Lean Accounting…. Measuring your lean processes

Lean Enterprise have become our number one service for most companies, small to big, specially if you need to compete for new products, new customers or need cost reductions to keep up with the market demand.  The words Lean Manufacturing, Lean Thinking, Kaizen and Toyota System are now familiar.  Lean is about doing more with less: less time, inventory, space, motion, equipment, money. Lean is about speed and getting things right the first time. It is about identifying “waste” – non-value added activities throughout every process and service. It is a coordinated response to today’s highly competitive environment- a journey to excellence! Benefits such as productivity increases over 30%, lead time reduction more than 70%, defects reduction over 20%, inventory reductions over 75% are common when lean is properly spread in the organization. These are examples of what PRiMEX provides to our customers

Through our Lean services, we have seen that as the shop brings processes and services under control, the need for transactions, complexity and lengthy reporting goes away.  This is a problem because to measure overall performance traditional accounting uses transactions to apply costs. For example, the mountain of inventory disappears because the material moves faster creating difficulty in tracking and valuing inventory. Despite the dramatic improvements that lean creates, no corresponding impacts are seen on the financial statements. The reason being: the disconnect between lean and standard costing.                                                                     

The traditional accounting system fails to reflect operations improvements and negatively represents lean results. When waste is reduced, inventories maximize, giving extra capacity and freeing up cash, measures such as efficiency and machine utilization need to be change. In order to make lean recognizable, management reporting needs to “redesign” its cost accounting. A new set of performance measures for the lean cells; the value stream and the plant are needed- a system that allows managing the lean company at every level.  The first principle of Lean is VALUE.  In a lean environment, the accounting system must also add value, it must be LEAN.

Bringing leading services to companies, helping them understand issues as the above; assisting them throughout an implementation is our day to day job. To address the specific issue of Lean Manufacturing Vs the accounting systems, we have a three (3) day workshop on April that will allow management to understand the financial implications of lean, the performance measures to link the business strategy, the need to eliminate wasteful transactions and how to work with allocating costs.  Bruce Baggaley, co-author of the book "Practical Lean Accounting"

We are a non profit organization sponsored by the US Dept of Commerce and Puerto Rico Industrial Development Company (PRIDCO).  Since 1996, we have been providing consulting services to small and midsize companies.  Through a multidisciplinary staff, drawn from relevant engineering and managerial disciplines, we offer leading edge technical and business services in most areas: engineering, production, planning, quality, environmental and safety, process improvements, technology transfer, organizational development, marketing, sales, business and financial management. It is a FULL SERVICE Integrated approach for increase productivity and competitiveness. Our goal is to help companies meet their business objectives. We measure the quality of our services by the economic impact generated to our customers. Since our inception the results speaks for themselves: