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Managerial Decision Making in the Aerospace Industry Case Study
As in many other industries, the IT has changed the way of performing management process. For example, the cost management process went from hand-written and mainframe computers to sophisticated software applications that help reducing the workload, headcount, and expedite the job completion. Also, this helps improving the outcome quality and increase productivity. The managerial accounting process in the aerospace industries follows a certain steps.
The success of each of the steps depends heavily on the previous step, any break of inefficiency of one or more of the steps will collapse the whole process. Organizations have to chose between operating a commercial-of-the-shelf software of invest in designing a special software. The companies that chose to operate the commercial software will be able to use it in for operations such as cost estimating, analysis, and proposal pricing.
While the special designed software allows more specific operations, it requires a substantial investment to create and operate. Accurate estimation is critical for the financial success and it allows the organization to successfully propose price decision, source of investment. The Department of Defense requires contractor to have an “acceptable” estimating system. There are different estimate methods such as round table, comparison, detailed, and parametric. A combination of the four methods could be used based of the needs and timing.
The pricing proposal step is one of the complexes and demanding functions that requires an analysis for alternative program plans and schedule, prospective cash flow and return on investment, satisfy internal management views, and respond to the costumers’ expectations. The project cost has been depending on applications that were designed internally to help account manager to analyze the cost. After that, some companies created software that targeted the aerospace industry to help them with project scheduling and earned value.
The continuous change of requirement made by DOD forces the aerospace industry to accommodate the new demands and there was more application software available. The constant change of requirements and imposing new regulations by the government and implementation of the advanced software applications have greatly improved the productivity of the cost analysis managers and reduce the workload on the contractors. This resulted in having more effective cost analysis staff that performs better in satisfying the requirements in less time and cost, and provides an more accurate information.