The Measurement Nightmare

Debra A. Smith


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Info

Level of TOC knowledge acquired:

Intermediate

Length:

208 pages

Designed for:

Business owners, Consultants and Implementers

Topics:

Finance and Measurements

Application:

Throughput Accounting

Language:

English

Format:

Hardcover and Download

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This book shows how companies of various sizes have aligned accounting measurements and policies with TOC implementations - and cleared a major roadblock toward adoption of TOC guidelines.

The leading authority on Throughput/Theory of Constraints (TOC) Accounting explains how companies of various sizes have aligned accounting measurements and policies with TOC implementations - and cleared a major roadblock toward adoption of TOC guidelines. Techniques that Smith has suggested, implemented, and tracked at various companies highlight The Measurement Nightmare, especially the "Day to Day" tools she developed to ensure successful implementation.

Today's competitive environment requires that companies distinguish themselves in the marketplace using factors other than prices. Companies that excel at on-time delivery, short cycle/leadtime, quality, and fast response to the market gain a competitive edge - and have the ability to market based on these features. A proven approach to achieve this is the Theory of Constraints (TOC) production solution known, as drum-buffer-rope scheduling. Just in time (JIT), Total Quality Management (TQM) and other philosophies aim at exploiting these competitive edge factors.

However, accounting systems, financial, and incentive measurements continue to be the biggest stumbling blocks to companies wishing to improve their financial performance with these tools. Agreement on the need for a measurement system that encourages local actions in line with bottom line results is common, but solutions have remained elusive. Whether a company is pursuing JIT, TQM, or TOC, cost accounting is the common enemy. Attempts have been made to introduce "new" costing methods such as activity based costing and economic value added, but they have failed to recognize the basic difference between product costing for financial statement purposes and collective management information to make real time decisions.

The Measurement Nightmare shows you how to resolve the conflicts and remove the accounting systems, financial, and incentive measurement roadblocks to adopting TOC, thereby gaining improved performance and sustaining competitive advantage. The techniques that the author, leading authority Debra Smith, has implemented and tracked at various companies highlight "the productivity measurement nightmare". Especially important are the day-to-day tools she developed to ensure successful implementation.

Features

  • Shows how to use the Theory of Constraints to solve conflicts between local and global optimization goals for improved performance
  • Explains how to align executive strategy and decision making with both short and long-term results for improved incentive plans
  • Explores four basic financial strategic decisions from a Theory of Constraints and direct costing approach and illustrates the varied consequences of different costing approaches
  • Exposes the simple bridge to convert a direct costing system to absorption costing to satisfy GAAP and external reporting requirements
  • Provides case studies in support of each chapters discussion

Table of Contents

  • Unbelievable Decisions by Companies You Would Know if I Could Name Them
  • The Measurement Nightmare
  • Theory of Constraints: The Evolution of a Revolution
  • How We Got in This Accounting Measuring Mess
  • Drum-Buffer-Rope Basics and Predictable Implementation Effects
  • New Manufacturing Floor Measurements and Reporting
  • New Measures for Operations: Subordination
  • The Bridge Between Throughput Accounting and GAAP Financial Statements
  • Four Basic Strategic Decisions from a Theory of Constraints/Management Accounting Standpoint
  • Aligning Strategy in the Organization