Current Cost Information

Nov 21, 2013

I recently attended a meeting with a group of accountants that are specialist in manufacturing. The purpose of the meeting was to review common practices, look for opportunities to serve clients within the manufacturing industry and to assist one another with projects where one accountant has specialized knowledge and skills that another would find useful in their delivery of services to their client. This group was diverse, representing firms from all over the country and having extensive experience in manufacturing processes and the delivery of accounting and tax services to that industry.

More specifically, the group shared extensive experience associated with the tax issues manufacturers face and how to tailor their resolutions to be more beneficial to one type of manufacturer compared to the other. Additionally, there were a series of specialized assignments in six sigma and lean manufacturing. Some of the group was comprised of consultants who specialized in those kinds of processes and delivering those kinds of improvements to manufacturers. However, I was surprised to find that very few people in the group had any current working knowledge on costing matters.

It seems to me, as result of our experience with our cost forums and also my general experience working with manufacturing clients over the years, that the one reoccurring theme, regardless of the size of the business or the type of manufacturing, relates to figuring out what things cost. Furthermore, what’s profitable and what’s not profitable. There of course are a whole range of subjects associated with knowing what things cost at various stages of the process to make informed decisions related to all kinds of manufacturing changes.

shutterstock_135596615During the meeting, I described the kinds of things that we have been doing with costing over the years that and that generated a whole series of questions from the attendees. These questions ranged from what sort of skills were needed for training inexperienced people all the way to experienced. I also discussed what we found as the general outcome of many of these assignments.

It was clear to me that as the meeting continued that many of the manufacturing specialists, particularly in the tax and accounting area, are relying on others to provide some sort of advice relative to product costs and the various concepts surrounding that whole area. I’ve heard Doug Hicks say more than once that many decisions today are not placed on solid cost information but rather senior managers perception of what the circumstances are and how they should react. The example that I’ve heard Doug use more than once relates to our shipping offshore manufacturing processes to China under the presumption that such off shore production is cheaper than doing it in house especially considering all the cost included related to shipping offshore.

If the specialists who make a living advising manufacturers have limited experience working in this area I can only imagine that the overall level of sophistication among many manufacturers is less than optimal because there is no readily available source of information guidance or review to provide expertise that will be useful.

Categories: Cost Accounting