The
costing of tangible benefits
Scores of research studies have identified
numerous tangible benefits that firms may realise as
a result of the successful adoption and integration
of new technology with existing technical and social
systems. The following are several examples of tangible
potential benefits of new technology that must be considered
in new cost accounting systems:
Inventory savings - Flexibility, orderly product flow, higher quality, and better scheduling all result in reductions of work-in-process and finished goods inventories in manufacturing. These savings are easily documented at the time the technology becomes operational. However, these savings are also realised, and quite often missed, in all future years.
Less floor space - This can be accounted for by considering the opportunity costs of new space, either its rental value or the annualised costs of new construction. Firms can actually rent out the new space, can consolidate operations, curtail plant and/or office expansion, or reorganise systems and workflows. Improvements in workflows lead to savings in materials handling costs such as fork-lift trucks and operators.
Higher quality - New technology often leads to more uniform production and frequently and to an order-of-magnitude decline in defects. Five- to ten-fold reductions in waste, scrap and rework have also been reported. These increases in quality not only lead to reductions in warranty expenses, but they lead to competitive advantages in the market. Although one can not estimate these types of savings or opportunities with great accuracy, they should not be considered as zero.
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Holistic Management Pty. Ltd.