©2013 nitto denko corporation. all rights reserved. material flow cost accounting...
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©2013 Nitto Denko Corporation. All Rights Reserved.
Material Flow Cost Accounting(MFCA)
March, 2013Yoshikuni FurukawaSecretary of ISO/TC207 WG8NITTO DENKO CORPORATION
©2013 Nitto Denko Corporation. All Rights Reserved.
Contents:
1. Introduction
2. Significance and Characteristics of Material Flow Cost Accounting (MFCA)
3. MFCA vs. Conventional Cost Accounting
4. Implementation & Case Example of Nitto Denko
5. Implementation & Key Factor for Success
©2013 Nitto Denko Corporation. All Rights Reserved.
Modern image ofenvironmental management
Traditional image ofenvironmental management
level of environmental management
highlow
costs
high
low
Costs increase in proportion to the level of environmental management
level of environmental management
highlow
costs
high
low
Costs decrease in proportion to the level of environmental management
Introduction
©2013 Nitto Denko Corporation. All Rights Reserved.
• MFCA focuses on emission (waste)• Profit is hidden in emission (waste)• MFCA finds out the hidden profit
INR
MFCA
Japanese “Mottainai” Concept, “What a shame to be wasteful” in ISO
Significance of Material Flow Cost Accounting
©2013 Nitto Denko Corporation. All Rights Reserved.
Reducing environmental impacts
Increasing profitImproving productivity
Internal benefits External benefits
Benefits of MFCA
Contributing to sustainable development
©2013 Nitto Denko Corporation. All Rights Reserved.
[Goods from Process 1] - Raw materials 900 g, $10,000 - Conversion cost $10,000
[Conversion cost] $15,000Total inputs 900 g, $35,000
Raw materials1,000 g($10,000)Conversion cost
$10,000
Raw materials 100 g, $0
Conversion cost, $0
Total 100 g, $0
Flow to emissions
Flow to finished products
Process 1 Process 2
Emissions (waste)
Inputs: ・Raw materials - Quantity: 1,000 g - Unit cost: $10/ g ・Conversion cost: - Process 1: $10,000 - Process 2: $15,000
Raw materials 720 g, $10,000 Conversion cost $25,000 Total 720 g, $35,000
Raw materials 180 g, $0
Conversion cost, $0
Total 180 g, $0
Flow to emissions
Flow to finished products
Finished products
Emissions (waste)
Raw materials 180 g, $0
Conversion cost, $0
Total 280 g, $0
Emissions (waste)
Conventional Cost AccountingConventional Cost Accounting
©2013 Nitto Denko Corporation. All Rights Reserved.
[Goods from Process 1] - Raw materials 900 g, $9,000 - Conversion cost $9,000
[Conversion cost] $15,000Total inputs 900 g, $33,000
Raw materials1,000 g($10,000)Conversion cost
$10,000
Raw materials 100 g, $1,000 Conversion cost, $1,000 Total 100 g, $2,000
Flow to emissions
Flow to finished products
Process 1 Process 2
Emissions (waste)
Inputs: ・Raw materials - Quantity: 1,000 g - Unit cost: $10/ g ・Conversion cost: - Process 1: $10,000 - Process 2: $15,000
Raw materials 720 g, $7,200
Conversion cost $19,200 Total 720 g, $26,400
Raw materials 180 g, $1,800 Conversion cost, $4,800 Total 180 g, $6,400
Flow to emissions
Flow to finished products
Finished products
Emissions (waste)
Raw materials 280 g, $2,800 Conversion cost, $5,800 Total 280 g, $8,600
Emissions (waste)
Characteristics of MFCACharacteristics of MFCA
©2013 Nitto Denko Corporation. All Rights Reserved.
Conventional cost accounting
MFCA
Outputs
・Raw materials - Quantity: 1,000 g - Unit cost: $10/ g - Cost of materials: $10,000・Conversion cost: - Process 1: $10,000 - Process 2: $15,000
Total: $35,000
Inputs
Raw materials: 720 g ($10,000)Conversion cost: $25,000
Total: $35,000
Raw materials: 280 g ($0)Conversion cost: $0
Total: $0
Raw materials: 720 g ($7,200)Conversion cost: $19,200
Total: $26,400
Raw materials: 280 g ($2,800)Conversion cost: $5,800
Total: $8,600
Flow to finished products
Flow to emissions
Flow to finished products
Flow to emissions
MFCA vs. Conventional Cost Accounting
MFCA vs. Conventional Cost Accounting
©2013 Nitto Denko Corporation. All Rights Reserved.
