Material Flow Cost Accounting (MFCA)

Material Flow Cost Accounting (MFCA) is an instrument to identify and calculate the real cost of waste and material losses. For many companies MFCA is an important element in tackling corporate resource efficiency. On this page learn about Material Flow Cost Accounting (MFCA) and the underlying standard ISO 14051. Further you can find successful examples of MFCA application and bibliographic hints for further reading. 

What's Material Flow Cost Accounting?

Looking at waste in production process: mass and cost

Many manufacturing companies are not always clear about their real production costs. Often, costs for material losses are only associated with the direct disposal costs. 

However, further costs need to be assigned to rejected or disposed materials to obtain the total financial impact of material losses. There are the material direct costs on the one hand and further costs in upstream processes caused by transportation, energy, auxiliaries, etc. on the other hand which all need to be taken into account. 

Against this background material flow cost accounting aims at calculating hidden costs as they can highly influence the economic relevance of material losses.

After all, this concept is used to improve the efficient use of material and energy. 

ISO 14051:2011 - international standard for MFCA

The International Organization for Standardization (ISO) published the ISO 14051:2011 to offer a general framework for Material Flow Cost Accounting (MFCA). 

The standard assists companies with the implementation steps of MFCA including the development of a material and energy flow model for the quantification of material, energy, system and waste management costs, the communication of the MFCA results and the identification of improvement opportunities. 

While companies are still collecting experience with ISO 14051, the planned ISO 14052 standard 'Guidance for practical implementation in a supply chain' will be describing how to do a Material Flow Cost Accounting (MFCA) along the supply chain.'

Practical Examples of MFCA Application

Internationally the material flow cost accounting has primarily been disseminated in Japan where more than 300 manufacturing companies already applied the concept, though the method was originally developed in Germany. Here, especially small and medium sized enterprises have started using the material flow cost accounting to assess their product systems and to render them more efficient. Here are some examples of application of MFCA.

  • A small furniture manufacturing company in the Czech Republic has been producing furniture mainly made out of chipboards. The production model for the MFCA comprises five main process steps. All of these processes have material losses that sum up to 9.22 % of input raw material and nearly 11 % of the total production costs. The accumulated material losses cost the company 25793 CZK (1377 USD) per month.

  • A large metal processing company in Germany produces flexible metal components and had sales of more than 500 million Euros in 2013. An MFCA revealed that in total they have 36 % material losses compared to the input material. The entire production consists of eight process steps. The second process step has material losses of more than 75 kg whereas the sixth process step has the second highest amount of material loss with about 35 kg. Surprisingly, the total cost for the loss of the sixth process step is twice as much as the total cost for the material loss of the second process. This clearly shows the importance to consider the embedded cost due to additional system and waste management costs.

  • The Mitsubishi Tanabe Pharma Corporation manufactures medical products in Japan. The MFCA identified total material losses worth 1.372 billion JPY (12,7 million USD) annually, nearly 50 % of the total production costs. 

Further reading on Material Flow Cost Accounting (MFCA)

  • Asian Productivity Organization: Manual on Material Flow Cost Accounting: ISO 14051 (2014). Available online here
  • Hyršlová, J.; Vágner, M.; Palásek, J. 2011. Material Flow Cost Accounting (MFCA) – tool for the optimization of corporate production processes. Business, Management and Education 9(1): 5–18. doi:10.3846/bme.2011.01   open access article available here
  • ISO 14051:2011 Environmental management - Material flow cost accounting - General framework
  • Kokubu, K; Kos Silveira Campos, M; Furukawa, Y; Tachikawa, H.: Material flow cost accounting with ISO 14051.
  • Kokubu, K; Kitada, H: Material flow cost accounting and existing management perspectives. In: Journal of Cleaner Production, Volume in print (2014)
  • Material Flow Cost Accounting: MFCA Case Examples. Tokyo 2011. Available online here.
  • Schaltegger, S; Zvezdov, D: Expanding material flow cost accounting. Framework, review and potentials. In: Journal of Cleaner Production, Volume in print (2014)
  • Schmidt, A.; Hache, B.; Herold, F.; Götze, U.: Material Flow Cost Accounting with Umberto
  • Schmidt, M.: The interpretation and extension of Material Flow Cost Accounting (MFCA) in the context of environmental material flow analysis. In: Journal of Cleaner Production (2014). 
  • Schmidt, M.; Nakajima, M.: Material Flow Cost Accounting as an Approach to Improve Resource Efficiency in Manufacturing Companies. In Resources 2013, 2, pp. 358-369; doi:10.3390/resources2030358. Open access article available online 

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