Importance of Management Accounting in a Manufacturing Organization: A Case Study of Adelaide Brighton Limited

This report discusses the importance of management accounting in a manufacturing organization through a case study of Adelaide Brighton Limited. It covers their value chain, planning and controlling processes, and decision-making strategies. The report also evaluates the company's business strategy, competitive advantage, and adoption of the balanced scorecard method.

COST ACCOUNTING
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Contents
Introduction......................................................................................................................................3
Company brief.................................................................................................................................4
The value chain of Adelaide Brighton Limited...............................................................................6
The process of planning in manufacturing unit...............................................................................8
Business Strategy.........................................................................................................................8
Completion..................................................................................................................................8
Significant information for production........................................................................................8
Controlling in the manufacturing company.....................................................................................9
Monitoring manufacturing and selling plans...............................................................................9
Balanced scorecard method.........................................................................................................9
Decision making............................................................................................................................10
Conclusion and recommendation..................................................................................................11
References......................................................................................................................................12
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Introduction
The main purpose of this report is to map out the importance of management accounting in a
manufacturing organization. Management accounting can be explained id the inflow and
distribution of information within an organization that can help management of such
organization to take an important decision. The important if management accounting increases
for a manufacturing company as the importance of such data for a manufacturing company is
higher as compared to another type of companies. There are various business decisions in a
manufacturing business that can have vital financial and operational impact on the business such
as make or buy decision. Here Adelaide Brighton Limited has been selected for better evaluation
than management accounting has on a manufacturing company. This report will focus on various
branches of management accounting and evaluate how such branch impacts manufacturing
company. The process of manufacturing will also be discussed in this report that will give a light
on the value chain process adopted by the company. In addition to that planning and controlling,
the process implemented in the manufacturing process will also be discussed in this report.
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Company brief
The company selected for evaluation of cost management in this project report is Adelaide
Brighton Limited. Adelaide Brighton is engaged in the production of construction material such
as cement. The company is also engaged in the production of lime which is a type of rock that
contains more than 75% of calcium or magnesium carbonate. Over the period of time, the
company has become leading producer of lime a construction material in Australia. Adelaide
Brighton is also listed in the list of ASX-100 that contains the companies that are biggest
companies in Australia in term of market capital (Adelaide Brighton Ltd, 2017). Inclusion in
ASX-100 list explains the size of the organization and its impact on Australians cement
manufacturing market. Other products produced by the company include concrete, aggregates
and concrete products.
The company was established in 1882 and not it operating in every state and territory of
Australia. The company currently has 1500 employees that are working for growth and
development of the company.
Main products of the company are-
1. Cement- Adelaide Brighton has become a second largest supplier and producer of cement in
Australia. Currently, the company has manufacturing units for production of cement in South
Australia and Western Australia. The company is thinking to extend its cement production
operation to Northern Australia. In addition to that company is also the largest importer of
cement with other construction-related materials.
2. Lime- Adelaide Brighton is the largest manufacturer of lime in Australia. It has manufacturing
units in various parts of South Australia, Northern Australia and Western Australia.
3. Concrete and aggregates- Adelaide Brighton relatively new in this market but has quickly
established its feet in the market. Adelaide Brighton has indulged in the production of concrete
and aggregates in various parts of Australia with the help of joint ventures.
4. Concrete Products- Adelaide Brighton is the largest producer of concrete products in Australia
(Adelaide Brighton Ltd, 2017).
Adelaide Brighton has a very experienced and skilful executive team that is working in best
interest of the company. The executive team of the company is led by Martin Brydon who is
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acting as Managing Director and Chief Executive Officer of the company (Adelaide Brighton
Ltd, 2017). The vision of the company is to continue its marketing position in future and become
leading producer of cement in the market. The mission of company making company enables to
achieve highest standards of business operation in cement manufacturing industry.
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The value chain of Adelaide Brighton Limited
The value chain can be defined as the set of procedures that are adopted by an organization in
their manufacturing process. This is a core activity of business as for a manufacturing entity;
effective and efficient production process is the main source of income. The value chain is
responsible for production and delivery of goods and services to its customers (Christopher,
2016).
The value chain of Adelaide Brighton can be divided into two categories-
Primary activities- These are the activities that responsible for the production of primary
products manufactured by the company.
