Designing a systems approach to develop cost-management systems in the manufacturing industry

Abstract

Contemporary manufacturing is a global economic force, yet effective management faces challenges due to the relevance of cost management information. The study explored the interdependencies among systems thinking, cost accounting, and business process analysis in the context of effective cost-management systems. The research is guided by three assertions, i.e., viewing the organisation as a goal-oriented system with interconnected components and stakeholders, the flexibility of cost and management accounting compared to financial accounting, and emphasising the analysis of business operations within the organisational system and drawing from operational improvement philosophies. The objective is to evaluate how a systems-based process modelling approach can facilitate the development of an effective cost-management system. Three sub-objectives were formulated: (1)understanding the contextual interaction between systems thinking, cost accounting and business processes, (2) developing a process modelling approach that considers organisational systems and operational complexities for cost-management system design, and (3) validating the process modelling approach in context. The literature is based on a three-pillar approach to effective cost management. The first pillar, systems thinking, encompasses systems theory, systems engineering, and cybernetics, providing a comprehensive understanding essential for the subsequent process modelling developmental efforts. The second pillar focuses on cost accounting, comprehensively covering costing principles, cost management, costing systems, methods, and approaches, providing the necessary knowledge for process modelling development. The final pillar explores the significance of business process analysis, emphasising its value in formulating an effective cost-management system. This literature foundation provides essential knowledge for process modelling in the research context. The empirical research is founded on an action design research (ADR) methodology, applying an elaborated action design research (eADR) approach. The research adopted a researcher practitioner concept, involving industry experts who possess knowledge in designing and implementing cost-management systems and recognise the significance of relevant cost information for effective decision making. The eADR iterations utilised in the process model design are as follows: The problem-centred diagnosis iteration involved the collaborative participation of the researcher-practitioner team. Its objective was to comprehensively define and validate the encountered business problem within the designated problem class. The outcome was the creation of developmental artefacts in process flow format, serving as foundational guidelines for subsequent process model development. This knowledge was formalised in focused developmental guides to facilitate the collection of relevant information needed to develop a cost-management system. The object-centred design iteration, facilitated by ongoing collaboration with the researcher-practitioner team, integrates the three pillars (systems thinking, cost accounting and business processes) into three dimensions: costing process, operational systems and costing systems. These dimensions formed the foundation for developing an integrated process flow that adopted a multi-dimensional and multi-level approach. In the final phase of knowledge formalisation, the insights gained were applied to develop a contextual cost-management system environment to comprehensively represent the wicked problem that effective cost-management systems seek to address. The development-centred implementation iteration served to verify and validate the supportive artefacts and the final process model. Industry experts experienced in designing and implementing cost-management systems evaluated the prior artefacts against pre-defined design statements through scrutiny and assessment, leading to minor enhancements. Subsequently, the validated findings were incorporated into the final process model. The study concluded with a reflective discussion and summary of the project, providing an overview of attaining research objectives. Additionally, the study offers recommendations, identifies potential limitations, and highlights opportunities for future research endeavours.