The Lean CFO Blog Series #4
Here are final two paradigms the Lean CFO must incorporate into the business to drive financial success with Lean
Tame the ERP Beast
ERP systems are designed for traditional manufacturing methods & management practices. Collect lots of detailed operating information and summarize it for management for them to analyze in the comfort of their offices so they can tell everyone what is wrong and what to do. Ultimately all this information ERP systems produce end up creating the financial statements. So the CFO has a vested interest in how an ERP system is set up & run.
Lean companies recognize that ERP systems impede the 3 major flows: material, information & cash because of all the unnecessary transactions that must be done, non-lean information created & reported and all the meetings needed to understand the this information.
The Lean CFO must take control of the ERP system and make if work for the lean company, rather than against it. Lean systems require real-time, accurate information on how well processes are performing in terms of flow, value creation and waste elimination. This information needs to be simple to gather, easy to understand and actionable. The Lean CFO needs to reduce the reliance on ERP information & transaction control and increase reliance on lean controls & measures.
Change the Future, Don’t Analyze the Past
Financial projections and annual budgets are important at a high level for owners, shareholders & other stakeholders. The traditional method used is to develop these high level numbers from the bottom up by creating detailed budgets by month for each department and each line item on the financial statements. This leads to managers explaining why monthly actual results did not meet budget.
The Lean CFO needs to focus the resources of the company away from analyzing the past towards understanding the present. Develop a deep understanding today of the root causes of lean operating performance and capacity usage. Use proven lean improvement methods to eliminate root causes and tomorrow’s performance will be better. Constantly measure to ensure that these improvements are really working. These improvements will drive financial success.