Lean Manufacturing Overview

1
Lean Accounting
Superfactory Lean Enterprise Series
2
Outline

1. Introduction
2. What is Lean Accounting?
3. Why Lean Accounting?
4. Traditional vs. Lean Assumptions
5. Implementing Lean Accounting
6. Summary

3
Definitions
Applying lean concepts to drive waste out of the
accounting function itself
Lean Accounting
Modifying the accounting process to properly
deliver information which promotes lean behaviors
Accounting for Lean
4
Comparing Assumptions
Traditional Assumptions
Lean Assumptions

• Profit comes from full utilization of resources
• Direct labor is the most important conversion
  cost
• Control the business thru detailed tracking
• All excess capacity is bad

• Profit comes from maximizing flow on pull from
  customers
• Waste resources impeding the flow
• Control thru continuous attention to flow waste
• Excess capacity provides flexibility

5
Comparing Measurements
Traditional Measurements
Lean Measurements

• Labor efficiency machine utilization
• Cost variance vs. standard
• Budget adherence
• Direct labor as of sales

• Cycle time
• Throughput
• First time quality
• Inventory turns
• Delivery to customer
• Value stream focus

6
Lean Measurement
Lean performance measurements drive and support
lean performance
Strategic Issues Increase Cash Flow Increase
Sales Market Share Continuous Culture
Improvement
Strategic Measures Sales Growth Cash from
Operations Inventory Days On-time
Delivery Customer Satisfaction Sales per Employee
Value Stream Measures Sales per Person On-time
Delivery First Time Through Average Cost per
Unit AR Days Outstanding
Process Measures Daily Production WIP to
SWIP First Time Through Operational
Effectiveness
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Lean Accounting
Primary method of lean control for meeting
customer needs and driving continuous improvement
Simple, direct accurate way to create financial
reports. Very few transactions
Save time, money confusion by radical
elimination of wasteful transactions
Manage the business by value streams with
accountability for growth, profitability, and
continuous improvement
Understand the financial impact of lean
improvement create a money-making strategy
Drive the business from the customer value not
the cost
8
Lean Accounting
Lean Accounting assumes profit is from maximizing
flow on actual demand (pull signals) from
customers, waste is any resource that impedes
flow. Control is achieved through attention to
flow and waste and excess capacity provides
flexibility.

• An early step to lean is to create a value stream
  map to identify all the specific actions to bring
  a specific product through the three critical
  tasks
• Problem Solving concept, design and launch
• Information Management order taking, scheduling
  and delivery
• Physical Transformation moving from raw
  material to finished item

The team then prepares a cost analysis for
calculating the cost of the value stream, which
replaces the standard costing system. With this
transition, value stream profitability and
contribution margin become the basis for business
decisions.