©2013 nitto denko corporation. all rights reserved. material flow cost accounting...

©2013 Nitto Denko Corporation. All Rights Reserved.

Material Flow Cost Accounting（ＭＦＣＡ）

March, 2013Yoshikuni 　 FurukawaSecretary of ISO/TC207 WG8NITTO DENKO CORPORATION


Contents:

1. Introduction

2. Significance and Characteristics of Material Flow Cost Accounting (MFCA)

3. MFCA vs. Conventional Cost Accounting

4. Implementation & Case Example of Nitto Denko

5. Implementation & Key Factor for Success


Modern image ofenvironmental management

Traditional image ofenvironmental management

level of environmental management

highlow

costs

high

low

Costs increase in proportion to the level of environmental management

level of environmental management

highlow

costs

high

low

Costs decrease in proportion to the level of environmental management

Introduction


• MFCA focuses on emission (waste)• Profit is hidden in emission (waste)• MFCA finds out the hidden profit

INR

MFCA

Japanese “Mottainai” Concept, “What a shame to be wasteful” in ISO

Significance of Material Flow Cost Accounting


Reducing environmental impacts

Increasing profitImproving productivity

Internal benefits External benefits

Benefits of MFCA

Contributing to sustainable development


[Goods from Process 1] - Raw materials 900 g, $10,000 - Conversion cost $10,000

[Conversion cost] $15,000Total inputs 900 g, $35,000

Raw materials1,000 g（$10,000）Conversion cost

$10,000

Raw materials 100 g, $0

Conversion cost, $0

Total 100 g, $0

Flow to emissions

Flow to finished products

Process 1 Process 2

Emissions (waste)

Inputs：・Raw materials - Quantity: 1,000 g - Unit cost: $10/ g ・Conversion cost: - Process 1: $10,000 - Process 2: $15,000

Raw materials 720 g, $10,000 Conversion cost $25,000 Total 720 g, $35,000


Conversion cost, $0

Total 180 g, $0

Flow to emissions


Finished products

Emissions (waste)


Conversion cost, $0

Total 280 g, $0

Emissions (waste)

Conventional Cost AccountingConventional Cost Accounting


[Goods from Process 1] - Raw materials 900 g, $9,000 - Conversion cost $9,000

[Conversion cost] $15,000Total inputs 900 g, $33,000

Raw materials1,000 g（$10,000）Conversion cost

$10,000

Raw materials 100 g, $1,000 Conversion cost, $1,000 Total 100 g, $2,000

Flow to emissions


Process 1 Process 2

Emissions (waste)

Inputs：・Raw materials - Quantity: 1,000 g - Unit cost: $10/ g ・Conversion cost: - Process 1: $10,000 - Process 2: $15,000

Raw materials 720 g, $7,200

Conversion cost $19,200 Total 720 g, $26,400


Flow to emissions


Finished products

Emissions (waste)


Emissions (waste)

Characteristics of MFCACharacteristics of MFCA


Conventional cost accounting

MFCA

Outputs

・Raw materials - Quantity: 1,000 g - Unit cost: $10/ g - Cost of materials: $10,000・Conversion cost: - Process 1: $10,000 - Process 2: $15,000

Total: $35,000

Inputs

Raw materials: 720 g ($10,000）Conversion cost: $25,000

Total: $35,000

Raw materials: 280 g （$0）Conversion cost: $0

Total: $0

Raw materials: 720 g ($7,200）Conversion cost: $19,200

Total: $26,400

Raw materials: 280 g （$2,800）Conversion cost: $5,800

Total: $8,600


Flow to emissions


Flow to emissions

MFCA 　 vs. 　 Conventional Cost Accounting

MFCA 　 vs. 　 Conventional Cost Accounting


Implementation of MFCAImplementation of MFCA

1. Material: Input 　 Value 　 of 　Material 　

　 2. Energy: Input 　 Value 　 of 　 Energy

3. System: Labor, Depreciation 　 and 　etc.,

　 4. Disposal (Waste Management Cost) ：

Cost Elements


Material Flow Cost Accounting (Flow Model)Material Flow Cost Accounting (Flow Model)


