WELCOME AND GOOD MORNING

1. WELCOME ANDGOOD MORNING

2. Competition is global, production times are shorter, the saleable life of product is shrinking, profit margins are smaller and consumer tolerance for poor quality is low. Action must be swift and powerful and focussed on identifying three things-where the firm needs to be if it is to be successful,what needs to be done in order to get there and how it is going to make this transformation. The Business Reality Shift

3. What drives business today ? Technological changes • Computing speed • Information acquisition and dissemination • Internet technologies Globalisation • Global cost advantages • Continuous reengineering • Time based deliveries (JIT) Customer driven • TQM • Value chain analysis

4. DIRECTION OF THE Mgmnt Accounting

5. Business environment of 21st century VALUE CREATING STRATEGIES/PROCESSES • Mass customization through a good design • Instant production driven by pull of customer demand and ability to build on customer ideas. • Network of producers through strategic alliances. • Supplier privy to strategy. • Delayered management hierarchies • Trust , Reliability and core competencies • Information technology as a major enabler • Global markets and world class practices BUSINESS MODELS CREATE VALUE

6. COMPONENTS OF A BUSINESS MODEL MISSION STATEMENT VISION STATEMENT VALUES STAEMENT OBJECTIVES IT ENABLED STRATEGIES PROCESS BASED ORGANISATION

7. TIME SLICES IN MA EVOLUTION Eye ball control Simple cost data on production Prior to 1825 Scale advantages Capacity centric MA concepts Process cost per unit IE based standard costing Between 1825 to 1925 External reporting, Regulations, Income taxes, Levies, etc Between 1925 to 1975

8. TIME SLICES IN MA EVOLUTION After 1975 Value revolution Life cycle concept Strategy evaluation and control Brand management Distribution and channel management Service sector evolution Enterprise Risk Management Environmental Strategies

9. A Battle on Two Fronts ROI (1) Strategy choose the right ones ….. … and align the cost structure Strategic MA (2) Efficiency & Utilization take waste and unused capacity out of the organization Value creation Operational MA Management Accounting

10. DIMENSIONS OF CHANGE IN MA • OWNERSHIP • CONTENT • FREQUENCY OF USAGE • LIFE CYCLE ORIENTATION • PROCESS ORIENTATION • NEW TOOLS AND TECHNIQUES • INTEGRATION WITH IT

11. DIMENSIONS OF CHANGE IN MA OWNERSHIP • No more vested with costing/finance • Company wide process • Major role by non finance teams • Innovations led by non finance • Management Accountant has to be a facilitator with business orientation.

12. DIMENSIONS OF CHANGE IN MA CONTENT • Strategic Vs Operational focus • Non Cost related information • Cycle time related • Quality related • Statistics oriented such as SD, Six Sigma

13. DIMENSIONS OF CHANGE IN MA FREQUENCY OF USAGE • On line ( torque sensing CNC to avoid tool damage) • Hourly variations ( Japanese cost practice) • Weekly reviews • Monthly Cycle • Quarterly strategic information • Life Cycle phased information

14. DIMENSIONS OF CHANGE IN MA LIFE CYCLE ORIENTATION • Operation focus is no more production focussed. • Design stage costing • Post sale service costing • Amortising over life cycle volumes • Switch over costs in segments

15. DIMENSIONS OF CHANGE IN MA PROCESS ORIENTATION • Cost centre and departmental costs losing relevance to process view. • Cross functional views • Process based organisation structures • Business Vs Manufacturing process • Process based cost/time/quality measures

16. DIMENSIONS OF CHANGE IN MA NEW TOOLS AND TECHNIQUES • Strategic Management Accounting tools • Operational tools

17. STRATEGIC AND OPERATIONAL TOOLS STRATEGIC TOOLS Balanced Scorecard, Strategic Cost management, Target Cost Analysis, Customer Profitability and Customer value Measurement. OPERATIONAL TOOLS Cost of Quality, Kaizen Costing, Parametric Cost Control Activity Based Costing and Budgeting, Activity Management Vendor Cost Analysis, Statistical Quality and Cost Control, Six sigma costing, Service Process Costing, Non Financial Performance Measures, Benchmarking, Process Mapping. THE ABOVE TO BE IT SUPPORTED OR EVEN WEB BASED

