Note: Lean Accounting and
Productivity Measurement
Lean Manufacturing
Lean Manufacturing is an approach in
accounting which is designed to
eliminate waste and maximize
customer value. It is often characterized
by:
> Delivering the right product
> In the right quantity
> With the right quality (zero defects)
> At the exact time the customer needs
> At the lowest possible cost
Value Stream Costing
The worth of one or more features of
a product for which customers are
willing to pay is called the value. The
value stream is made up of all
activities required to bring a product
group or service from its starting
point to a finished product in the
hands of its customer.
Identifying value streams may be
accomplished by using a two-
dimensional matrix where activities
are listed on one dimension, and
products on a second dimension. Lean
accounting employs value stream
costing, linking costs directly to the
value-added activities in the
production process.
Elimination of Waste
Waste is anything that customers do not
value. It is through lean accounting that
we eliminate waste. Major sources
include:
> Defective products
> Overproduction of goods not needed
> Unnecessary processing
> Unnecessary movement of people
> Unnecessary transport of goods
> Waiting
> Inventories of goods awaiting further
processing or consumption
Productivity Measurement
Productivity is concerned with producing
output efficiently, and its specifically
addresses the relationship of output and
the inputs used to produce the output.
The quantitative assessment of
productivity changes is called
productivity measurement.
An assessment of productive efficiency
for all inputs combined is called total
productivity measurement.
Types of Productivity
Partial Productivity Measure:
Measuring productivity for one input
at a time. The productivity ration is
calculated through the output and
input.
Operational Productivity Measure:
Partial measure where both input and
output are expressed in physical
terms.
Financial Productivity Measure:
Partial measure where both input and
output are expressed in monetary
symbols such as pesos or dollars.
Total Productivity
Measurement
Profit-Linkage Rule: For the current
period, calculate the cost of the inputs
that would have been used in the
absence of any productivity change,
and compare this cost with the cost of
the inputs actually used. The difference
in costs is the amount by which profits
changed because of productivity
changes.
To compute the inputs that would have
been used (PQ), use the following
formula:
PQ = Current period output/base
period productivity ratio