“Attainment of Sustainable Development employing

Material Flow Cost Accounting / ISO 14051”

- A vision of Industrial Re-Engineering.
Asst. Prof. H D Santoki
Aroh A Vadnerkar

Abstract:
Research and development, along with technology and manufacturing industries, have shown exponential progress by
21st century. On the other end, the core engineering is critically fighting against the screams of environment conservation
and sustainable development. In the same race, a specialized breed of engineers, Industrial Engineers, have remained keen
to mark and attain sustainable development. This paper presents an Industrial Re-Engineering vision by throwing light
on the emerging weapon of environmental and financial performance up gradation, Material Flow Cost Accounting, the
Skeleton of ISO 14051.

Keywords: MFCA, ISO 14051, Material Waste, Cost Accounting, Sustainable Development, Lean Manufacturing.

1. INTRODUCTION TO MFCA: internal and external face. When it internally reduces the
cost incurred behind a process, it also lessens the
Developed and Emerged in Germany, and accepted environmental burden by reducing the input from earth
worldwide by September 2011 as a part of ISO 14051, and market.
Material Flow Cost Accounting is a collective term
abbreviated as MFCA. It is the simple compilation of Sustainable Development in technical terms refer to the
terms: Material, Flow and Cost Accounting. growth of an industry where the coming generation do
not face shortage of resources. Thus making an
Material refers to the input raw materials that are organization self-sufficient to generate enough
involved in a process. These raw materials are either resources from the input and converting maximum
necessarily converted into final product or are exhausted amount of waste into utility. MFCA originated with a
in the process of outcome. Flow denotes the material reason to identify the areas of waste and convert them
behaviour in the shop floor. The directional flow of a into by-products uplifting a firm to self-sustainability
material is generally followed with a vision of MFCA is the basic of ISO 14051:2011 which is a self-
productive and economic process. Cost accounting is the certification standard that directs firm to improve
most essential associated term with the prior as it covers productivity and attain Sustainable Development.
more than certain important work-areas. The global
environment conservation is the need of decade which 2. OBJECTIVES:
has brought in the concept of sustainable development.
Sustainable Development evolved with the increasing
With a vision towards uplifting of financial growth, necessity of environment conservation. The basic
global environment conservation, the updated series of objective of sustainable Development is 3R. ' Re Use,
environment standards, ISO 14000 series, introduced Reduce, Re Cycle'. The material flow is sequenced that
MFCA as the basic of ISO 14051:2011. MFCA has intake material flow is reduced and reused and recycled
rapidly found place in the global market as it not just simultaneously. The objectives and outcomes of
orients itself with reduced disposal waste but finds the sustainable development are highlighted as under:
suitable yield and converts maximum input into final
usable product. 1. Improvement in Environmental and financial
performance:
MFCA preaches a dual benefit to a company on an The more material cost accounting is studied the greater
scope for re-utilization is found in environment and material and energy and disintegrate into more complex
financial performance. modules. The tracking of the material is made by
establishing Quantity Centers. The entire process can be
2. Upgraded version of conventional cost accounting explained as:
and Activity based accounting: 1. QC- Quantity Center-Process where energy/material
A directional approach is given to orthodox approach is used or wasted. It is measured in physical terms like
and calculations are done to reduce following costs: kg, litre, metre cube, etc
2. Positive Product- which is a part of the final product
Material Flow Costs: It includes the purchase costs of 3. Negative Product- which is/are waste product/s and
raw materials. energy/material/ money is wasted behind it.
Systems Costs: It includes the transportation and related Thus, applying the PDCA cycle, the waste amount and
costs. cost is reduced and more resources are recycled, reused
Energy Costs: It covers the costs incurred behind energy, and reduced.
fuel, electricity, etc
Waste management costs: Waste treatment, disposal, etc

3. A 3D approach is given with a vision of improvement

in Economic growth, environmental up gradation and
social inclusion.

4. Remodelling of energy uses and re-structuring losses

and costs behind separated flows.

