Implementation of an industrial variance analysis process - A constructive study at Alstom
MONONEN, JARI (2013)
MONONEN, JARI
2013
Yrityksen taloustiede, laskentatoimi - Accounting and Finance
Johtamiskorkeakoulu - School of Management
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Hyväksymispäivämäärä
2013-10-08
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:uta-201310301550
https://urn.fi/URN:NBN:fi:uta-201310301550
Tiivistelmä
The spark for this research came from case-company’s need to strengthen its’ manufacturing control function. Key focus there is to understand the behavior of direct manufacturing costs. When differences between planned and actual results are seen it is possible to detect the root-causes for the problems, which makes also performing of corrective actions possible. The need, to see the most critical problems on operations and performing corrective actions to fix them, is universal for all the companies. One possible method to detect those problems is variance analysis. However, only detecting problems and reporting of information is not enough and real actions are also needed. Therefore, this research examines the whole control process from creating figures to the follow-up of corrective actions.
The theoretical framework concentrates on presenting good characteristics of the manufacturing control function. Manufacturing control is split to five important areas: target setting, performance measurement, distribution of information, corrective actions and to reconciliation to financial books. The criticism towards variance analysis and management accounting is deeply emphasized in the theoretical part. Major part of this criticism arises from utilization of modern manufacturing practices and the case-unit provides a good environment to study this discrepancy.
The empirical part observed case-units’ most critical deficiencies in the current manufacturing control process. The construction was then built based on recommendations of the theoretical framework, and by taking the specific characteristics of the case-unit into account. Major part of the construction was implemented into use during this research and the process implemented is assessed in the end of the empirical part.
Several problems of case-unit were solved during this research. Especially the understanding of the bridge between the operations and the financial statements was improved. However, mainly due to limitations of the unit’s IT-systems and due to limited time of involved people, not all of the recommendations provided in the theoretical framework, were actually implementable. Although some corrective actions were implemented, some remained at low level due to limited time usable for this research. The scientific contribution of this research can be controversial because the construction was built only to one unique company. However, some observations can be applied in a different environment and be beneficial for other manufacturing companies.
The theoretical framework concentrates on presenting good characteristics of the manufacturing control function. Manufacturing control is split to five important areas: target setting, performance measurement, distribution of information, corrective actions and to reconciliation to financial books. The criticism towards variance analysis and management accounting is deeply emphasized in the theoretical part. Major part of this criticism arises from utilization of modern manufacturing practices and the case-unit provides a good environment to study this discrepancy.
The empirical part observed case-units’ most critical deficiencies in the current manufacturing control process. The construction was then built based on recommendations of the theoretical framework, and by taking the specific characteristics of the case-unit into account. Major part of the construction was implemented into use during this research and the process implemented is assessed in the end of the empirical part.
Several problems of case-unit were solved during this research. Especially the understanding of the bridge between the operations and the financial statements was improved. However, mainly due to limitations of the unit’s IT-systems and due to limited time of involved people, not all of the recommendations provided in the theoretical framework, were actually implementable. Although some corrective actions were implemented, some remained at low level due to limited time usable for this research. The scientific contribution of this research can be controversial because the construction was built only to one unique company. However, some observations can be applied in a different environment and be beneficial for other manufacturing companies.