Material Flow Cost Accounting

Transcription

1 Material Flow Cost Accounting (MFCA) March, 2013 Yoshikuni Furukawa Secretary of ISO/TC207 WG8 NITTO DENKO CORPORATION

2 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

3 Introduction Traditional image of environmental management Modern image of environmental management high high costs Increase in recycle rate costs Reduction in waste low low level of environmental management high Costs increase in proportion to the level of environmental management low low level of environmental management Costs decrease in proportion to the level of environmental management high

4 Significance of Material Flow Cost Accounting 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

5 Benefits of MFCA Internal benefits External benefits Increasing profit Improving productivity Reducing environmental impacts Contributing to sustainable development

6 Conventional Cost Accounting Inputs: Raw materials - Quantity: 1,000 g - Unit cost: $10/g Conversion cost: - Process 1: $10,000 - Process 2: $15,000 Process 1 Process 2 Raw materials 1,000 g($10,000) Conversion cost $10,000 Flow to emissions Flow to finished products [Goods from Process 1] - Raw materials 900 g, $10,000 - Conversion cost $10,000 [Conversion cost] $15,000 Total inputs 900 g, $35,000 Flow to finished products Finished products Raw materials 720 g, $10,000 Conversion cost $25,000 Total 720 g, $35,000 Flow to emissions Emissions (waste) Raw materials 100 g, $0 Conversion cost, $0 Total 100 g, $0 Emissions (waste) Raw materials 180 g, $0 Conversion cost, $0 Total 180 g, $0 Emissions (waste) Raw materials 180 g, $0 Conversion cost, $0 Total 280 g, $0

7 Characteristics of MFCA Inputs: Raw materials - Quantity: 1,000 g - Unit cost: $10/g Conversion cost: - Process 1: $10,000 - Process 2: $15,000 Process 1 Process 2 Raw materials 1,000 g($10,000) Conversion cost $10,000 Flow to emissions Flow to finished products [Goods from Process 1] - Raw materials 900 g, $9,000 - Conversion cost $9,000 [Conversion cost] $15,000 Total inputs 900 g, $33,000 Flow to finished products Finished products Raw materials 720 g, $7,200 Conversion cost $19,200 Total 720 g, $26,400 Flow to emissions Emissions (waste) Raw materials 100 g, $1,000 Conversion cost, $1,000 Total 100 g, $2,000 Emissions (waste) Raw materials 180 g, $1,800 Conversion cost, $4,800 Total 180 g, $6,400 Emissions (waste) Raw materials 280 g, $2,800 Conversion cost, $5,800 Total 280 g, $8,600

8 MFCA vs. Conventional Cost Accounting Inputs 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 Conventional cost accounting MFCA Outputs Flow to finished products Flow to emissions Flow to finished products Flow to emissions 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

9 Implementation of MFCA Cost Elements 1. Material: Input Value of Material 2. Energy: Input Value of Energy 3. System: Labor, Depreciation and etc., 4. Disposal (Waste Management Cost):

10 Material Flow Cost Accounting (Flow Model)

11 Material Flow Chart with Data Product: Adhesive Tapes for Electronics Application Quantity: 912pcs. Period: one month (Nov , 2000), (JPY1.80/INR ) Flow to Product Flow to Waste Dissolution etc., Coating & Drying Store Slitting etc., Product 2, kg 22, m2 27, m kg 21, m2 24, m2 SI: kg 9, m2 10, m kg 24, m2 28, m kg 17, m2 17, m2 177, ,165, ,264, , ,142, ,142, EI: kg 5, m2 6, m2 74, ,307, ,307, , , , Core etc 714, ( 2,499,944.19) SI: 27, , , <Total Waste> 68% Waste: kg m2 2, m2 EI: 17, , , Waste: kg 7,299.10m2 10,785.50m2 Waste: kg 7, m2 13, m2 Solvent Gases 1, kg Solvent Gases 1, kg Waste: 13, ,, , Waste: 21, , , % Waste: 35, , , ( 1,061,765.29) Solvent Gases 99, Top: Adhesive(Red) Middle: Backing Film(Blue) Bottom: Separator(Green) 3% Solvent Gases 99,064.50

12 Allocation Method of Energy and System Cost Cost Elements Energy (electricity) Energy (fuel) Labor (legular employee) Labor (part-timer) Depreciation (straight-line method) Maintenances Tools and Implements Allocation Base Consumption Consumption Man-hour Man-hour Operating time Expenditure Expenditure Allocation Type B B A A B C C A : Allocation on base of real data B : Allocation on base of monthly data (correctly as possible) C : Apportionment on base of monthly data

13 Result of Material Flow Cost Accounting Period: from November 01 to 30, 2000 (Unit: JPY ), (JPY1.80/INR ) 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, pcs (100%) 12

