Lean Accounting Maturity Path – Managing by Value Stream

As lean manufacturing becomes the operating system, it is critical that lean accounting practices take hold and replace traditional measurement, control and reporting practices. The rapid pace of continuous improvement will not be reflected in any traditional measurements or controls.


Box Score – Performance Measurements

  • The lean performance measurement linkage chart becomes the primary method to control the operations. Strategic measures are reviewed monthly by senior management, value stream measures are used weekly by the value stream to plan & manage continuous improvement and cell measures are used on a daily basis to control cell production activities.
  • The lean performance measurement linkage chart has also been introduced into all support and administrative processes


Box Score – Capacity

  • The productive, nonproductive and available capacity of value streams is available weekly
  • Value streams use the capacity analysis to plan & measure the impact of continuous improvement initiatives


Box Score – Value Stream Costing

  • Standardized work has been implemented so all costs are directly charged to value streams.
  • The general ledger is being modified for value stream costing
  • A company value stream P&L can be produced that matches the traditional P&L. At a minimum it is used as an internal analysis tool, with the traditional P&L used for financial reporting
  • Value stream P&L’s are produced weekly for each value stream
  • Features & Characteristics has been introduced to replace standard costing when a product cost is required


Transaction Elimination

  • Direct expensing of materials, labor and overhead costs to the value streams eliminates the need for most shop floor transactions and allocations
  • Inventory tracking transactions are stopped, replaced by a pull system and visual management
  • Procurement transactions such as individual purchase orders, receiving transactions and 3-way matching can be eliminated as supplier certification matures


Planning & Budgeting

  • Monthly sales, operations and financial planning is used by value streams and senior management
  • Budgeting is by value stream


Lean Decision Making

  • Standardized processes have been created to analyze business decisions using box score data which considers the operational, financial and capacity impact of decisions. Examples of such decisions are make/buy, profitability of orders, capital purchases, outsourcing and new product profitability
  • Standard costs are not used to make business decisions, even if standard costing is still required to value inventory


Inventory Valuation

  • If standard costing is still required for inventory valuation, is it maintained only to value inventory and has been greatly simplified
  • If inventory is low and consistent (30 days or less), simplified inventory valuation methodologies using value stream costing are introduced and standard costing is “turned off”