Accounting Information Systems : Manufacturing Organisation

1.Role of Accounting Information System (AIS) in the value chain of a manufacturing organisation:

AIS mainly include procedures, people, software, data and information technology. It assembles information about transactions as well as activities and then processes he collected information into data that are useful in decision-making procedures (Adenike & Michael, 2016).

The crucial target of any organization is to offer value to its consumers. An organization will earn profit only when its created value is more than the cost of production of its services or products. In manufacturing organization, AIS creates value by supplying timely and accurate data so that major ac

• Improving the quality with minimisation of costs of services and products
• Improvement of efficiency
• Improvement in decision-making competency
• Increasing the process of knowledgesharing within the organization
• Improving the system of internal control (Liu et al., 2013).

Well-planned AIS has the ability of increasing the profit of any business by improving the effectiveness and efficiency in their supply chain. For a manufacturing organization, their main activities are placing purchase order to supplier, receiving the goods from vendors, making payment to them, manufacturing the final good using the received goods from vendor, taking orders from customers, shipping of the final goods, receipt of payments from customers and maintaining general ledger for all the transactions. All these activities can be carried out smoothly with the help of well-designed AIS. Moreover, the functional decisions taken by the managerial personnel regarding achieving the target performance through ideal production, marketing and supply are managed by AIS only (Hall, 2012).

2. Assistance of AIS with decision making of contemporary manufacturing organisation:

The superiority of decisions, obtained by managerial personnel, largely depends on the accuracy and substance of data provided by available system. AIS is one of the most efficient tool for making decisions by management, as it offers an orderly system of organising and gathering data about several business transactions, so that it can be utilized as a support to management in business operation. AIS also help managers to have clear idea about their tasks and therefore decrease uncertainty in making decisions. AIS is important to each organization both non-profit oriented as well as profit oriented as no business is free from making decisions in their business operations (Collier, 2015).

In today’s competitive business world, AIS has proved to be a information system, which does not stop working at unavailability of sufficient information and financial data, but it also comprises of information and quantitative and descriptive data that is helpful in making decisions for users with diversity. Such users are comprised of lenders, customers, potential investors, governments, creditors, suppliers and public. Responsibilities of administration are to prepare and display the programs of accounting, the information of which must be capable of attaining the target. Therefore, the functions of AIS in making effective decisions cannot be over looked (Ward & Peppard, 2016).

In a manufacturing organization, managers are engaged with various types of activities that involves reliable and quality information. They also require non-financial data like quality of production, statistics and many more. Therefore, quality of data produced from AIS is very essential for management. Efficiency of AIS also depends on the need of the person who makes decision, as data produced by the system must satisfy the requirement for managerial reports, operation process, control and budgeting within the business. Usefulness of data is described as the level to which they are helpful in making decisions. Five ways o evaluate the usefulness of data are – demand of the subject for the particular item, level to which it affects the forecast of the subject, the degree to which the item influence the decision of the subject and to what extent the item directs to better decisions (Pettigrew, 2014).

3. Using value chain analysis to create competitive advantage for manufacturing organization:

Value chain analysis can be used to improve the performances of the business and its major function is to develop and generate competitive advantages. All business organizations including the manufacturing ones, makes decisions to make profit and compete in the market. Analysis of value chain can be exercised to formulate strategies to compete, understand the basis of competitive advantages and recognise and create the inter relationships and linkages between movements that generates value. An organization’s hunt for competitive advantages starts with strategic decisions it make with respect to their position in the industry. They should understand the procedure to turn their competitive strategies to competitive advantages (Soosay, Fearne & Dent, 2012).

The growth of a manufacturing organization’s competitive advantage means they must hold some simulation of their strategies that can create barriers for their competitors. A value chain is a way of giving shape to their activities that are required to offer service or product to consumer. It represents the manner a product achieves value as it move through the process of production, design, delivery, marketing and service to consumers (Barney, 2012).

References:

Adenike, A. T., & Michael, A. A. (2016). Effect of Accounting Information System Adoption on Accounting Activities in Manufacturing Industries in Nigeria.

Barney, J. B. (2012). Purchasing, supply chain management and sustained competitive advantage: The relevance of resource?based theory. Journal of Supply Chain Management, 48(2), 3-6.

Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons.

Hall, J. A. (2012). Accounting information systems. Cengage Learning.

Liu, H., Ke, W., Wei, K. K., & Hua, Z. (2013). The impact of IT capabilities on firm performance: The mediating roles of absorptive capacity and supply chain agility. Decision Support Systems, 54(3), 1452-1462.

Pettigrew, A. M. (2014). The politics of organizational decision-making. Routledge.

Soosay, C., Fearne, A., & Dent, B. (2012). Sustainable value chain analysis-A case study of Oxford Landing from “vine to dine”. Supply Chain Management: An International Journal, 17(1), 68-77.

Ward, J., &Peppard, J. (2016). The Strategic Management of Information Systems: Building a Digital Strategy. John Wiley & Sons.