ABSTRACT
In conclusion, here is a recap of how traditional accounting methods may be making your customers wait:
By motivating long runs to amortize overhead and setup costs. Remember, there are customer orders waiting in queue behind the long run.
By motivating large purchase quantities of raw materials to obtain discounts, but which result in large inventories. Cash invested in raw materials, especially raw materials that are not needed immediately, may delay purchases in raw materials that are needed for orders that can ship now.
By motivating build to inventory rather than build to order. Putting product in inventory can improve profit in the short run, and it can also improve traditional metrics like utilization and efficiency. However, an order that can ship and be converting to cash may be waiting in queue behind product that is going to stock.
By not applying a cost to the practice of dedicating resources in the form of machine time, materials, and labor to products that do not need to ship ahead of those that can ship immediately.
By not valuing the cost of resources to make product that goes into inventory any different than those that go into product that can be converted to cash immediately.
By using traditional product cost data to determine the cost–benefit of an investment, project, or customer. Projects that reduce lead time may be undervalued and therefore not authorized.
