SAPICS conference to examine shortcomings in current methods of accounting for improvement and supply chain productivity

Thirty years ago, MRP and standard cost accounting were a good way for an organisation to try and figure out how much it was saving thanks to improvement activities, says John Darlington, Managing Director at Value Flow Consulting Limited and part time staff member at the University of Buckingham where he teaches MSc in Lean Enterprise.

“That’s right, in the ‘80s, MRP and standard costing systems were great breakthrough inventions that moved manufacturing organisations of their day on enormously. However, today these two obsolete beasts still form the biggest elements in modern organisations’ information structures, executed through modern ERP,” says Darlington, who will be elaborating on this topic at the forthcoming SAPICS Conference and Exhibition to be held at Sun City from 2-4 June 2013*.

“Unfortunately, today MRP and standard costing systems are doing much harm to the organisations that revere them and spend millions on their upkeep and promulgation.”

The Zombie Zone

According to Darlington, the people in the organisation whose responsibility it is to run these systems have effectively become “administrators” of obsolete systems, embedding the same redundant learning and rules day after day.

“This renders them almost completely immune to the possibility of doing something significantly better at a process level,” Darlington points out. “And if something new does appear on the horizon and appears to be a threat, some well-established, change-resistant “mechanisms” kick in e.g. in accounting they have GAAP (Generally Accepted Accounting Principles) and it is the law of each particular land.”

Same £$%@, different day

Originality of new methods is “much cherished” in theory, according to Darlington. Departments are even formed for “transformation” as if this demonstrated commitment. However, most often the change is directed at the lower reaches of the organisation whilst the main information structures, roles and responsibilities remain unchanged.

“The unlucky lean change agents who know there is a better way, and that top down matters as much as bottom up, attract so much opposition in their efforts to effect a wholesale change for the better that they eventually become dispirited, marginalised and many leave for new pastures.”

No-one move and nobody gets hurt!

The issue is also tied up with the credibility gap as people question how their systems can possibly be wrong if everyone has them. “I’ve seen it time and again: as long as everyone is competing with the same rubbish systems, then the conventional organisations believe they’re ok. However, the problem for the majority occurs when a single company begins to do something discernibly different; like Toyota for instance.”

Now, imagine this

“Are we brave enough to do something different?” he asks.  “Or another way of putting it is: if we really do something different how could we tell if it was working?”

Darlington suggests an alternative known as Flow Accounting.  “Flow Accounting, which is not for accountants per se – although it would be great if they would join in – enables improvement and supply chain personnel to scope out opportunities as it places special emphasis on lead time compression.”

* Interested in finding out more? Don’t miss John Darlington at the Annual SAPICS Conference 2013. Visit www.sapics.org

John Darlington’s presentation at SAPICS 2013 – Cost Accounting: Public Enemy No.1 to Productivity – will explain the shortcomings of current methods of accounting for improvement and supply chain productivity and offer an alternative known as Flow Accounting.  Flow Accounting, which is not for accountants per se, enables improvement and supply chain personnel to scope out opportunities as it places special emphasis on lead time compression.

SAPICS Conference and Exhibition 2013 – Design for Change: Supply Chain Solutions for a Dynamic World – 2-4 June 2013, Sun City. For more info and to book, visit www.sapics.org.

The leading event in Africa for Supply Chain and Operations Management Professionals, the Annual SAPICS Conference and Exhibition is the premier educational and networking event in Africa for Supply Chain and Operations Management Professionals. The conference is designed to offer practical and relevant information by providing delegates with excellent educational presentations, case studies and interactive workshops.