Material Flow Cost Accounting



Material Flow Cost Accounting (MFCA) is a management tool developed in Germany in the 1980s and is related to approaches such as eco balances and flow cost accounting. It helps organizations to better understand potential environmental and financial consequences of their material and energy operations. It also aims to support organizational decisions in areas such as process engineering, production planning, quality control, product design and supply chain management. MFCA is known to be instrumental in an integrated analysis of material and energy flows.


The costs of materials generally form a significant part of industrial enterprises costing and thus, it becomes extremely important for companies to give attention to material efficiency. This can essentially be accomplished through optimally utilizing raw material, reducing wastage, optimized production techniques and organizational measures, recycling, innovative product and packaging designs. To efficiently achieve this particular objective, Material Flow Cost Accounting (MFCA) is being rigorously applied in the industry. It can help calculate cost data for the material flows during each step of the process, including material, energy, labour and waste management costs while also ensuring high transparency of material flows within and across companies.


Coming onto the standardization of the MFCA method, it was carried out by the working group of the International Standardization Organization's Technical Committee (ISO WG 207/ WG8) and the standard (ISO 14051:2011). The general procedure of MFCA is inclusive of three main steps: flow structure modelling, quantification of flows and evaluation (cost appraisals of the quantified flows). In the first step, the boundaries of material and energy flows system are specified. The boundaries can range over a single or several processes, the whole organization or even entire supply chains. Furthermore, the specification of a time period is important. In the second step, based on the flow structure, material flows have to be quantified in physical units such as mass, length, volume or number of pieces. By using a single standardized unit for every quantity center, a material balance can be created. Within the last step, material flows are quantified in terms of monetary units in order to evaluate them while clearly differentiating between material, energy and waste management costs.


Today, MFCA is increasingly being employed to enhance environmental and economic performance through refined material and energy use.