Using the Balanced Scorecard in a particular part of the business to monitor the effectiveness of a change.

Having received poor feedback about hospital catering services, a company adopts Balanced Scorecard measures to monitor how their change in practices actually impact on the service.

Read to see the four measures they used. Note how they are very specific to the problem and not generic.

http://www.foodprocessing.com.au/content/prepared-food/article/do-you-want-to-provide-food-or-do-you-want-your-patients-to-eat–1090226000

She looks happy to me.

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Curiosities of decision making – Life Cycle Costing

Hinkley Point. Always interesting to see decisions made that ignore basic management accounting principles. 

Here the Conservatives have committed us to paying over the odds for electricity for 35 years and of course, we will end up also paying for the decommissioning costs at the end of the plants short life. The problem will go on a very long time after it ceases to make electricity.

Further evidence, if we needed it that politicians do not make decisions like management accountants!

http://www.independent.co.uk/news/uk/politics/hinkley-point-nuclear-power-national-audit-office-slams-government-high-cost-risky-deal-a7803446.html

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Throughput Accounting – what are the levels of production on a machine?

Interesting to look at real examples of speed of production.

This may be an example where we wouldn’t use Throughput Accounting as there is really only one product. However, we could , I suppose, switch between sizes of cans in a bottleneck scenario. Or between brands.

Look how fast the machines are!

Again, this factory is just down the road from me.

“Coca-Cola Enterprises is one of the company’s largest bottlers in Europe, and over the past five years they’ve invested £41million at their Sidcup site in south-east London. It’s their second biggest site in Great Britain, and the funds are going towards manufacturing upgrades and facility developments which will have multiple sustainability benefits.

One upgrade in particular includes pushing the button on a £16.6m high-speed canning line (pictured) for 150ml mini cans and 250ml slim line cans, which will:

• Increase line capacity from 57,600 cans per hour (cpc) to 110,000cph
• Reduce water usage by 20%
• Save 330 tonnes of CO2

The investment also means the installation of a £14.6m high tech, energy efficient canning line for 330ml cans, enabling them to operate at 2,000 cans per minute, and a £4.7m investment on the 500ml PET line, which includes pre-labelling for drinks like Coca-Cola, Fanta and Sprite.”

http://www.coca-cola.co.uk/stories/what-does-a-41m-investment-look-like-coca-cola-enterprises-upgrades

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The costs of warehousing

We need to think about the cost of warehousing both as part of the Fixed Costs (either Factory or possibly Sales & Distribution if it is for finished items) and when considering stock holding costs.

Always interesting to see real examples. Here is coverage of the development of warehousing at the Coca Cola plant about 1 mile from my home. A warehouse we can see going up.

£39 million pounds of investment!

http://www.foodmanufacture.co.uk/Supply-Chain/Coca-Cola-makes-multi-million-pound-warehouse-investment

 

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Considering Abandonment Costs in Life Cycle Costing

We consider the additional stage of dealing with Abandonment Costs at the end of a product Life Cycle. making sure that the company makes enough profit over the life time of a product to be able to cover the costs of closing the product down (laying off staff, decommissioning factories, covering potential liabilities etc.).

Handy if you can get the Government (Taxpayer) to do it for you as in this case where Shell have been given £112m as a contribution to decommissioning the North Sea oil fields.

http://www.independent.co.uk/news/business/news/shell-oil-112-million-tax-rebate-billions-profits-uk-treasury-government-north-sea-a7789701.html

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Life Cycle Costing

There were suggestions that paper based books were in the decline phase as purchasers switched to e-books.

It now looks like those predictions may have been premature.

https://www.theguardian.com/books/2017/mar/17/paperback-books-sales-outperform-digital-titles-amazon-ebooks

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Trend Analysis

Trends can not only affect overall demand for a product, but demand for the source of a particular product.

Over recent years we have seen a  change in the amount of organic vegetables bought as  a proportion of all vegetable sales and the rise of gluten free bread.

Here is another example and one that is concerning the big producers. As gin sales go up, they are not necessarily maintaining market share.

Record number of UK distilleries open in 2015

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Increasing productivity

With Labour costs being a major element of production costs, improvements in productivity per labour hour are very important. However, over recent years, productivity ahs been falling.

Will developments in technology reverse this?

http://www.standard.co.uk/business/hamish-mcrae-don-t-panic-techies-could-solve-productivity-crisis-a3505976.html

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Relevant Costing and ignoring Sunk Costs

We’ve discussed how hard it is for human beings to ignore the money they have already spent “We can’t stop now after spending all this money!”, when in reality they should be looking at whether future expenditure brings sufficient benefits.

It is interesting to see an example where a major project is abandoned despite the spending of very large sums.

Here the example is the Garden Bridge.

https://www.theguardian.com/uk-news/2017/apr/28/garden-bridge-across-thames-scrapped-by-sadiq-khan-london

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Drink to think – how water will boost your exam success.

Drinking more water improves memory and mood

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