Implementation of MFCAImplementation of MFCA
1. Material: Input Value of Material
2. Energy: Input Value of Energy
3. System: Labor, Depreciation and etc.,
4. Disposal (Waste Management Cost) :
Cost Elements
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Material Flow Cost Accounting (Flow Model)Material Flow Cost Accounting (Flow Model)
©2013 Nitto Denko Corporation. All Rights Reserved.
Top: Adhesive(Red)Middle: Backing Film(Blue)Bottom: Separator(Green)
Product: Adhesive Tapes for Electronics Application Quantity: 912pcs. Period: one month (Nov. 01-30, 2000), (JPY1.80/INR )
Flow to ProductFlow to Waste
29%
68%
3%
Waste: 103.14 ㎏ 7 , 299.10 ㎡
10 , 785.50 ㎡
Waste: ¥ 21 , 852.79 ¥ 384 , 163.18
¥ 497 , 792.32
<Total Waste>
Waste: 86.27 ㎏ 430.35 ㎡
2,642.25 ㎡
Waste: ¥ 13,357.00¥ 22,,650.00
¥ 121,950.00
Solvent Gases 1,981.29 ㎏
Solvent Gases ¥ 99 , 064.50
Waste: 289.41 ㎏ 7 , 729.45 ㎡
13 , 427.75 ㎡
Waste: ¥ 35 , 209.79 ¥ 406 , 813.18
¥ 619 , 742.32(¥ 1 , 061 , 765.29 )
351.01 ㎏ 24 , 840.60 ㎡
28 , 327.00 ㎡
¥ 74 , 370.26¥ 1 , 307 , 400.00¥ 1 , 307 , 400.00
Slitting etc.,
¥ 65 , 009.62 ¥ 1 , 142 , 850.00
¥ 1 , 142 , 850.00
306.83 ㎏ 21 , 714.15 ㎡ 24 , 761.75 ㎡
Coating & Drying
SI: 127.58 ㎏9 , 028.80 ㎡
10 , 296.00 ㎡
EI: 83.40 ㎏ 5 , 902.35 ㎡6 , 730.75 ㎡
SI: ¥ 27 , 031.58¥ 475 , 200.00¥ 475 , 200.00
EI: ¥ 17 , 670.94¥ 310 , 650.00¥ 310 , 650.00
Store
247.87 ㎏ 17 , 541.50 ㎡
17 , 541.50 ㎡
¥ 52 , 517.47¥ 923 , 236.82¥ 809 , 607.68
Core etc ¥ 714 , 582.22 (¥ 2 , 499 , 944.19 )
Product
2 , 474.39 ㎏ 22 , 144.50 ㎡ 27 , 404.00 ㎡
¥ 177 , 431.12 ¥ 1 , 165 , 500.00
¥ 1 , 264 , 800.00
Dissolution etc.,
Solvent Gases 1 , 981.29 ㎏
Solvent Gases ¥ 99,064.50
“Material” Flow Chart with Data
©2013 Nitto Denko Corporation. All Rights Reserved.
CExpenditureMaintenances
BOperating timeDepreciation
(straight-line method)
AMan-hourLabor (legular employee )
AMan-hourLabor (part-timer)
CExpenditureTools and Implements
BConsumptionEnergy ( fuel )
BConsumptionEnergy ( electricity )
Allocation Type Allocation Base Cost Elements
A : Allocation on base of real data B : Allocation on base of monthly data (correctly as possible)C : Apportionment on base of monthly data
Allocation Method of “Energy and System Cost”
©2013 Nitto Denko Corporation. All Rights Reserved. 13
Cost Material Energy System Disposal Total
Product 2,499,944(68.29%)
57,354(68.29%)
480,200(68.29%)
N/A 3,037,498(67.17%)
Material loss
1,160,830(31.71%)
26,632(31.71%)
222,978(31.71%)
74,030(100%)
1,484,470(32.83%)
Total 3,660,774(100%)
83,986(100%)
703,178(100%)
74,030(100%)
4,521,968912pcs (100%)
Result of Material Flow Cost AccountingResult of Material Flow Cost Accounting
Period: from November 01 to 30, 2000 (Unit: JPY ), (JPY1.80/INR )
©2013 Nitto Denko Corporation. All Rights Reserved.
