Paige Maddern owns and operates Paige Nightwear (PN), an internet-based company specialising in high-quality nightwear for men and women. From the outset, Paige has kept a number of key principles in mind which guide most of the business decisions and operations of PN including:

1. All products are to be manufactured locally by small manufacturers that satisfy strict quality control procedures and a quality audit conducted by PN.

2. The use of high-level electronic intelligence systems which support:

• Real-time tracking of all orders throughout the complete order-filling process

• An objective of all orders shipped within 24 hours of receipt of an order

• Real-time reporting of orders, sales and cost data, including product profitability

• Electronic links to manufacturing suppliers, enabling production to be triggered by sales order data

• Customer follow-up procedures which ensure a constant flow of customer feedback regarding the products as well as delivery processes.

Paige has always believed that, as an internet-based company, it is important to make use of a range of technologies to maintain customer loyalty and customer growth. It was not going to be enough to just have good-quality products.

Required

(a) How do electronic links to manufacturing suppliers, enabling production to be triggered by sales order data, help reduce waste?

(b) Given PN’s operating environment and the key principles Paige uses to guide her company, what kind of accounting practices would you expect and not expect to observe with respect to output controls (refer to figure 17.3).

Figure 17.3

Transcribed Image Text:

Variables Before lean After loan Strategic manufacturing technology Batch-and-queue manufacturing • Produced to forecast • Separate functional areas • Ad hoc teams to increase quality Employees are single tasked Lean manufacturing • One piece flow • Produces to customer order • Manages bottlenecks to optimise flows • Produces in teams • Quality built into process Organisational Vertical structure Cell structure • Flatter with cell- and value-stream structure Vertical reporting • Functional (departmental) responsibility centres • Employees are single tasked teams Multi-functional members • Employees responsible for entire production process (multiple machines and tasks) Accounting practices Output controls • Traditional variance measures • Traditional manufacturing variances • Low margin exception reports • Facility measures included traditional accounting measures • Accounting group tracks performance measures • Information provided to managers and supervisors Output controls • Non-traditional operational measures • Operational measures • No variance analysis • Posted throughout facility and shop floor • Generated from the bottom-up on a frequent basis Behavioural controls Behavioural controls • Absent • Technical process documents located in supervisor and engineering offices • Standard operating procedures (SOPS) • SOPS visible in cell and includes pictures of each part of the process • Yellow floor markings indicate flow of material and finished goods Social controls • Heavy reliance • Empowerment: formation of cells Social controls • Absent • Empowerment: supervisors and managers only • Peer pressure: none (individual contributors) • Visualisation: none; paper reports only to manager and supervisor • Training: single process only and teams; self-selection of cell team members; vacation and work schedules • Peer pressure: cell members pressure one another to perform; cell members pressure one another to gain additional training and skills; posted responsibility for action items • Visualisation: yellow marking on floor indicating layout of machines, tools inventory; cell and value stream metric boards; flip charts Training: skills matrix; intranet training