14 Comparison of P/L Period: from November 01 to 30, 2000 (Unit: JPY), (JPY1.80/INR) Material Flow P/L (Unit: Yen) Conventional P/L (Unit: Yen) Sales* 15,000,000 Sales* 15,000,000 Cost of Product Cost of Material loss 3,037,498 Cost of Sales 4,521,968 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

15 Decision Making Flow (1) 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

16 Decision Making Flow (2) 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

17 Implemented Countermeasure Improvement for Winding Roller Change of Slitter Change of Slitting Timing Task Force Team Activities Change of Coating Width Change of Separator Width Ageing Condition of Jumbo Roll Improvement for Jumbo Roll Rewinding Improvement for Extruding Machine Up-Grade Pigment Up-Grade Base Resin r q p o n m l k j i h g f e d c Loss Analysis Packing Improvement for Materials Cleaning of Base Film Edge Others b a ` 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% New Investment

18 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) Suppliers 3 Recovery, Refinement, Deodorizing Furnace Solvent Gases (100%) 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 Energy (1) Steam, Thermal (2) Electric power Gas emissions One of material: Plastic core (Unit: Piece) Energy: Electric power Auxiliary materials Packaging materials 172, Dissolution 104, , Two of materials (Unit: Kg) Solvent, Polymer Batch Blend 2 Adhesive Mass (Unit: Kg) Materials Waste Coating & Drying Waste 1 Store Upper quantity center 1,307, ,307, , Slitting Waste 541, , , , Each size of product (Width x Length) Inspection & Packing Manufacturing Division Finished Product: Adhesive tapes for Electronics Application Quantity: 912 rolls Warehouse Finished Products(912 rolls) Backing film: 923, Separator: 809, Adhesive: 52, Plastic core: 541, Packaging materials: 172, Total 2,499, Energy cost: \83,986 (Dissolution, Batch blend, Coating & Drying, Slitting & Inspection and Packaging) 13, Waste: Backing film: 22,650 Separator: 121,950 Adhesive: 13,357 22, , , , , Waste: out of Jumbo Roll Backing film: 384, Separator: 497, Adhesive: 21, The cause of losses does not always lie in the quantity center where they occurred

19 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)

20 What is ignored in Conventional Cost Accounting Standard cost (including allowable losses) Cost of finished product Avoidable/ abnormal loss The scope of improvement target in standard costing Normal loss Theoretical Design loss Ignored The scope of improvement target in MFCA Cost of finished product Cost of waste

21 Mass Balance vs. Yield Ratio D=A+C = Input Adhesive compound Coated width Sheet A:Length of Master roll C:Normal loss, Theoretical loss (e.g. trial loss, idling loss ) B:Master roll (goods completed) G:Edges of roll(normal loss and Theoritical loss) F:Defective loss Cut E:Finished products B:Master roll (goods completed) 4 tapes (E) Yield rate = = 80% 5 tapes (E+F)

22 MFCA and PDCA Cycle Determine the applicable product and boundary Make the flow cost matrix Set up the material flow model Analyze material flow data (loss analysis and process analysis) Establish quantity centers Collect material flow data Repeat this cycle Plan measures to solve problems Decide data collection methods Determine allocation methods of energy and system cost Implement measures planned Collect material flow data Cost reduction and lowered environmental impacts

23 Improvement Cost (Latest) Product 67% 78% 93% Material Loss 33% 22% 7% Total 100% 100% 100%

24 Example of Key Factor for Success(1) High Degree of the accuracy of data Cost (man-hours) and degree of the accuracy of data Cost low small Number of the established quantity center Reasonable level large

25 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:

26 External Benefits Environmental Impacts 1. Reduction of industrial waste 2. Reduction of CO2 emission

27 Improvement Unit: Ton CO2, one product only Cost Product Material Loss (-7.2) 58.8 (-14.4) Total

28 Conclusion of MFCA 製造工程単位に廃棄物原価 MFCA grasps the cost of material loss for ( each 負の製品 production ) を把握 process MFCA is like a CT scanner that provides clearer picture of manufacturing processes 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 It helps to determine the priority of process improvement The improved performance will be made clear as savings from curtailing material losses 改善効果は 負の製品阻止額 ( 新しい概念 ) Necessary information for implementation is often 現行の会計システムを変えるものではない already in a site It enables companies to cut costs and reduce environmental impact simultaneously

29 Thank you very much YOSHIKUNI FURUKAWA ISO/TC207 WG8 Secretary General Manager SUSTAINABLE MANAGEMENT NITTO DENKO CORPORATION 10 TH FLOOR, EAST TOWER, GATE CITY OHSAKI ,OHSAKI,SHINAGAWA-KU TOKYO , JAPAN T E L: F A X: yoshikuni_furukawa@gg.nitto.co.jp