Material Flow P/L (Unit: Yen) Conventional P/L (Unit: Yen)
Sales* 15,000,000 Sales* 15,000,000
Cost of Product
3,037,498 Cost of Sales 4,521,968
Cost ofMaterial loss
1,484,470 N/A N/A
Gross Profit 10,478,032 Gross Profit 10,478,032
Selling, General and Administrative Expenses*
8,000,000 Selling, General and Administrative Expenses*
8,000,000
Operating Profit 2,478,032 Operating Profit 2,478,032
*Provisional Figure
Period: from November 01 to 30, 2000 (Unit: JPY) , (JPY1.80/INR)
Comparison of P/LComparison of P/L
©2013 Nitto Denko Corporation. All Rights Reserved.
Input value of Material Loss and input value of Product are clarified in each Quantity Center.
The Material Loss Analysis in each Production Process
Implemented Countermeasure to reduce Material loss
Increase of profit and reduction of environmental impact
Decision Making Flow (1)
Decision Making Flow (1)
©2013 Nitto Denko Corporation. All Rights Reserved.
Material Loss Analysis 1. Theoretical/ Design Loss: Machine Design, Solvent Medium, Edge of Jumbo Roll, etc
2. Normal Loss: Set-up, Trial Running, Cleaning, Sample, etc
3.Avoidable/Abnormal Loss: Poor Workmanship, Spoilage, Defective Unit, etc
Decision Making Flow (2)Decision Making Flow (2)
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Improvement for Winding RollerChange of SlitterChange of Slitting Timing
Task Force Team Activities
Change of Coating WidthChange of Separator WidthAgeing Condition of Jumbo RollImprovement for Jumbo Roll Rewinding
Improvement for Extruding MachineUp-Grade PigmentUp-Grade Base Resin
Packing Improvement for Materials
Cleaning of Base Film EdgeOthers
New Investment
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S Loss AnalysisImplemented Countermeasure
©2013 Nitto Denko Corporation. All Rights Reserved.
Finished Products ( 912 rolls)Backing film: ¥ 923,236.82Separator: ¥ 809,607.68Adhesive: ¥ 52,517.47Plastic core: ¥ 541,681.52Packaging materials:¥ 172,900.70 Total ¥ 2,499,944.19
Batch Blend
Two of materials (Unit: Kg)Solvent, Polymer
Four of materials (Unit: Kg)-Solvent -Monomer-Crosslinker A-Crosslinker B
Two of materials (Unit: Width x Length)(1) Backing Films: 570mm width(2) Separator: 650mm width
Two of materials (Unit: Kg)Solvent, Polymer
Adhesive Mass (Unit: Kg)
Energy cost: \83,986( Dissolution, Batch blend, Coating & Drying, Slitting & Inspection and Packaging)
¥ 104,494.22 ¥ 72,936.90
Dissolution Inspection & Packing
Auxiliary materialsPackaging materials
ManufacturingDivision
Each size of product(Width x Length)
Finished Product:Adhesive tapes for Electronics ApplicationQuantity: 912 rolls
Warehouse
¥ 172,900.70
Slitting
One of material: Plastic core (Unit: Piece)Energy: Electric power
Waste : out of Jumbo RollBacking film : ¥ 384 , 163.18Separator : ¥ 497 , 792.32Adhesive : ¥ 21 , 852.79
¥ 384,163.18
¥ 497,792.32
¥ 21,852.