Top: Adhesive(Red)Middle: Backing 　 Film(Blue)Bottom: Separator(Green)

Product: Adhesive Tapes for Electronics Application Quantity: 912pcs. Period: one month (Nov. 01-30, 2000), (JPY1.80/INR )

Flow 　 to 　ProductFlow 　 to 　 Waste

29%

68%

　 3%

　 Waste: 　　　 103.14 ㎏　　　　　　 7 ， 299.10 ㎡

　　　　　　　 10 ， 785.50 ㎡

Waste: 　￥ 21 ， 852.79　￥ 384 ， 163.18

￥ 497 ， 792.32

<Total 　 Waste>

　　　 Waste: 　　　　　 86.27 ㎏　　　　　　　　 430.35 ㎡

　　　　　　　　 2,642.25 ㎡

　　　 Waste: 　　￥ 13,357.00￥ 22,,650.00

　￥ 121,950.00

Solvent 　 Gases 　 1,981.29 ㎏

Solvent 　 Gases ￥ 99 ， 064.50

　 Waste: 　　　　 289.41 ㎏　 7 ， 729.45 ㎡

13 ， 427.75 ㎡

Waste: 　￥ 35 ， 209.79　￥ 406 ， 813.18

￥ 619 ， 742.32（￥ 1 ， 061 ， 765.29 ）

　　　　　 351.01 ㎏　　 24 ， 840.60 ㎡

28 ， 327.00 ㎡

　　￥ 74 ， 370.26￥ 1 ， 307 ， 400.00￥ 1 ， 307 ， 400.00

　 Slitting 　 etc.,

　　　　　　　　　　　　　　￥ 65 ， 009.62　　　　￥ 1 ， 142 ， 850.00

　　　　　　￥ 1 ， 142 ， 850.00

　　 306.83 ㎏　 21 ， 714.15 ㎡　 24 ， 761.75 ㎡

　 Coating & Drying

SI: 　　　　　　　 127.58 ㎏9 ， 028.80 ㎡

10 ， 296.00 ㎡

EI: 　　　　　　　　 83.40 ㎏ 5 ， 902.35 ㎡6 ， 730.75 ㎡

　　　 SI: 　　　　￥ 27 ， 031.58￥ 475 ， 200.00￥ 475 ， 200.00

　　　　　　 EI: 　　　　￥ 17 ， 670.94￥ 310 ， 650.00￥ 310 ， 650.00

　 Store

　　　　　 247.87 ㎏　　 17 ， 541.50 ㎡

17 ， 541.50 ㎡

￥ 52 ， 517.47￥ 923 ， 236.82￥ 809 ， 607.68

Core 　 etc ￥ 714 ， 582.22　（￥ 2 ， 499 ， 944.19 ）

Product

2 ， 474.39 ㎏　　　　　　　 22 ， 144.50 ㎡　　　　　　　 27 ， 404.00 ㎡

　　￥ 177 ， 431.12　　￥ 1 ， 165 ， 500.00

￥ 1 ， 264 ， 800.00

Dissolution 　etc., 　

Solvent 　 Gases 　 1 ， 981.29 ㎏

Solvent Gases ￥ 99,064.50

“Material” Flow Chart with Data


CExpenditureMaintenances

BOperating timeDepreciation

(straight-line method)

AMan-hourLabor (legular employee ）

AMan-hourLabor (part-timer)

CExpenditureTools and Implements

BConsumptionEnergy （ fuel ）

BConsumptionEnergy （ electricity ）

Allocation Type Allocation Base Cost Elements

A 　：　 Allocation on base of real data B 　：　 Allocation on base of monthly data (correctly as possible)C 　：　 Apportionment on base of monthly data

Allocation Method of “Energy and System Cost”

©2013 Nitto Denko Corporation. All Rights Reserved. 13

Cost Material Energy System Disposal Total

Product 2,499,944(68.29%)

57,354(68.29%)

480,200(68.29%)

N/A 3,037,498(67.17%)

Material loss

1,160,830(31.71%)

26,632(31.71%)

222,978(31.71%)

74,030(100%)

1,484,470(32.83%)

