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When you go lean, remember that the demon waste lurks within your finance and accounting processes
Lean accounting methods make essential financial information available throughout a company. They allow people in the financial community to contribute to the implementation of lean manufacturing and distribution, instead of remaining on the sidelines, waiting for improvements to show up on the bottom line.
Lean management accounting aims to provide information useful to the people in production plants who are actively implementing and sustaining lean manufacturing. Lean accounting includes the development of local performance measurements to allow cell leaders, value-stream owners, and managers to understand and monitor production processes and their improvements. Performance measurements can provide operational information to senior managers, program managers, and company executives. While the format and style of the reports will differ at each reporting level, their content will come from the same bottom-up data. All current information should be constantly available to people at all levels of the organization when they need to see a report.
Another aspect of lean accounting, value-stream cost management, a simplified form of activity cost analysis, provides cost information in a focused manner. The value stream consists of all tasks required to serve a customer and create value. Most companies have several value streams, each relating to a different family of products and different market channels. Value is created for customers through a series of processes and tasks performed by people from different parts of the company. Lean manufacturing seeks to eliminate the waste associated with the flow of these tasks. Most companies focus initially on the value stream within their own operations; in fact, the value stream extends to the company's suppliers and customers. Traditional companies focus on optimizing departmental effectiveness. Lean companies focus on perfecting the value stream process.
As the value stream becomes lean, costs of activities within it are calculated, using data derived from value-stream mapping and process redesign. This cost information enables companies to evaluate the benefits of lean improvements, and helps them establish priorities for further improvement initiatives.
Cost data also help establish root cause costs, so companies can understand the financial implications of fundamental issues within the value stream. Value-stream cost analysis can also track the success of improvement projects, and...