Product Quality One implication of a just-in-time inventory philosophy is the need to emphasize product quality. If a component is to be produced just in time for the next production stage, it must be “just right” for its intended purpose. One flawed component can shut down the entire production line, entailing considerable cost. Therefore, managerial accountants have become involved increasingly in monitoring product quality and measuring the costs of maintaining quality.

Productivity As global competition increases in virtually all industries, businesses are forced to reach higher levels of productivity in order to price their products and services competitively. Once again, managerial accountants have been called upon to develop productivity measures to help management meet the challenges of international competition.

Computer – Integrated Manufacturing Over a long period of time, manufacturing processes have evolved from labor-intensive methods to more automated processes, in which most of the work is accomplished by machines. This trend continues today, as computer-integrated-manufacturing (or CIM) systems become more common. A CIM process is fully automated, with computers controlling the entire production process. In CIM systems, the types of costs incurred by the manufacturer are quite different from those in traditional manufacturing environments.

Product Life Cycles and Diversity One impact of highly automated manufacturing systems has been to enable manufacturers to produce an evermore diverse set of products. Moreover, the rate at which technology is changing means that the life cycles of most products are becoming shorter. In the computer industry, for example, product models are used only a few years before they are replaced by more powerful version. To be competitive, manufacturers must keep up with the rapidly changing marketplace. Managers must have timely information about production costs and other product characteristics in order to respond quickly and effectively to the competition.

Exhibit 1-5. Just-in-Time (JIT) Production and Inventory Management System.

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