Cooper, R. and C. A. Raiborn. 1995. Finding the missing pieces in Japanese cost management systems. Advances in Management Accounting (4): 87-102.

Summarized by Chris Hourigan
Master of Accountancy Program
University of South Florida, Summer 2002

At the time of this article there was little understanding of the way the Japanese were able to bring a superior product to market in less time and for less money than their Western counterparts. This article was intended to explain this and the reason for the misconceptions held previously. The authors first set out to dispel the myth about the secrecy of Japanese production methods. They are in fact very open about their operations. It is the authors' position that the reason previous attempts to understand their methods failed was the combination of three main factors.

First, there is a large cultural gap. The visits were really controlled by the Westerners, who brought along their questions and expected full open and descriptive answers that followed their thought process. Obviously, the two cultures thought quite differently and although their questions were answered, the key issues were not revealed. This was not secretive behavior because when the right questions were posed, the answers were promptly given. The Japanese were acting in a manner consistent with their culture to avoid embarrassing the questioner by pointing out that he or she had asked the wrong question.

Second, and maybe the most obvious, is the language barrier. Even with translators, the communication process was lacking. Some words or phrases have no translation. There is no common ground or frame of reference. The Japanese language lacks the precision that the English language possesses, therefore whole conversations can be had without a mention of a subject.

The third obstacle they had to overcome was distraction. This is broken up into two areas. Questioners often were distracted by new innovations such as with "lean enterprise" and did not try to delve further into the Japanese system. They often wrote off the ability of the Japanese to create such a superior product with less cost to a single innovation. And the questioners simply asked the wrong questions. They came looking for a cost accounting system that explained all of the differences and found cost systems remarkably the same as the ones they were using back home. What they needed to understand was the Japanese cost management system. All of their questions about the cost accounting system were answered, but nobody bothered to ask about a broader dynamic.

The broader dynamic was the feedforward system, as opposed to the traditional feedback system. If you think about it, the West produces everything on a feedback method. We compile data after the product has been produced and use that to check goals, not very "kaizen-like". The Japanese use feedforward methods such as target costing, value engineering, and inter-organizational cost management systems to achieve long-term growth. All of these incorporate the goal of reducing cost overtime by increasing functionality and quality. The bigger picture is taken into consideration. The emphasis is on long-term company growth, which eventually trickles down into greater market share.

The authors also touched on another area that creates a Japanese competitive advantage over U.S. companies. It is the worker productivity created by the lean organization. The example in the article showed twice as much production from slightly fewer workers (Toyota's 1993 4.5 million vehicles with 109,000 people compared to Chrysler's 2.47 vehicles with 116,00 people).

The authors also posed several questions such as, will the Japanese cost management techniques work as well in the U.S.?; How will they affect cost accounting?; Will labor unions help or hurt?; and Would inter-organizational cost systems work or will they be considered anti-trust violations?

Although the Japanese have a different culture and a different business mentality, knowledge of the hidden aspects of the Japanese system is needed to understand the global competitive environment and to translate those secrets effectively into U.S. companies and locations.

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