Total 3,660,774(100%)

83,986(100%)

703,178(100%)

74,030(100%)

4,521,968912pcs (100%)

Result of Material Flow Cost AccountingResult of Material Flow Cost Accounting

Period: from November 01 to 30, 2000 (Unit: JPY ), (JPY1.80/INR )


Material Flow P/L (Unit: Yen) Conventional P/L (Unit: Yen)

Sales* 15,000,000 Sales* 15,000,000

Cost of Product

3,037,498 Cost of Sales 4,521,968

Cost ofMaterial loss

1,484,470 N/A N/A

Gross Profit 10,478,032 Gross Profit 10,478,032

Selling, General and Administrative Expenses*

8,000,000 Selling, General and Administrative Expenses*

8,000,000

Operating Profit 2,478,032 Operating Profit 2,478,032

*Provisional Figure

Period: from November 01 to 30, 2000 (Unit: JPY) , (JPY1.80/INR)

Comparison of P/LComparison of P/L


Input value of Material Loss and input value of Product are clarified in each Quantity Center.

The Material Loss Analysis in each Production Process

Implemented Countermeasure to reduce Material loss

Increase of profit and reduction of environmental impact 　

Decision 　 Making 　 Flow (1)

Decision 　 Making 　 Flow (1)


　Material Loss Analysis 　 1. Theoretical/ Design Loss: Machine Design, Solvent Medium, Edge of Jumbo Roll, etc

2. Normal Loss: Set-up, Trial Running, Cleaning, Sample, etc

3.Avoidable/Abnormal Loss: Poor Workmanship, Spoilage, Defective Unit, etc　　

Decision Making Flow (2)Decision Making Flow (2)


Improvement for Winding RollerChange of SlitterChange of Slitting Timing

Task Force Team Activities

Change of Coating WidthChange of Separator WidthAgeing Condition of Jumbo RollImprovement for Jumbo Roll Rewinding

Improvement for Extruding MachineUp-Grade PigmentUp-Grade Base Resin

Packing Improvement for Materials

Cleaning of Base Film EdgeOthers

New Investment

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00%

Ａ

Ｂ

Ｃ

Ｄ

Ｅ

Ｆ

Ｇ

Ｈ

Ｉ

Ｊ

Ｋ

Ｌ

Ｍ

Ｎ

Ｏ

Ｐ

Ｑ

Ｒ

Ｓ Loss AnalysisImplemented Countermeasure


Finished Products （ 912 rolls)Backing film: ￥ 923,236.82Separator: ￥ 809,607.68Adhesive: ￥ 52,517.47Plastic core: 　　￥ 541,681.52Packaging materials:￥ 172,900.70　　 Total 　　　￥ 2,499,944.19

Batch Blend

Two of materials (Unit: Kg)Solvent, Polymer

Four of materials (Unit: Kg)-Solvent -Monomer-Crosslinker A-Crosslinker B

Two of materials (Unit: Width x Length)(1) Backing Films: 　　　 570mm width(2) Separator: 　　　 650mm width

Two of materials (Unit: Kg)Solvent, Polymer

Adhesive Mass (Unit: Kg)

Energy cost: \83,986（ Dissolution, Batch blend, Coating & Drying, Slitting & Inspection and Packaging)

￥ 104,494.22 ￥ 72,936.90

Dissolution Inspection & Packing

Auxiliary materialsPackaging materials

ManufacturingDivision

Each size of product(Width x Length)

Finished Product:Adhesive tapes for Electronics ApplicationQuantity: 912 rolls

Warehouse

￥ 172,900.70

Slitting

One of material: Plastic core (Unit: Piece)Energy: Electric power

Waste ： out of Jumbo RollBacking film ：　　￥ 384 ， 163.18Separator ：　￥ 497 ， 792.32Adhesive ：　￥ 21 ， 852.79

￥ 384,163.18

￥ 497,792.32

　￥ 21,852.