18. DIMENSIONS OF CHANGE IN MA INTEGRATION WITH IT • No more close to the chest of few policy • Need for disseminated information. • Data warehousing and mining tools • Data analyser and decision making tools • Work flow alerts and On line controls • Legacy and transactional systems • ERP,CRM and SCM integration

19. MA PRACTICES OF SHINGO WINNERS • Accounting itself under self scrutiny • Methods of efficiency evaluation reengineered • Introduced time based measures • Measurement of cost at bottleneck operation in cellular manufacturing. • Management accounting supported continuous improvement • Elimination of waste in accounting processes. • MA becoming internal business consultants • Empowered structure based management accounting • Knowledge of core business

20. Legacy Pangs of the service sector MA • Historically insignificant use of MA • Were operating in non competitive markets • Local competition and not national/global. • Operating environment did not require customer driven processes. • MA literature itself not rich on service sector in the past.

21. Fundamental shifts in service sector • Privatisation galore. • IT AND ITES as a major focus • Unbundling of power sector. • Pay and use and withdrawal of free meals. • Sectoral cross subsidisation anomalies. • Competition in transportation sector, innovation in health care, growth pangs in telecommunication. • Retail financing in finance sector

22. MA developments in service sector • Power generating companies seek Deming awards on quality. ( Florida Power & Light Co) • Research on ABC application in power sector by CPRI in US and CERC in India. • Extensive use of ABC by health care sector in UK • Attempts on ABC by banks and telecom in India. • Cost accounting record rules in telecom • CAM I publication on ABM in service processes as a breakthrough project.

23. MA Content for Service sector • Measurement of Quality, Cost and Time. • Time as a critical dimension more important in MA focus. • Cost of processes needs focus and the most appropriate tool is Activity Based Costing. • Process mapping is fundamental. • Measurement of customer satisfaction • Extensive use of IT is prerequisite.

24. Mindset impediments for Reforms and Revolution in MA field • FINANCIAL ACCOUNTANTS ALSO DOMINATING MA DISCIPLINE • COMPLIANCE/TAXATION COMES FIRST • TREASURY MANAGEMENT MINDSET • LACK OF AWARENESS IN TOP MANAGEMENT OF DEVELOPMENTS IN MA FIELD AND THEIR SIGNIFICANCE • LACK OF PRIDE IN MA THEMSELVES AND SEEKING MORE AVENUES TO COMPETE WITH CHARTERED ACCOUNTANTS • PROFESSIONAL DEVELOPMENT FOCUS MORE ON STATUTORY AREAS AS A WAY TO MOVE FORWARD • LACK OF AUTHORITATIVE PUBLICATIONS ON MA AND CEDED THE INITIATIVE TO OTHER BODIES.

25. Business Model FOR A MA ACCN STRATEGY DEFINITION METHODOLOGIES TIME PROJECT ACCOUNTING, PROGRAM MANAGEMENT Expenses General ledger MINIMIZE $$s hours UNUSED (AVAILABLE) CAPACITY CUSTOMERS, MARKETS OPERATIONAL PERFORMANCE - PRODUCTIVITY & EFFICIENCY - BENCHMARKING - UTILIZATION/YIELD - TOTAL QUALITY MANAGEMENT (Cost of Quality) STRATEGY REALIZATION SUPPLY / INVEST STRATEGY RESOURCES SUPPLY CHAIN MANAGEMENT ACTIVITIES (ABC/M) PROCESS MANAGEMENT DEMAND VOLUME & MIX FORECAST ACTIVITY DRIVERS MAXIMIZE Alignment of cost structure to strategy Asset management PRODUCTS, CHANNELS & CUSTOMERS DEMAND STRATEGY PROFITABILITY ANALYSIS What-if Planning? PRODUCT & SERVICES REVENUES SHAREHOLDER WEALTH [VBM] PERFORMANCE MEASUREMENT SCORECARDS MAXIMIZE KEY PERFORMANCE INDICATORS (KPIs) versus ACTUALS

26. THANK YOU