Business Excellence Consortium

Accounting for Lean

What Operations Needs to Know

As manufacturing organizations implement Lean throughout their operations , many improvements occur:

• Batch operations are replaced with one piece flow and flow lines
• Inventories are lowered
• Setup times are reduced to 10 minutes or less
• The lead-time through manufacturing is radically reduced
• On time deliveries to customers improve
• Shop floor space is freed up
• Direct and indirect labor division requirements are eliminated

However, in this new Lean environment traditional cost accounting methods, which were developed many years ago, are no longer relevant. This can lead to the Accounting department becoming a barrier to the Lean transformation and the operations staff "throwing their hands in the air."

This presentation gives the operations staff a basic understanding of how Lean affects a company's financials and the traditional measures of a standard cost accounting system. Accounting and Operations must create a common understanding and partnership to support the organization's Lean journey.