Lean Thinking and Lean Accounting

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Lean Thinking and Lean Accounting
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?????????????? ?????? 26 ?????? 2550
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???????????????

• What is Lean ?
• Lean Thinking and Lean Principles
• Lean Enterprise and Value Stream
• Accounting for Lean
• - Value Stream Costing
• - Value Stream Profit and Loss
• - Value Stream Box Score
• 5. Lean Accounting

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What is Lean ?

• Lean is thin, not fleshy or fat
• ???????????? Lean ??? ??? ??????
• ????????????? .......
• Lean management ?????????????????????????
• Fast MBA Lean ????????????????????

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Lean in Business
??????????????????????????????????? ?????????????
? ???????? ??????????????????????????????
??????? ???????????
?????????? ??????????????
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History Timeline for Lean Manufacturing
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The Roots of Lean
Eiji Toyoda
Kiichiro Toyoda
Sakichi Toyoda
Taiichi Ohno
Henry Ford
Automatic Loom Assembly Line
Toyota Sedan Model AA 1936
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Toyota Production System (TPS)

• Toyota Motor Corporation's production system
  is a way of "making things" that is sometimes
  referred to as a
• "lean manufacturing system" or a
  "Just-in-Time (JIT) system,"
• TPS s Concepts
• Jidoka Visualization of problems in order to
  get high Quality
• Just in time Productivity Improvement

Making only "what is needed, when it is needed,
and in the amount needed!"
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Jidoka

• Automation with a human touch Autonomation

Type G Toyoda Automatic Loom Origin of Jidoka
Concept of Jidoka
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Production ControlKanban System (supermarket
method)
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Illustration of TPS
Producing and delivering order vehicles in a
timely manner. http//www.toyota.co.jp/en/vision/
production_system/illustration.html
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Production Environment
Traditional
Lean

• Produce for Stock
• Mass Production
• Batch and Queue
• Automation
• Inspection
• Reject and Rework
• Create FG and WIP
• Leader / Supervisory

• Produce for Customer
• Pull and Flow
• Just in Time
• Autonomation
• TQM
• Kaizen
• Less or Zero Inventory
• Empowerment

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???????????????? vs. ?????????????
????????????????
????????????
????????? ?????????
???????????????????
Lead-Time
????????? ?????????
?????????????
???????????????????
Lead-Time
Cycle Efficiency Value-added time
Total lead time
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?????????? (Muda)
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????????? MUDA

• ???????????? ?? Muda 7 ?????????
• 1. ???????????? (Defect)
• 2. ??????????????????????? (Over Production)
• 3. ????????????????????????????? (Unnessary
  Inventory)
• 4. ?????????????????????????? (Unnessary
  Processing)
• 5. ???????????????????????????????? (Unnecssary
  Motion)
• 6. ???????????????????? (Unnecessary
  Transportation)
• 7. ???????? (Waiting)
• 8. Human

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Lean ThinkingWomack Jones
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1
2
4
3
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Value Perspective
?????? (??????)
??????? (??????)
??????????????????????????????????? /
????????????????????????????????????????????? -
???????????? - ??????(????????????)

• ????????????? / ??????
• ????????????????????????

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?????????? Lean

• 1. ????????????????????????????????????????
• Specify Value from the Viewpoint of the
  Customers
• 2. ???????????????????????????????????????????????
  ??
• Value Streamlining
• 3. ??????????????????????????????
• Improve Quality and System Flow
• 4. ??????????????????????????
• Pull System
• 5. ???????????????????????????????????????????????
  ?????????
• System Perfection

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A Lean Enterprise

• Uses the value stream as the primary method for
  serving the customer, improving the processes,
  growing the business, and increasing
  profitability.
• Focuses on Flow and Pull
• Empowers The People at Every Level in the
  Organization
• Pursues Perfection

Source www.maskell.com
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A Lean Enterprise

• Focuses on Customer Value
• Eliminates Waste
• Uses Partnerships
• Manages by Value Stream

Source www.maskell.com
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What adds Value to the Customer

• The products
• The service
• Continuous improvement
• Developing relationships
• Innovation
• Flexibility
• Intangibles like reputation of fashion

• Requires a profound understanding of what creates
  value for the customer.
• Requires a relentless focus on changing our
  processes to create move value.

Source www.maskell.com
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Two Major Aspects of Lean Accounting

• The lean business management system supporting
  lean thinking throughout the organization
• Applying lean to the companys accounting
  processes

Source www.maskell.com
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Two Aspects of Lean Accounting

• Applying Lean Thinking and Methods to the
  Companys Accounting Processes.

• Accounting to Lean. Supporting the Lean
  Transformation.

Cost Accounting, labor reporting, production
reporting work orders. Purchasing and accounts
payable. Inventory tacking and valuation. General
ledger simplification. Month-end close, etc.
Reporting and decision-making to support lean
manufacturing and other lean processes. Financial
reporting that is immediately understandable and
useable to everyone. Single lean accounting
system for management accounting and external
reporting. Accounting processes focused on
customer value, value streams, pull, empowerment,
and continuous improvement.
Source www.maskell.com
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Lean Accounting Maturity Path
Lean Manufacturing Maturity Path
Pilot lean production cells
Lean manufacturing widespread
Lean throughout company and partners
Getting started with Lean accounting
Managing by value streams
The lean enterprise
Source www.maskell.com
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Progressing with Lean
TRADITIONAL
STARTING LEAN
LEAN PROGRESS
LEAN COMPANY
Traditional Manufacturing
Starting Lean Manufacturing
Lean Manufacturing
Lean Manufacturing
Traditional Accounting
Traditional Accounting
Lean Accounting
Lean Accounting
Traditional Financial Reporting
Traditional Financial Reporting
Lean Financial Reporting
Lean Financial Reporting
Lean Supplemental Statement
Traditional Financial Reporting
Source www.maskell.com
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What is a Value Stream?

