Lean accounting

One of the reasons it is sometimes hard to keep a lean initiative alive, or indeed, get it past first base after the initial adrenalin has worn off is the manner in which the traditional accounting systems monitor performance.  Often, accounting is the hardest function to win across, because their whole rationale is brought to account, if I may use such a bad pun.

Lets just consider a few of the more common things accounting does to (unintentionally)  frustrate lean: 

    1. Counts inventory as an asset, encouraging a build up of inventory, at best, not discouraging it
    2. Fails to monitor capacity, so simple improvements such as reducing downtime, reducing changeover time, speeding up throughput, do not get counted until a full bill of materials review is done, and often not then. Therefore, good work is not seen on the bottom line.
    3. Fails to monitor the performance, other than direct cost ,of individual steps in a value stream to understand the impact one may have on the whole value stream.
    4. Rarely is there a full value stream costing done, including sales and marketing costs, Accounting simply do not have the tools in their kitbags.
    5. Customer value is a foreign concept to accounting, “marketing takes care of that”  (“by the way, what is it?”) making it easy to ignore anything outside the ledger
    6. Fails to understand that lean builds capacity, and the benefits start to flow only when the freed up capacity is utilised
    7. Fails to recognise that value streams are cross functional, and rarely fit comfortably into the common functional responsibilities and performance measures that are applied.

 So, perhaps task No.1 in a Lean initiative is to get the “beenies” on board and thinking about how the impact of the initiative can be counted, made transparent, communicated, and improved upon.

 

 

About strategyaudit

StrategyAudit is a boutique strategy and marketing consultancy concentrating on the challenges of the medium sized manufacturing businesses that make up the backbone of our economy. The particular focus is on their strategic and marketing development. as well as the business and operational efficiency improvements necessary for day to day commercial survival. We not only give advice, we go down "into the weeds" to ensure and enable implementation.
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