5. Refinement of MFCA cost analysis and planning.

3. MFCA: THE CORE OF ISO 14051

4. DIFFERENCE BETWEEN MFCA & LEAN
The international standards were established with a MANUFACTURING
vision to bring all global leading manufacturers
available and acceptable for all. Thus it uncovers certain Lean Manufacturing is a Japanese technique (TPS)
points by defining a basic technical terminology for all. established by Toyota Corporation of Japan. It keenly
I gives the guidance on fundamentals. It gives a common focuses on MUDA waste, MURA inconsistency, and
background to global manufacturers. MFCA emerges to MURI unreasonableness. The lean system defines 7
be the core of recently set standard- ISO 14051, an types of waste which are generally responsible:
upgraded version of ISO 14000- Environmental series. - Overproduction – Waiting time – Inventory -
Transportation – Excess Motion – Reprocessing –
MFCA accounts and reduces major losses like end of Defects
coil, edge material, by applying SQC and Quality tools.
The elements of MFCA are quality centers, quantity MFCA concept on the other end first employs waste
centers, material flowmodels, cost calculation and reduction techniques and later brings the Re-engineering
material balance. MFCA makes the firm reach: into action. The same techniques are applied to reuse
and recycle the waste. Thus, after the waste is reduced,
1. Jumbling cross functional team members as a part of MFCA technique takes into consideration the cost
quality circles. accountability by re-utilizing maximum waste, reduce
2. Employing and maintaining total quality management hazardous disposal waste and maintain the cost of waste,
tools and techniques. highlight the cost of waste, achieve material efficiency
3. Convince, gain and acquire top order and and energy efficiency and bring it under the review of
management support. management.
4. Visualization of material flow losses within
organization/ supply chain. Lean manufacturing tools involve Kaizen, Kanban, 5S,
5. Improving co-ordination an awareness for material JIT, VSM, TQM, TPM, 6 sigma, etc
and energy usage.
6. Improves process efficiency. Main tools of MFCA are quantity center establishment,
Conventional MFCA material balancing, cost accounting, charts, etc
Management Facilities Materials
Target 5. ACHIEVING SUSTAINABLE DEVELOPMENT:
Proposal Improve process Cost Efficient,
Eco Friendly Sustainable development is an environment preventive
Manufacturing portal which is ironically impractical to achieve on shop
Goal Increase Productivity floor. The paper attempts to simplify the steps which can
Production Yield Increases assist to achieve and persevere the same. Presented are
2 models to employ MFCA using tools like charting,
MFCA focuses keenly on identification of use of cost & waste accounting of PDCA.
 PLAN - DO - CHECK – ACT- Cycle model dual options of optimization and review decision
Plan: It decides and evaluates the time and quantity making in planning and Input/ Output quality centers
constraint. and unit flows.

DO: The actual work to be done is processed and If the decisions are optimum, than result of elevator
evaluated. model, R1 and R2 will be same. In case different results
are obtained both can be reviewed, evaluated, and
optimally chosen. Thus, Elevator model gives
possibility to explore optimal out of optimum options.

6. RULING THE ALTERNATIVES:

The other tools that lead to waste reduction are discussed

as under and how MFCA stands apart. In Root Cause
Analysis, only the reason behind the waste can be
obtained, and need of brain storming of solution remains
a huge task. Man Material Movement charts describe the
motion economy but waste re-utility remains unjust.
Inventory turnaround ration analysis can only govern
material flow and waste. Thus MFCA shows overall
efficiency and economic tool of improvement in
CHECK: Consider the material costing, waste costing,
environmental horizons.
waste reduction, and reach to a decision after evaluation
of data summary and chartings.

ACT: The scope for improvement is studied

theoretically and applied practically in the Act process
and maintained by continuous improvement process.

A and B are the input materials which undergo processes

to result into output AB. In conventional methods, C is
the waste which is disposed into environment. MFCA
allows C to be cast as input material for a product CD
and notable amount of cost burden is lightened.

7. CONCLUSION:
After going through the paper it can be concluded that
employing MFCA following benefits can be achieved:
1. Reducing material use and energy use and tends
The Elevator model: towards positive ecological turnovers.
In several cases a re-consideration is required to 2. Reduced wastes and energy losses.
conclude if the plan and do phase are judged to precision. 3. Economical savings can be reached in material-
In such situations, elevator model is used which avails energy- disposal costings.
Moreover ISO 14051 has established a hand book of
guidelines to companies for implementation.
1. A bi-monthly/ weekly report for material balance.
2. A watch on estimated monetary value of company’s
work.

8. REFERENCES:

[1] Schmidt, Hache, Herold, Götze “Material Flow Cost

Accounting with Umberto” at Chemnitz University of
Technology, Chair of Management Accounting and
Control
[2] R. Sygulla1, A. Bierer1, U. Götze “Material Flow
Cost Accounting – Proposals for Improving the
Evaluation of Monetary Effects of Resource Saving
Process Designs”
[3] R.B. Breginski, M.G. Cleto, J.L. Sass Junior
“Assembly Line Balancing Using Eight Heuristics” at
22nd International Conference on Production Research
[4] Yasushi Onishi, Katsuhiko Kokubu, and Michiyasu
Nakajima “Implementing Material Flow Cost
Accounting in a Pharmaceutical Company” – Chapter
22, Material Flow Cost Accounting
[5] Katsuhiko Kokubu, Marcelo Kos Silveira Campos,
Yoshikuni Furukawa, and Hiroshi Tachikawa “Material
flow cost accounting with ISO 14051”
[6] Booklet on Material Flow Cost Accounting by
National Productivity Council, India 2012
[7] Yoshikuni Furukawa Secretary Of ISO/TC207 Wg8
Nitto Denko Corporation “MFCA awareness 2 -
Significance and overview of MFCA” At Seminar On
MFCA - Its Applications And Impacts By Malaysian
Companies
[8] Quick Reference To Material Flow Cost Accounting
(ISO 14051) National Productivity Council in Aug 2013
[9] Y P Rao “Productivity Improvement Through Lean
Manufacturing”– Industrial Engineering Journal Vol 8.
August 2015
[10] Prasad B (1998), “A Measure For Measuring Total
Value Towards Designing Goods And Services” The
TQM Magazine.

9. Authors:

H.D.Santoki
Asst. Professor – Industrial Engineering Department
L.E. College Morbi
E-mail id: [email protected]

Aroh A Vadnerkar
B.E. Industrial Engineering
L.E. College Morbi
E-mail id: [email protected]