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Changes in the Manufacturing Environment
This is a simple approach to the problem which relies
on the classification of costs as either fixed or variable in relation
to production output. In some traditional mass-production environments
this classification may be largely justified. However, in many contemporary
manufacturing companies the nature of production has changed significantly.
The change is seen in the traditional accounting classifications as
a decrease in direct labour costs and a steady increase in both manufacturing,
and non-manufacturing overhead costs. This change reflects a move from
value adding activities involving physical work towards those involving
intellectual work. Increasingly it is a company's skilled, knowledgeable
technicians,
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programmers, technologists and product
and process designers who are employed in staff departments, rather than
in production, who actually create the value in modern manufacturing companies.
These 'knowledge workers' engage in activities that indirectly support
manufacturing activities: programmers help set-up CNC machines for production
runs; manufacturing specialists design efficiency and quality improvements
into particular production processes; product designers are engaged in
collaborative work with many departments to design customer value, and
quality, manufacturability and low cost into products.
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