Support activities- These activities are the activities that give support to the company in order to
make management of the company easy and smooth (Tayur, Ganeshan and Magazine, 2012).
Primary activities
1. Inbound logistics- these are the activities that are related to making the raw material available
to the manufacturing unit in given time. There is transportation that is in place to ensure
availability of raw material for production at the specified time.
2. Main operations- This primary activity is main activity for a cement manufacturing
organization as it is concerned with the actual conversion of raw material into the final product
(Olhager, 2012).
3. Outbound logistics- in this activity, the final product produced by the company are sent to
distributors, wholesalers and traders for sale in the market through companies transportation
channels. Inbound channels of transportation are used for outbound logistics.
4. Sale and marketing- it is also an essential activity for Adelaide Brighton as the customer will
be aware of the quality and availability of the product in the market through sales and marketing
activities of the company.
Secondary activities
These are the management activities that help in effective management of primary activities
performed by the company. These are not considered as primary activities as they are not directly
related to goods and services produced but they are equally essential for effective production and
distribution of such goods and services. There are various secondary activities that are helping
the company in the production of final products. Some of these activities are-
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1. Human resource management- HR management helps in bringing efficiency and effectiveness
in work done by the company. It helps in harmonizing the activities done by each and every
department (Jacobs, Chase and Lummus, 2014the ).
2. Procurement- This activity is concerned with the methods used by management of the
company to procure raw material for the production process.
3. Technology development- Over the period of time, the company has effectively moved from
manual to IT infrastructure to improve the efficiency of business operations. This has helped the
company in increasing direct profitability (Stadtler, 2015).
4. Infrastructure- this activity is concerned with the wide range of support action cities that are
supporting other activities of business such as financing, quality control checks, strategic
management it etc.
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The process of planning in manufacturing unit
Business Strategy
The business strategy the strategies that a business organization uses for operating business. The
business strategy used by the company is cost leadership. As per this strategy, the company
provides the quality services to at the best prices to its customers. Price is a significant factor that
can affect supply and demand of a product. Hence a company can increase the demand for the
products by effectively decreasing the prices of the product as compared to its competitors. But
effective implementation of this strategy is a very important task as it can result in loss of money
for that company if prices are decreased without bringing efficiency in a business operation
(Metzger, ). Adelaide Brighton uses various cost reduction methods to reduce the cost incurred in
a production process that helps in cutting down the selling prices offered to the customer.
Completion
Cement manufacturing industry in Australia is very competitive and there are various other
organizations that are working in this industry giving completion to Adelaide Brighton. Over the
period of time, Adelaide Brighton has become the leading manufacturing companies in Australia
as it is the second largest producer of cement and largest producer of lime in Australia. To reach
this level the business strategy adopted by the company has been very helpful. The prices of the
company are lower as compared to other cement producer and distributors in the country. In
addition to that, the quality of products produced by the company is also high as compared to its
competitors. Hence it can be said that price and quality are the two factors that have given a
competitive advantage to the company (Erasmus, Strydom and Rudansky-Kloppers, 2016).
Significant information for production
Most important information that is required for the production of goods and services is the
demand for the product among customer. It is very important that the quantum of production
should be exactly equal to the demand of the product in the market. If the production is low then
it would result in loss of business to the company and if the production is high then it would
require an extra cost in form of storage and wastage of product (Adekola and Sergi, 2016).
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Controlling in the manufacturing company
Monitoring manufacturing and selling plans
Manufacturing and selling of goods is an essential part of every manufacturing company such as
Adelaide Brighton. Hence it is important that these activities are properly overviews and
monitored. Main monitoring methods adopted by Adelaide Brighton are as follows-
- Review plan- Review plans are prepared by management of the organization to monitor
production processes. This review plan includes all important sub-activities that are undertaken
for production of each and every primary business product of the company (He, Jia and Xu,
2016).
- Tracking system- With the help of information technology, the company has prepared a
tracking system that helps in tracking the addition made in a production process. Development of
a particular production batch can be done form the activity issue of raw material to selling to the
final customer.
Balanced scorecard method
Balanced scorecard method is a performance evaluation system that can help an organization in
reviewing the processes undertaken and give feedback to management for its improvement.
Balanced scorecard method can be implemented in the following manner.
