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QICID: 15279
Title: A User Friendly Financial Reporting System
Copyright: 2002, ASQ
Author: Long, Jeffrey Alan; Castellano, Joseph F.; Roehm, Harper A.; Organization: Master Industries Inc., Piqua, OH; University of Dayton, Dayton, OH
Organization:
Subject: Business process reengineering (BPR),Case study,Control charts,Cost management,Variation,Financial industry,Goldratt, Eliyahu M.,Statistical process control (SPC),Deming, W. Edwards;
Series: Quality Progress, Vol. 35, No. 1, January 2002, pp. 60-65
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Abstract: In the late 1980s Master Industries, Inc. began implementing W. Edwards Deming's 14 points and management philosophy to create a customer focused and employee oriented culture committed to continuous improvement. More recently, the company integrated Deming's statistical process control tactics with Eliyahu M. Goldratt's troughput accounting (TA) philosophy to improve communication with workers and non-financial managers. This latter step was undertaken in response to the loss of a major customer to a competitor. Although the loss would cause the company to have a high, unused fixed capacity cost, raising customer prices or employee layoffs were not considered viable options. Management decided upon an unconventional approach, incorporating Goldratt's key measurements into a series of Deming-style control charts to document performance measurement. Master's objective was to manage decisions so it could establish equilibrium after the loss of business. As a result, improvement in three key performance measures is taking place. The use of control charts to communicate key variables of TA is justified by the important role SPC plays in understanding and analyzing data. As with TA variables, traditional analysis of financial and accounting data often makes all variation appear to come from a special cause, rather than from just a common cause variation or noise. By presenting Goldratt's variables in the familiar control chart format, nonfinancial managers are able to use the TA data to determine the effect their potential decisions and actions could have on key reporting variables.
Number of pages: 6
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