Computers, cell phones, the internet, and other new technologies have changed our lives and revolutionized business and industry in the last two decades. E-business, b2b, b2c, cloud computing have all changed the very business models of major corporations. Google, Facebook, Amazon, e-Bay could not have come into existence without such technologies. Here are some new technologies with the potential to make even greater changes to the way we do business and run our lives. Management Accountants must be aware that these technologies will have a major impact cost management and decision making.
In this issue of On Target, I will summarise the research I have undertaken for my next editorial in the Journal of Applied Management Accounting Research (JAMAR).
3-D Printing: A 3-D printer is literally a factory in a box; a person puts in raw material, pushes a button, and the box makes an object. 3D printing is any of various processes to make a three-dimensional object. In 3D printing, additive processes are used, in which successive layers of material are laid down under computer control. These objects can be of almost any shape or geometry, and are produced from a 3D model or other electronic data source. A 3D printer is a type of industrial robot. The management accountant must be aware of the significant changes to cost structures that result in 3-D printing. The old concept of direct materials and labour and indirect overhead allocated based on activities will need to be replaced by a costing model that recognizes the chemical elements of components. As these chemical elements can be used for a number of products; the concept of direct materials becomes a thing of the past. All costs are indirect. Also, the concept of set-up costs, transportation costs and quality control costs will need to be rethought. The benefits of mass production would be eliminated with the advent of 3D printing. Every product will be a customised product. In addition, there will be an impact on international trade. A design done in one country can be emailed to another without any shipping costs, insurance, customs duties or import taxes being paid.
Maglev: A magnetic levitation (Maglev) train uses magnetism to literally levitate right above a track. This enables the train to move across the ground at speeds of over 300 miles per hour using minimal energy and few moving parts. That means it provides high speed ground travel at little or no cost. The effects of Maglev travel could be as disruptive as earlier transportation advances like cars. It could also greatly reduce the cost of shipping and travel. The only thing blocking this technology would be the high cost of building Maglev lines. Whereas in 3-D printing the product was manufactured on the spot (thus requiring no delivery costs); a Maglev train can bring the product (or the person to do the service required) for very little variable cost to the location the product or service is required in. The main cost will be a sunk cost; i.e. the depreciation of the cost of building Maglev lines. This is much like the Telecommunications industry today. The main cost is the infrastructure; i.e. the Telecommunications network. The variable cost of a telephone call is almost zero.
Fuel cells: A fuel cell is a device that converts fuel such as hydrogen, natural gas, or gasoline directly into electricity. With such cells, all the energy needed for your home could be produced by a box in your basement. Other advances could be electric cars that could run for a year or more on a unit. The management accountant must be aware of the significant changes to energy cost structures that will result with this technology. The business model of power companies would need to be re-thought. They will no longer be generating power via a coal fired plant and transporting this power 1,000s of miles to business and household end-users. Also, as the emission of green-house gases will be minimised; this technology has the potential to impact Climate Change legislation. Governments may provide subsidies to businesses and homes that change to fuel cells.
Hydroponics: This is the science of growing plants in water and liquid fertilizer in a greenhouse instead of a farm’s field. One advantage such Hydroponics operations have would be lower transportation costs; food could be grown in warehouses and other buildings in large cities and provide vegetables all year long. The management accountant must be aware of the significant changes to food production and food transport cost structures that will result with this technology. If crops can be grown 12 months a year in a climate controlled greenhouse that are in the local area of the end-user, how will traditional farms compete? In addition to food transport costs, this technology has the potential to reduce the emission of green-house gases from both farm equipment (carbon dioxide) and farm animals used as beasts of burden (methane). As such this technology has the potential to impact Climate Change legislation. Governments may provide subsidies to farm businesses using Hydroponics.
Robotic Vehicles: These are remote-controlled drones and robot planes are already changing the face of warfare and will soon be moving into other fields. Some examples could be buses and taxi cabs that drive themselves. Or delivery trucks without drivers. Another potential development would be pilot-less air shuttles that could pick people up and take them where they want to go. The management accountant must be aware of the significant changes to labour cost structures and human resource management that these robotic vehicles will bring about. Programming and specialist costs at central locations will increase, but the labour costs of those involved in the actual moving (truck drivers, pilots, ambulance drivers, etc.) will be reduced. In addition, all of the service stations, cafés, motels, and adult entertainment venues set up to service the long-haul drivers will have a reduction in clientele.
In summary, factories at home or in a small business (3D Printing); costless travel over long distances (Maglev); generators powering all home or small business energy requirements (Fuel Cells); a farm in your local city neighbourhood in a high-rise building (Hydroponics); driver-less taxis, ambulances and aircraft (Robotic Vehicles) are all technologies that are already with us, and only a few years away from commercialisation. The management accountant of today will need to be thinking of the strategic implications of such technologies in terms of cost management and business analysis.
In the next issue, I will cover new technologies that are expected to be commercialised in the next 10-20 years.
Warm regards,
Professor Janek Ratnatunga, CMA, IMAP
CEO, ICMA Australia
