Overloaded overheads: Activity-based cost analysis of material handling in cell manufacturing
| Autor: | Eric Svaan, Tridas Mukhopadyay, Srikant M. Datar, Sunder Kekre |
|---|---|
| Rok vydání: | 1991 |
| Předmět: |
Total absorption costing
Total cost Strategy and Management Cost accounting Management Science and Operations Research Industrial and Manufacturing Engineering Manufacturing engineering Group technology Computer-integrated manufacturing Cost driver Economics Operations management Activity-based costing Fixed cost |
| Zdroj: | Journal of Operations Management. 10:119-137 |
| ISSN: | 0272-6963 |
| Popis: | Manufacturing managers today are pressed by aggressive international competitors, high input factor prices, and customers who demand better quality at lower cost. In such an environment, there is a growing need to exploit the time, cost and quality advantages of cell manufacturing (Hyer and Wemmerlov (1984)). Unfortunately, traditional cost accounting systems may be a major roadblock on the highway to future manufacturing competitiveness. These systems may stifle manufacturing initiatives to improve process design by providing inaccurate cost information. They may also send the wrong signals to managers who must evaluate the cost/benefit impact of process innovation (such as cells and group technology implementation), thereby causing companies to retain outmoded, inefficient manufacturing practices. We discuss the results of our field study which illustrates the use of activity-based costing (ABC) to quantify the benefits of cell manufacturing and synchronized process flows. Auto Light Company, a Fortune 500 automobile components manufacturer, had begun to replace its functional layout with synchronous manufacturing cells. Although dramatic progress had been made in operational measures (such as throughput time, work-in-process (WIP) inventories, and material flow distance), existing accounting systems failed to trace these savings to the source, namely the change in manufacturing practices. Overheads were being allocated to products on the basis of direct labor or machine hours, which at Auto Light are no different in cells than in traditional manufacturing. A joint Auto Light management/Carnegie Mellon University team examined the impact of cell manufacturing on major cost categories. The group identified material handling expenses (which exceed $5,000,000 per year, and comprise approximately 10% of total factory costs) as a promising area for analysis using ABC principles. We sought to identify relevant material handling cost drivers: that is, activities that (1) create costs and (2) seem reasonable to use as proxies for assigning costs to products. Interviews, plant records and time-and-effort studies pointed to “number of moves” and “distance moved” as key drivers of material handling costs. Annual production volumes, physical dimensions of products and their production routings were used to calculate the number of moves, and the distance |
| Databáze: | OpenAIRE |
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