79
¥ 1,307,400.00
¥ 1,307,400.00
¥ 74,370.26
¥ 923,236.82¥ 809,607.68
¥ 52,517.47
¥ 541,681.52
Coating & Drying
Recovery, Refinement, Deodorizing Furnace
Energy(1) Steam, Thermal(2) Electric power
Waste : Backing film : ¥ 22,650Separator : ¥ 121 , 950Adhesive : ¥ 13 , 357
Waste
¥ 22,650.00¥ 121,950.00
¥ 13,357.00
Solvent Gases(100%)
Gas emissions
Store
Waste Waste
The cause of losses does not always lie in the quantity center where they occurred
The cause of losses need to be examined from a perspective of supply chain.
It is important to trace upstream the cause of losses (e.g. Upper processes, Materials, suppliers)
①②
③Suppliers
Materials
Upper quantity center
©2013 Nitto Denko Corporation. All Rights Reserved.
Headline of major Japanese Newspaper:
- Nitto Denko and MFCA
- Invested ”seven hundred million JPY”, based on MFCA
- Reducing Costs
- Firstly in Japan
(Note:JPY1.80/INR)
©2013 Nitto Denko Corporation. All Rights Reserved.
Cost of finished product Cost of waste
Theoretical
Design loss Avoidable/abnormalloss
Normalloss
The scope of improvement target in standard costing
The scope of improvement target in MFCA
Ignored
Standard cost (including allowable losses)
What is ignored in Conventional Cost AccountingWhat is ignored in Conventional Cost Accounting
Cost of finished product
©2013 Nitto Denko Corporation. All Rights Reserved.
Yield rate = 80%4 tapes (E)
=5 tapes (E+F)
Normal loss,C: Theoretical
losse.g. trial loss,(idling loss )
Coated width
Length of Master rollA: Master rollB:(goods completed)
Adhesive compound
Sheet
= InputD=A+C
FinishedE:products
Cut
Master rollB:(goods completed)
Defective lossF:
Edges of roll Normal loss and Theoritical lossG: ( )
Mass Balance vs. Yield Ratio Mass Balance vs. Yield Ratio
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Determine the applicable product and boundary
Establish quantity centers
Set up the material flow model
Decide data collection methods
Determine allocation methods of energy and system cost
Collect material flow data
Make the flow cost matrix
Analyze material flow data (loss analysis and process analysis)
Plan measures to solve problems
Implement measures planned
Collect material flow data
Cost reduction and lowered environmental impacts
Repeat this cycle
MFCA and PDCA Cycle
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Cost
2001 2004 2012(Latest)
Product 67% 78% 93%
MaterialLoss
33% 22% 7%
Total 100% 100% 100%
ImprovementImprovement
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Example of Key Factor for Success(1)Example of Key Factor for Success(1)
Number of the established quantity center
Cost (man-hours) and degree of the accuracy of data
High
low
small large
Cost
Degree of the accuracy of data
Reasonable level
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Example of Key Factor for Success (2)Example of Key Factor for Success (2)
Priority of Countermeasure:
1. Avoidable/Abnormal Loss: Poor Workmanship, Spoilage, Defective Unit , etc
2. Normal Loss: Set-up, Trial Running, Cleaning, (Sample), etc
3. Theoretical/ Design Loss:
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1. Reduction of industrial waste
2. Reduction of CO2 emission
External BenefitsExternal Benefits
Environmental Impacts
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Cost 2001 2004 2011
Product 136.8 136.8 136.8
MaterialLoss
73.2 66.0(-7.2)
58.8(-14.4)
Total 210.0 202.8 195.6
ImprovementImprovement
Unit: Ton CO2, one product only
©2013 Nitto Denko Corporation. All Rights Reserved.
製造工程単位に廃棄物原価(負の製品)を把握産廃原価はレントゲン、マテリアルフローコスト会計はCTスキャン
どの製造工程の改善に人とお金を投入すべきか優先順位が明確になる
改善効果は「負の製品阻止額(新しい概念)」
現行の会計システムを変えるものではないNecessary information for implementation is often already in a site
It enables companies to cut costs and reduce environmental impact simultaneously
MFCA grasps the cost of material loss for each production process MFCA is like a CT scanner that provides clearer picture of manufacturing processes
It helps to determine the priority of process improvement
The improved performance will be made clear as “savings from curtailing material losses”
Conclusion of MFCAConclusion of MFCA