Accounting in the Lean Enterprise: Providing Simple, Practical, and Decision-Relevant Information, 1st Edition (Paperback) book cover

Accounting in the Lean Enterprise

Providing Simple, Practical, and Decision-Relevant Information, 1st Edition

By Gloria McVay, Frances Kennedy, Rosemary Fullerton

Productivity Press

196 pages | 21 B/W Illus.

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pub: 2013-05-13
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Description

Despite the obvious need for transparency, a company’s Lean results can continue to hide behind the mask of traditional accounting and dilute the benefits of a Lean implementation. When your organization opts to go Lean, you must empower your accountants with Lean tools that serve the Lean mission.

Winner of a Shingo Research and Professional Publication Award

Accounting in the Lean Enterprise: Providing Simple, Practical, and Decision-Relevant Information explains how to develop the information and financial reports that serve the needs of a Lean-minded business. It presents alternative methods of reporting, and includes a step-by-step guide for transitioning to Lean accounting methods. The book is divided into three parts:

  1. The Fundamentals of Lean as a Competitive Strategy
  2. The Nuts and Bolts of Lean Accounting
  3. Controls and Transition

Walking you through Lean tools, activities, and philosophies, it addresses some of the most often asked questions about Lean implementations. It confronts many of the fears that are the source of accountants’ resistance to change—including inventory management and valuation, GAAP compliance, and loss of control and benchmarks. Each fear is identified and resolved in a "Fear Box" inset, as the related topic is discussed.

Filled with checklists, guidelines, exercises, case studies, real-world examples, and company stories, the book provides you with the tools you will need to provide relevant, timely, and actionable information to the decision makers in your Lean environment.

Reviews

When the Lean accounting field coalesced at the first Lean Accounting Summit in 2005 the thought leaders realized that promoting Lean accounting concepts at the university level was critical to long term manufacturing success in the United States. Drs. Gloria McVay, Frances Kennedy, and Rosemary Fullerton have not only led that effort and emerged as leaders in the academic community; they are Lean thought leaders in their own right.

Accounting in the Lean Enterprise: Providing Simple, Practical, and Decision-Relevant Information is an outstanding contribution to the Lean accounting body of work. Written in textbook style, it is a great learning resource that will be widely used in college classrooms, as well as in the manufacturing community. It is easy to read and understand, while comprehensively covering the entire scope of Lean accounting. It is easy to see this book becoming the standard tool that CFOs and Controllers will use to train and bring their entire accounting team along for the Lean journey. I highly recommend this outstanding book!

—Bill Waddell, Lean Author and Consultant

This is a must-have guide for all those wanting to leverage the power of Lean in their organization. The authors have done a tremendous job of capturing the essence of what Lean accounting is and how companies can use it to better understand and improve their business! The book is written in an easy-to-understand manner, with great examples and explanations of the various aspects of Lean accounting. It demonstrates how Lean accounting helps all levels of employees see and understand their business through a better lens than what the traditional accounting reports and processes offer.

—Jan Brosnahan, Controls Division Controller for Watlow Electric Mfg Co.

McVay, Kennedy, and Fullerton marshal up a long needed instructional book, closing a significant gap in the ‘why’ and ‘how’ of applying Lean accounting as a cornerstone for a successful Lean journey. Accounting in the Lean Enterprise: Providing Simple, Practical, and Decision-Relevant Information should be used by companies and universities alike to bridge this informational gap and give our future accountants and leaders required knowledge on managing financial, operational, and strategic decisions for our business organizations.

—Jim Huntzinger, Founder and President of the Lean Accounting Summit

Rising out of the academic community, Accounting in the Lean Enterprise: Providing Simple, Practical, and Decision-Relevant Information provides legitimacy to what successful Lean CEO and CFO's know: we must move away from standard cost accounting to release the untapped human and financial value in our organizations!

—Jean Cunningham, Jean Cunningham Consulting

Accounting in the Lean Enterprise: Providing Simple, Practical, and Decision-Relevant Information is a great learning tool for beginners, as well as a great reference book for the highly trained. The book begins at the start of the Lean accounting journey and ends with practical examples that are applicable on a daily basis.

—Bill Stabler, Corporate Controller, Barry-Wehmiller, Inc.

Accounting in the Lean Enterprise: Providing Simple, Practical, and Decision-Relevant Information is a concrete, actionable roadmap for those wanting to transform their internal reporting systems to support Lean manufacturing. The book is written from the perspective of ‘why it matters’ and ‘how to do it.’ In-depth examples provided are sure to guide the Lean journeys of those willing to explore more relevant accounting alternatives.

