of Cost Management (Fall): 63-70. (Summary).

Patell, J. M. 1987. Adapting a Cost accounting system to just-in-time manufacturing: The Hewlett-Packard Personal Office Computer Division. Accounting & Management Field Study Perspectives, edited by William J. Bruns, Jr. and R. S. Kaplan. Harvard Business School Press: 229-267. (Summary).

Swenson, D. W. and J. Cassidy. 1993. The effect of JIT on management accounting. Journal of Cost Management (Spring): 39-47. (Summary).

Vollmann, T. 1990. Changing manufacturing performance measurements. Proceedings of the Third Annual Management Accounting Symposium. Sarasota: American Accounting Association: 53-62. (Summary).