Incremental Contribution of Lean Management †MyAssignmenthelp.com

Question: Discuss about the Incremental Contribution of Lean Management. Answer: Introduction This case study deals with a company named as Monoclean Limited that manufacturers as well as markets household cleaners in a batch process-manufacturing and Activity-based costing as it is used for allocating overhead to production (Williams 2014). The company had come out with new structure where the monthly declaration is arranged for each business unit. Furthermore, manufacturing profit report is organized for the region as well as total-company profit statement is prepared. Addition to that, the transfer price for goods transferred between manufacturing as well as marketing areas within the same trade in at regular manufacturing cost. The current segment properly identifies each issue and provide with recommendations that will help Monoclean Limited (Fullerton, Kennedy and Widener 2013). Therefore, the present segment properly put emphasis upon how management of Monoclean Limited take assistance from management consulting team for solving the issue as far as possible. There are several issues that are identified by business unit managers. The issue is related to obsolete inventory. The first issue is related to obsolete inventory and this had directly affected the manufacturing profit statement (Suomala, Lyly-Yrjninen and Lukka 2014). Furthermore, there is little encouragement for the marketing human resources that are responsible for selling off or managing slow or old stock as they actually purchase goods at standard cost from the manufacturing as and when needed. The above issue can be solved by considering inventory optimization tools that have been gaining around as Monoclean Limited seek to assess their intact network as well as formative the best inventory policies for each of the product in their supply chain (Fullerton, Kennedy and Widener 2013). The software tools should be used by Monoclean Limited that uses data from WMS as well as ERP systems. Monoclean Limited should utilize business solutions that make use of real-time analytics under one major stage. It will help the company to have real-time inventory within one form as well as follow it properly who owns that inventory and it is still in the same inventory model (Renz 2016). The issue in this case is related to inventory shipping as well as transportation where it is properly managed by manufacturing staff members (Suomala, Lyly-Yrjninen and Lukka 2014). The cost for this need to be shown in the manufacturing profit The above problem can be solved by presenting realistic advice on how top administration can distinguish the extent of its own supply weakness as well as treat it with a all-inclusive approach for managing the level of supply activities (Otley and Emmanuel 2013). In order to guarantee long-term accessibility of vital materials as well as components at a competitive cost, the manufacturing staff members are responsible to look after the risks and the complexity of global sourcing activities. In that way, other staff members at Monoclean Limited already sources on a global basis that actually come up with uncertainties as well as supply or price disruptions on annual unprecedented scale. It is important to monitor the current developments where the management needs to learn matters relating to supply chain activities. It actually calls for a solution that is a total change of viewpoint that starts from purchasing or working functions to supply management or a tactical function in the m ost appropriate way (Suomala, Lyly-Yrjninen and Lukka 2014). The issue here is about change in product or raw material sourcing where the trade units takes into consideration manufacturing areas that attract manufacturing variances from standard cost (be it favorable or unfavorable). It mainly outcome to an adjusted with the standard costs in ensuing periods as well as affect the profit of the marketing units (Messner 2016). The above issue can be solved by using transfer pricing techniques as it will help in improving the level of profitability at Monoclean Limited. It is advisable to use these transfer pricing techniques as it will improve profitability at both business as well as corporate level. This technique has advantages but any of the incorrect transfer pricing can cause substantial dysfunctional purchasing behavior as well as undergo profitability component on corporate-wide level (Fullerton, Kennedy and Widener 2014). Market pricing help in aspects such as profitability enhancement, performance review as well as simple applicability The issue of concern is with the role of the business unit MD who is involved in the capital expenditure approval process. In that case, capital expenditure decisions mostly affect the business unit profits throughout the cash flow timing as well as depreciation of assets and maintenance cost (Suomala, Lyly-Yrjninen and Lukka 2014). The above issue can be solved by understanding the importance of capital expenditures and how it helps at the time of undertaking decisions (Ax and Greve 2017). Capital expenditure is used by business enterprise for acquiring or upgrading physical assets like property, industrial buildings or in that case equipment. It is used for undertaking new projects or investments by the business enterprise. It will help in tracking the capital expenditures on a trend line and comparing capital expenditures to sales. It actually matches capital expenditures to business units (Suomala, Lyly-Yrjninen and Lukka 2014). On analysis, it is noted that Monoclean Limited should use profit centre responsibility where executive are accountable to look after both revenue as well as costs. Here, the accountability of the manager is to undertake decisions that affect cost as well as revenues or profits for each of the department. Therefore, the main purpose of the profit centres is to earn profit for Monoclean Limited. It is the accountability of the profit centre executive to look after production as well as advertising of a product (Fullerton, Kennedy and Widener 2013). Conclusion At the end of the study, it is concluded that Monoclean Limited had taken assistance from management consultant team so that they can prepare a report by outlining the issue that may be working against efficient performance dimension as well as incentive systems in the trade units. The above analysis properly explain underlying problems as well as recommend with a solution that considers suitable responsibility centre type, transfer pricing policy as well as performance assessment scheme and administration compensation package. Reference List Ax, C. and Greve, J., 2017. Adoption of management accounting innovations: Organizational culture compatibility and perceived outcomes. Management Accounting Research,34, pp.59-74. Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2013. Management accounting and control practices in a lean manufacturing environment.Accounting, Organizations and Society,38(1), pp.50-71. Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices.Journal of Operations Management,32(7), pp.414-428. Messner, M., 2016. Does industry matter? How industry context shapes management accounting practice.Management Accounting Research,31, pp.103-111. Otley, D. and Emmanuel, K.M.C., 2013.Readings in accounting for management control. Springer. Renz, D.O., 2016.The Jossey-Bass handbook of nonprofit leadership and management. John Wiley Sons. Suomala, P., Lyly-Yrjninen, J. and Lukka, K., 2014. Battlefield around interventions: A reflective analysis of conducting interventionist research in management accounting.Management Accounting Research,25(4), pp.304-314. Williams, J., 2014.Financial accounting. McGraw-Hill Higher Education.