—Staci Gunnell, CMA, Financial Global Operations Manager, ThermoFisher Scientific; Former Controller, Autoliv

Table of Contents

THE FUNDAMENTALS OF LEAN AS A COMPETITIVE STRATEGY

Principles of Strategic Lean Thinking

Brief History of Lean Production

Lean Thinking

Lean Implementation and Management

Lean Results

Discussion Questions

References

Value Stream Management

Introduction to Value Stream Management

Defining Your Value Streams

Problem Solving in Value Streams

Value Stream Performance Measures

Summary

Discussion Questions

References

THE NUTS AND BOLTS OF LEAN ACCOUNTING

Principles of Lean Accounting

Accounting as Part of a Total Lean Business Strategy

Lean Accounting vs. Accounting for Lean

Traditional Cost Accounting in Lean Environments

Lean Accounting Principles

Value Streams

Flow and Pull

Customer Value

Employee Empowerment

Continuous Improvement

Changing the Internal Accounting Reporting System

Challenges to Implementing a Lean Accounting System

Discussion Questions

References

Value Stream Costing

The Motivation

The Costing Plan

Step 1: Identify Value Stream Resources

Step 2: Design the Value Stream Statement Format

Value Stream Statement Overview

Value Stream Revenue

Value Stream Costs

Material Cost

Conversion Costs

Facilities Cost

Step 3: Standardize Collection of Weekly Data

Step 4: Compile the Value Stream Statements

Step 5: Select the Reporting Mechanism

Step 6: Test It!

Step 7: Roll Up to Facility Statement

Step 8: Obtain Feedback from All Statement Users

Summary

Discussion Questions

Inventory Management

Inventory Valuation under a Traditional Standard Costing System

Inventory Valuation Using Lean Accounting Methods

Transitioning to an Accounting for Lean System

Monitoring of Inventory Levels

Summary

Appendix 5B: A Primer on Backflush Costing

Discussion Questions

References

Capacity Management

Capacity Management—An Overview

Reporting Capacity Measures

Determining the Box Score Capacity Measures

Step 1: Collect Monthly Data by Cell for the Capacity Spreadsheet

Step 2: Calculate Productive, Nonproductive, and Available Capacity

Step 3: Determine the Bottleneck Cell

Step 4: Transfer Capacity Measures of the Bottleneck Cell to the Box Score

Step 5: Review with Management and Target Kaizen Possibilities

Step 6: Tie Lean Improvements to Changes in Capacity and Improved operational Measures

Step 7: Use Freed-Up

Capacity to Improve Financial Performance

Space Management

Summary

Discussion Questions

Product Costs and Lean Decisions

Throughput and Conversion Costs

Standard Costing Method

Throughput Method

Product Pricing Decisions

Product Mix Decisions

Special Order Decisions

Make vs. Buy Decisions

Box Score Format

Summary

Challenge

Discussion Questions

Lean Planning

An Overview of Lean Planning and the PDCA Cycle

How Lean Planning Is Different from Traditional Planning

Traditional Planning—The Annual Budget

Lean Planning—A Different Focus and Process

The Four Levels of Lean Planning

Strategic Planning

Hoshin Planning (Strategy Deployment)—Medium Term

Sales, Operations, and Financial Planning (SOFP)—Short Term

Steps in the SOFP Process

The SOFP Schedule

Weekly Planning Meetings

Summary of Lean Planning

Discussion Questions

References

Measurement Selection and Alignment

Reasons for Change

Identifying Measures

Measures and Alignment

The Process

Level 1: Company Strategies and Goals

Level 2: Value Stream Goals and Measures

Level 3: Work Cell Critical Success Factors, Goals, and Measures

Measurement Challenges in Projects and Knowledge Work

Action Tracking Logs

Summary

Discussion Questions

Measurement and Lean Behavior

Impact of Traditional Measures

Attributes of a Good Measure

Technical Attributes

Behavioral Attributes

Cultural Attributes

The Assessment

Summary

Discussion Questions

CONTROLS AND TRANSITION

Leaning Accounting Processes

Eliminate or Improve?

Step 1: List All Accounting Processes and Activities

Step 2: Quantify Time and Resources

Step 3: Perform a Customer Value Analysis

Step 4: Consider the Cost and Impact of Change

Step 5: Select the Activity or Activities for Change

Step 6: Prepare an Action Plan

Summary

Transitioning to a Lean Accounting Reporting System

Preparing to Transition Your Accounting System

Steps for Making the Accounting Transition

Step 1: Identify Value Streams and Associated Costs

Step 2: Determine Appropriate Method for Valuing Inventory

Step 3: Identify the Types of Accounting Reports That Are Necessary

Step 4: Decide on Changeover Date

Step 5: Other Issues to Consider

Step 6: Review the Process

Potential Obstacles in Transitioning Your Management Accounting System

Benefits of a Lean Accounting System

Summary

Discussion Questions

Appendix A: Glossary of Lean and Lean Accounting Terminology

Reference

Appendix B: Lean Measurement Assessment Instrument

Performance Measure Assessment for the Lean Enterprise

Background

Purpose

Directions

Index

Subject Categories

BISAC Subject Codes/Headings:
BUS053000
BUSINESS & ECONOMICS / Quality Control