Question

five management control systems (other than the Balanced Scorecard) are thoroughly described

Use within the organization adequately described

Answer 1

Management Control Systems.

1. Benchmarking

Traditionally control involves comparison of actual result with actual result with an established standard or target. The practice of setting targets using external information is known as 'benchmarking'.

Benchmarking is an establishment through data gathering of targets and comparatives, with with which performance is sought to be assessed.

After examining the firm's present position, benchmarking may provide a basis for establishing better standards of performance. It focus on improvement on key areas and set targets which are challenging but evidently achievable. Benchmarking implies that there is one best way of doing business and orients the firm accordingly. It is a catching up exercise and depends on the accurate information about the comparative company be it inside the group or an outside firm.

Benchmark is the continuous process of enlisting the best practice in the world for the process, goals and objectives leading to world class levels of achievement.

Types of Benchmarking

i.Product Benchmarking

ii. Competitive Benchmarking

iii. Process Benchmarking

iv. Internal Benchmarking

v. Strategic Benchmarking

vi. Global Benchmarking

      2. Kaizen Costing

It refers to the ongoing continuous improvement program that focuses on the reduction of waste in the production process, thereby further lowering costs below the initial targets specified during the design phase. It is a Japanese term for a number of cost reduction steps that can be used subsequent to issuing a new product design to the factory floor.

Activities in Kaizen costing include elimination of waste in production, assembly, and distribution processes, as well as the elimination of unnecessary work steps in any of these areas. Thus Kaizen costing is intended to repeat many of the value engineering steps, continuously and constantly refining the process, thereby eliminating out extra costs at each stage.

     3. Target Costing

This is a technique has been developed in Japan. It aim at profit planning. It is a device to continuously control costs and manage profit over a product's life cycle. In short it is a part of a comprehensive strategic profit management system. For a decision to enter a market prices of the competitor's product are given due consideration. Target Costing initiates cost management at the earliest stages of product development and applies it throughout the product life cycle by actively involving the entire value chain. In the product concept stage selling price and required Profit are set after consideration of the medium term profit plans, which links the operational strategy to the long term strategic plans.

Target Cost = Planned Selling Price - Required profit

     4. Total Quality Management

Total Quality Management is a philosophy of continuously improving the quality of all the products and process in response to the continuous feedback for meeting the customer's requirements. It aims to do things right the first time, rather than need to fix problems after they emerge (A company should avoid defects rather than correct them). Its basic objective is customer satisfaction.

Total : Quality involves everyone and all activities in the company.( Mobilizing the whole organization to achieve quality continuously and economically)

Quality : Understanding and meeting the customer's requirements.(Satisfying the customer's first time every time).

Management : Quality can and must be managed.(Avoid defects rather than correct them).

TQM is vision based, customer focused, prevention oriented, continuously improvement strategy based on scientific approach adopted by cost conscious people committed to satisfy the customer's first time every time . It aims at managing an organization so that it excels in areas important to the customer.

       5. Just in Time (JIT)

Just in time is a 'pull' system of production, so actual orders provide a signal for when a product should be manufactured. Demand pull enables a firm to produce only what it required, in the correct quantity and at the correct time.

This means that the stock levels of raw materials, components, work in progress and finished goods can be kept to a minimum. This require a carefully planned scheduling and flow of recourses through the production production process. Modern manufacturing firm uses sophisticated production scheduling software to plan production for each period of time, which includes ordering the correct stock. Information is exchanged with suppliers and customers through EDI (Electronic data interchange) to help ensure that every detail is correct.

Supplies are delivered right to the production line only when they are needed. For example a car manufacturing plant might receive exactly the right number and type of tyres for one day's production, and the supplier would be expected to deliver them to the correct loading bay on the production line with in a very narrow time slot.