79

￥ 1,307,400.00

￥ 1,307,400.00　　

￥ 74,370.26

￥ 923,236.82￥ 809,607.68

　￥ 52,517.47

￥ 541,681.52

Coating & Drying

Recovery, Refinement, Deodorizing Furnace

Energy(1) Steam, Thermal(2) Electric power

Waste ：　Backing film ：　　　　￥ 22,650Separator ：　　　￥ 121 ， 950Adhesive ：　　　￥ 13 ， 357

Waste

　￥ 22,650.00￥ 121,950.00

￥ 13,357.00

Solvent Gases(100%)

Gas emissions

Store

Waste Waste

The cause of losses does not always lie in the quantity center where they occurred

The cause of losses need to be examined from a perspective of supply chain.

It is important to trace upstream the cause of losses (e.g. Upper processes, Materials, suppliers)

①②

③Suppliers

Materials

Upper quantity center


Headline of major Japanese Newspaper:

- Nitto Denko and MFCA

- Invested ”seven hundred million JPY”, based on MFCA

- Reducing Costs

- Firstly in Japan

(Note:JPY1.80/INR)


Cost of finished product Cost of waste

Theoretical 　

Design loss Avoidable/abnormalloss

Normalloss

The scope of improvement target in standard costing

The scope of improvement target in MFCA

Ignored

Standard cost (including allowable losses)

What is ignored in Conventional Cost AccountingWhat is ignored in Conventional Cost Accounting

Cost of finished product


Yield rate ＝ 80%4 tapes (E)

＝5 tapes (E+F)

Normal loss,Ｃ： Theoretical

losse.g. trial loss,（idling loss ）

Coated width

Length of Master rollＡ： Master rollＢ：(goods completed)

Adhesive compound

Sheet

= InputＤ＝Ａ＋Ｃ

FinishedＥ：products

Cut

Master rollＢ：(goods completed)

Defective lossＦ：

Edges of roll Normal loss and Theoritical lossＧ：（）

Mass Balance vs. Yield Ratio Mass Balance vs. Yield Ratio


Determine the applicable product and boundary

Establish quantity centers

Set up the material flow model

Decide data collection methods

Determine allocation methods of energy and system cost

Collect material flow data

Make the flow cost matrix

Analyze material flow data (loss analysis and process analysis)

Plan measures to solve problems

Implement measures planned

Collect material flow data

Cost reduction and lowered environmental impacts

Repeat this cycle

MFCA and PDCA Cycle


Cost

2001 2004 2012(Latest)

Product 67% 78% 93%

MaterialLoss

33% 22% 7%

Total 100% 100% 100%

ImprovementImprovement


Example of Key Factor for Success(1)Example of Key Factor for Success(1)

Number of the established quantity center

Cost (man-hours) and degree of the accuracy of data

High

low

small large

Cost

Degree of the accuracy of data

Reasonable level


Example of Key Factor for Success (2)Example of Key Factor for Success (2)

　 Priority of Countermeasure:

1. Avoidable/Abnormal Loss: Poor Workmanship, Spoilage, Defective Unit , etc

2. Normal Loss: Set-up, Trial Running, Cleaning, (Sample), etc

3. Theoretical/ Design Loss: 　


1. Reduction of industrial waste

2. Reduction of CO2 emission

External BenefitsExternal Benefits

Environmental Impacts


Cost 2001 2004 2011

Product 136.8 136.8 136.8

MaterialLoss

73.2 66.0(-7.2)

58.8(-14.4)

Total 210.0 202.8 195.6

ImprovementImprovement

Unit: Ton CO2, one product only


製造工程単位に廃棄物原価（負の製品）を把握産廃原価はレントゲン、マテリアルフローコスト会計はＣＴスキャン

どの製造工程の改善に人とお金を投入すべきか優先順位が明確になる

改善効果は「負の製品阻止額（新しい概念）」

現行の会計システムを変えるものではないNecessary information for implementation is often already in a site

It enables companies to cut costs and reduce environmental impact simultaneously

MFCA grasps the cost of material loss for each production process MFCA is like a CT scanner that provides clearer picture of manufacturing processes

It helps to determine the priority of process improvement

The improved performance will be made clear as “savings from curtailing material losses”

Conclusion of MFCAConclusion of MFCA

©2013 nitto denko corporation. all rights reserved. material flow cost accounting...

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