1. Financial- Metrics available in balance scorecard method can evaluate whether the company is
getting an appropriate return on its investment or not.
2. Customer process- Balance scorecard method helps in taking feedbacks from its customer that
can help in making customer process more effective and customer friendly.
3. Learning- One of the best features of balance scorecard method is that it reviews the current
business operations in business and provides feedback for improvement. This helps in
developing a learning curve for production process managers (Gibbons and Kaplan, 2015).
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Decision making
There are various important decisions that a manufacturing unit has to take in respect to the
production of goods and services. Same has been the case in business operations of Adelaide
Brighton and tow of such important decision are-
Make or buy decision- This decision has to be taken by the management of the company from
time to time to increase the cost efficiency of the production process. A company is providing
their products at lower prices it is essential that the cost of production is also lower as compared
to other market players. For this make or buy decision is required to evaluate whether it would be
cheap to produce certain raw material within the manufacturing unit or to purchase such raw
material from the market (Bianchi et.al, 2016). This is a very common decision that is required to
be taken in a manufacturing unit.
Continue or drop a particular business segment- This is also a common decision that is taken by
a manufacturing unit. It is a known fact that profitability of each and every product is different it
is not essential that all products are making profits for a company. Hence, in this case, it is
important that segment that is incurring losses should be shut down by the company so that it
does not affect other profitable ventures of the company.
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Conclusion and recommendation
Three important points that can be highlighted in respect of Adelaide Brighton are its supply
chain management, competitive advantage and adoption of balanced scorecard method. Supply
chain management of the company is very effective and it is helping the organization in the
implementation of the effective production process. The competitive advantage of the company
is its prices and quality of cement and lime provided to the customer that increases the demand
for the product in the market. As a discussed review of financial and operational activities is an
important function and balanced scorecard method is the best method for doing so. From an
overall evaluation of Adelaide Brighton, it can be said that it has bright future and it will
continue to lead the cement manufacturing industry in coming future. One change that it can
implement in its business operations it including more strategies to review the work done by
employees of the company. Through this management of the company would be able to identify
the idle time that can be used in a productive manner by such employees.
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References
Adekola, A. and Sergi, B.S., 2016. Global business management: A cross-cultural perspective.
Routledge.
Adelaide Brighton Ltd, 2017. Adelaide Brighton is one of Australia’s leading integrated
construction materials and lime producers. Retreivable at: http://adbri.com.au/aboutus#profile
Adelaide Brighton Ltd, 2017. Adelaide Brighton Ltd. Retrievable at:
http://adbri.com.au/-/adbri/lib/pdfs/2016/asx%20announcements/ASX%20-%20ABL
%202017%20Result%20Presentation%20(&%20cover%20sheet)%20280218.pdf
Adelaide Brighton Ltd, 2017. Executive team. Retrievable at:
http://adbri.com.au/aboutus#executive-team.
Adelaide Brighton Ltd, 2017. Our business. Retrievable at: http://adbri.com.au/ourbusinesses
Bianchi, A., Barnett, J., Dempsey, W., Giachinta, M., Hugenberg, M. and Talley, A., 2016.
Applying Value-Focused Thinking to a Make Versus Buy Decision. Industrial and Systems
Engineering Review, 4(2), pp.171-177.
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Erasmus, B., Strydom, J.W. and Rudansky-Kloppers, S. eds., 2016. Introduction to business
management. Oxford University Press Southern Africa.
Gibbons, R. and Kaplan, R.S., 2015. Formal Measures in Informal Management: Can a Balanced
Scorecard Change a Culture?. American Economic Review, 105(5), pp.447-51.
He, K., Jia, M. and Xu, Q., 2016. Optimal sensor deployment for manufacturing process
monitoring based on quantitative cause-effect graph. IEEE Transactions on Automation Science
and Engineering, 13(2), pp.963-975.
Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain
management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.
Metzger, R., Biomet Manufacturing LLC, 2017. Pre-operative planning and manufacturing
method for orthopedic procedure. U.S. Patent 9,757,238.
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Olhager, J., 2012. The role of decoupling points in value chain management. In Modelling
value (pp. 37-47). Physica-Verlag HD.
Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and
advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.
Tayur, S., Ganeshan, R. and Magazine, M. eds., 2012. Quantitative models for supply chain
management (Vol. 17). Springer Science & Business Media.
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