Integrating manufacturing and management accounting strategy: case study insights

Abstract

In recent years various new accounting techniques or new approaches to existing techniques have emerged in response to changes in manufacturing practices or the competitive positions of businesses. These techniques such as activity-based costing, throughput accounting, JIT-accounting and the emphasis on non-financial performance measures have featured in a range of accounting and management journals. There is, however, less clear guidance on when to adopt new techniques, when and whether to adapt old systems and which parts of the information system to emphasise, in particular, environmental and internal circumstances. That is, there is an absence of emphasis on the development of a management accounting strategy. The authors maintain that accounting practices such as product costing and the generation and use of performance measures should be considered in the context of an overall set of functional strategies. It is necessary to assess each accounting technique or measure, to determine under what environmental and internal conditions it is appropriate. This approach parallels, for example, the existing theory of manufacturing strategy which suggests that “best practice” manufacturing systems and procedures can be determined by the consideration of other functional strategies. The paper argues the case for the development of a coherent management accounting—manufacturing strategy and through selected case studies demonstrates the importance of the integration of accounting with other strategies. It uses insights from manufacturing strategy to evaluate how the emphasis on management accounting practices may change as a result of a change in competitive, marketing and manufacturing strategy. It argues that “best practice” management accounting techniques and measures are dictated by a company's manufacturing and marketing environment. As the pace of change within organisations increases, there will be an increasing need to swiftly adapt systems to cope with external and internal changes and hence a framework to assist with the development of appropriate management accounting practices will become more important.