Cost reduction techniques include standard costing. However, standard costing has limited applicability and can lead to undesirable results. For example, to minimize the purchase price variance, a purchasing manager may purchase a cheaper, lower quality part. As a result, the quality of the product is likely to be reduced, and the company may experience higher overall costs in the form of rework or warranty problems. In contrast, value engineering is performed on a company-wide basis and can be used in planning, design, and other processes as well as production.
Performance is judged over time, and progress towards goals is emphasized.
In the U.S., changes in the focus and methods of production need to be accompanied by changes in management accounting systems. The Japanese have demonstrated great innovation in their approaches to manufacturing and have provided insights into ways management accounting can help companies better cope with the current worldwide competitive environment. Their methods are particularly attractive in markets where competition is intense. Price increases are more difficult to achieve in this environment. While many organizations seem to realize their management accounting systems are not responsive to today's highly competitive milieu, relatively few have moved ahead to modernize their systems.