with Eagle Wing Education and Training Lessons from Lean Lean
with Eagle Wing Education and Training May 21st, 2010
Lessons from Lean Lean Accounting In the lean arena, accountants definitely get beat up, perhaps justifiably. But before we consider all of them “evil bean counters” blocking our attempts to implement lean, here is a story of one accountant who rose to the occasion. The company, which engineered and produced small engines, manufactured nearly all the major engine components. The company's current state was to manufacture in traditionally arranged departments. With the implementation of lean, these departments were being torn apart as one-piece flow cells were being set up in focus factories dedicated to specific engine models. It was literally a different plant each week, as new cells were moved into place and ramped up. Cells already in place would be moved again to accommodate cells coming from the old departments. The manufacturing engineers were having a field day. They were learning and implementing at a rampant pace. The divisional accountant, Jeff, was trying to keep pace with the massive change. While he wanted to maintain the usual cost data and budgets of normal product and manufacturing projects, he also had to deal with the surge of budgets for the massive rearrangement with all the extra expenses to track and manage. The complexity was compounded when information was in flux between the traditional department and the new cells and focus factories. Jeff began to notice that the standard costing system used by the company did not seem to fit well as engineers made changes on the plant floor. What had seemed reasonable in the context of the old departments did not make sense for the new cells in the focus factories. When the cells were physically set into place and operated, several things became apparent. Equipment, operators, setup personnel, material, tooling, floor space, and more were directly part of the cells. Most costs were now aligned with a product family and could be viewed as direct costs. Jeff began to make changes to the cost tracking system as he implemented value steam costing. Jeff's changes accomplished something remarkable. Under the traditional costing system, overhead [costs from unknown sources] accounted for around 85% of the cost of the product. After Jeff had established his version of value stream costing, overhead accounted for only about 15% of product cost. The new cost data was available at the engine and the component level.
What Jeff accomplished may not seem to be an amazing feat. But the methods Jeff used are still rare in manufacturing. Only a few companies are trying to implement these changes and ideas. What is more surprising is that Jeff's story took place in the early 1990s – almost 20 years ago! At the time there were no books describing what to do. The terminology, training, and techniques of value streams and value stream mapping were not known until Womack and Jones' book, "Lean Thinking." Jeff accomplished what he did for the right reason. As an accountant, he was supporting what was happening on the shop floor. He recognized a need, understood that traditional accounting techniques were of limited usefulness, and developed, on his own, a type of value stream costing. Jeff truly became a change agent. He accomplished something quite remarkable, and did it humbly, as just part of his job as an accountant. Adapted from “Accounting for the Right Reason” by Jim Huntzinger
Comical Cartoons Enjoy It While You Can
Quotable Quotes “People cannot be managed. Inventories can be managed, but people must be led.” H. Ross Perot “If the blind lead the blind, both shall fall into the ditch.” The Bible
Want to see your company’s successes featured in our weekly newsletter? Email the details of your latest achievements to [email protected]
Lessons from Lean Lean Accounting In the lean arena, accountants definitely get beat up, perhaps justifiably. But before we consider all of them “evil bean counters” blocking our attempts to implement lean, here is a story of one accountant who rose to the occasion. The company, which engineered and produced small engines, manufactured nearly all the major engine components. The company's current state was to manufacture in traditionally arranged departments. With the implementation of lean, these departments were being torn apart as one-piece flow cells were being set up in focus factories dedicated to specific engine models. It was literally a different plant each week, as new cells were moved into place and ramped up. Cells already in place would be moved again to accommodate cells coming from the old departments. The manufacturing engineers were having a field day. They were learning and implementing at a rampant pace. The divisional accountant, Jeff, was trying to keep pace with the massive change. While he wanted to maintain the usual cost data and budgets of normal product and manufacturing projects, he also had to deal with the surge of budgets for the massive rearrangement with all the extra expenses to track and manage. The complexity was compounded when information was in flux between the traditional department and the new cells and focus factories. Jeff began to notice that the standard costing system used by the company did not seem to fit well as engineers made changes on the plant floor. What had seemed reasonable in the context of the old departments did not make sense for the new cells in the focus factories. When the cells were physically set into place and operated, several things became apparent. Equipment, operators, setup personnel, material, tooling, floor space, and more were directly part of the cells. Most costs were now aligned with a product family and could be viewed as direct costs. Jeff began to make changes to the cost tracking system as he implemented value steam costing. Jeff's changes accomplished something remarkable. Under the traditional costing system, overhead [costs from unknown sources] accounted for around 85% of the cost of the product. After Jeff had established his version of value stream costing, overhead accounted for only about 15% of product cost. The new cost data was available at the engine and the component level.
What Jeff accomplished may not seem to be an amazing feat. But the methods Jeff used are still rare in manufacturing. Only a few companies are trying to implement these changes and ideas. What is more surprising is that Jeff's story took place in the early 1990s – almost 20 years ago! At the time there were no books describing what to do. The terminology, training, and techniques of value streams and value stream mapping were not known until Womack and Jones' book, "Lean Thinking." Jeff accomplished what he did for the right reason. As an accountant, he was supporting what was happening on the shop floor. He recognized a need, understood that traditional accounting techniques were of limited usefulness, and developed, on his own, a type of value stream costing. Jeff truly became a change agent. He accomplished something quite remarkable, and did it humbly, as just part of his job as an accountant. Adapted from “Accounting for the Right Reason” by Jim Huntzinger
Comical Cartoons Enjoy It While You Can
Quotable Quotes “People cannot be managed. Inventories can be managed, but people must be led.” H. Ross Perot “If the blind lead the blind, both shall fall into the ditch.” The Bible
Want to see your company’s successes featured in our weekly newsletter? Email the details of your latest achievements to [email protected]