• All the processes required to create value for
  the customer organized as a team accountable for
  increasing value profitability through
  continuous improvement.

Source www.maskell.com
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Why Do WeFocus on the Value Stream?

• Where the value is created.
• Identify value and waste.
• Focus on creating value for the customer.

• Identify flow and obstacles to flow.
• See the issues and
• Create value, growth, profit.

Source www.maskell.com
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Typical Value Stream Structure
Source www.maskell.com
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Value Stream Management
Defining Your Value streams
1
2
3
Controlling The Value Stream
Improving value Stream
6
5
Planning The Value Stream
Managing the Value Stream Team
Source www.maskell.com
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Criteria for Value Streams

• Family of products with similar production flow.
• Include all the people processes that support
  the value stream production process.
• The value stream team a reasonable size
• Minimize monuments
• Extend value stream as close to the customer as
  possible and close to the suppliers.

Source www.maskell.com
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Steps in Value Stream Definition

• Identify product families with similar production
  flow.
• Staple yourself to a customer order.
• Identify and minimize monuments.
• For design or configure-to-order products include
  the design/configuration in the production flow.

Source www.maskell.com
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Steps in Value Stream Definition

• Create a production flow matrix
• - Product families on the Y-axis
• - Machines or work centers on the X-axis
• Make sure the value streams you select include
  significant business.
• Move forward and backward through the value
  streams
• - Value added services
• - Purchasing and Sales Marketing
• - Administrative tasks

Source www.maskell.com
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Example of a Production Flow Matrix
Source www.maskell.com
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Example of a Value Stream Definition Analysis
Source www.maskell.com
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Format for Aligning People with Value Streams
Source www.maskell.com
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Value Stream Costing
Production Labor
Production Materials
Production Machines
VALUE STREAM
Operational Support
Facilities Maintenance
All Other VS Costs
Actual labor, machine, materials, support
service, and facilities directly within the value
stream. Little or no allocation of costs outside
the value stream.
Source www.maskell.com
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????????????????? Lean Cost Lean Accounting
1. ???? Cash Basis ??????? Accrual Basis 2.
?????????????????????? Cell (Value Stream)
???????????? direct cost ????????? - Direct
Production Cost - Direct Support Cost - Direct
Administrative Cost 3. ??????????????????????????
4. ?????? standard cost ? ???? Actual Costs 5.
Plain English Value Stream Income Statement 6.
??? Target Cost 7. ??????????????????????????????
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Value Streams Costs for ECI
Source www.maskell.com
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Three Levels of Performance Measurements
To enable the cell teams to monitor and control
their daily production activities.
Cell Level Measurements
To guide the continuous improvement team in their
pursuit of Perfection activities.
Value Stream Level Measurements
To enable senior managers to monitor the
achievement of strategic goals initiate
strategy changes.
Plant or Corporate Level Measurements
Source www.maskell.com
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Starter Set of Performance Measurements for
Lean Mfg.
STRATEGIC ISSUES
STRATEGIC MEASURES
VALUE STREAM MEASURES
CELL/PROCESS MEASURES
Increase Cash Flow Increase sales market share
Continuous improvement culture Provide Customer
value
Sales Growth Cash from Operations Inventory
Days On-Time Delivery Customer satisfaction
Sales per Employee
Sales per Person On-Time Delivery Dock-to-Dock
Time First Time Through Average Cost per Unit
AR Days Outstanding
Day-by-the-Hour Production WIP-to-SWIP First
Time Through Operational Equipment Effectiveness

Source www.maskell.com
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Performance Measurement Linkage ChartOrder
Fulfillment Value Stream
Source www.maskell.com
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Value Stream Box Score andValue Stream Profit
and Loss
Source www.maskell.com
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Box Score used for Decision-Making
Source www.maskell.com
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Decision-Making ExampleUsing Value Stream
Profitability Return
We are responding to an RFQ from a customer to
provide 1000 units per month for the next 12
months at a price of 209.49 per unit. We must
decide if we should make them, buy, or outsource
them in China.
Source www.maskell.com
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Lean Manufacturing

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

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

• MOTIVATION
• Eliminate barriers to flow
• Focus on value streams rather than departments
• Continuous improvement and team-work
• Eliminate waste, inventory, and over-production

• IMPORTANT
• Value to the customer
• Value streams
• Flow of value-creating tasks pull from the
  customers
• Inventory Turns
• Delivery to customer
• Value stream focus

Source www.maskell.com
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Traditional Cost Accounting

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

• MEASUREMENTS
• Labor efficiency machine utilization
• Cost variances vs standard
• Budget adherence
• Direct labor as of sales

• MOTIVATION
• Make more product
• Utilize resources to the max
• Optimize dept. efficiencies
• Track direct labor in detail
• Allocate other costs

• IMPORTANT
• Full utilization of resources
• Average part cost
• Overhead absorption

Source www.maskell.com
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Time Spent on Activities and the Departments
Capacity
Source www.maskell.com
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Accounts Payable Future States
Source www.maskell.com
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Process Map for Future States
Source www.maskell.com
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Box Score for Current and Future States
Source www.maskell.com
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References

• ??????????????????? Lean Accounting Summit ,
  Orlando, USA ,2007.
• www.maskell.com
• www.lean.org/
• www.toyota.co.jp/en/vision/production_system/
• www.strategosinc.com/principles.htm
• www.opdc.go.th/oldweb/Mission/File_download/22_12_
  47/Viput.pdf
• www.med.cmu.ac.th/hospital/ha/HA/filedownload/29HA
  /LeanManagement.ppt

Source www.maskell.com