Lean manufacturing: costing the value stream

Abstract

Purpose -The purpose of this paper is to identify the shortcomings of traditional cost accounting techniques in lean companies and then it seeks to analyse the validity and convenience of value stream costing (VSC) as a tool in a company that has adopted some concepts of lean manufacturing. Design/methodology/approach -The paper reviews the relevant literature in order to discuss the deficiencies of costing methods in lean manufacturing. It evaluates the requirements of VSC and provides a concrete illustration of VSC in the continuous improvement process of a point of sales terminal assembly line. Findings -The paper evidences the possible mistakes of cost accounting. The necessity and validity of VSC in lean manufacturing are presented, followed by a case example. In order to make continuous improvement decisions, VSM, VSC and box score offer complete information on the performance of the value stream. Research limitations/implications -Although accompanied by an application on a real case study, this is not an empirical investigation on the adoption of VSC. Practical implications -VSC requirements agree with the fundamentals of lean management. Therefore, VSC is a valid tool for lean companies, although the applicability depends on the maturity of the lean implementation. Originality/value -This paper contributes to the lean accounting literature because the management accounting literature still lags behind the lean transformation. This is one of the first papers on VSC in relevant journals and the first one to combine VSC and box scores with value stream mapping. The paper will be useful to academics involved in new accounting systems but also to practitioners who are implementing lean manufacturing.

Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices

“…Further, our results suggest that firms can leverage their returns from a lean manufacturing strategy by also implementing lean MAP. This implication is consistent with researchers and practitioners who have argued that traditional MAP motivate behaviors detrimental to the success of lean because of their focus on cost reduction rather than process improvement and customer value, and, thus, need to be updated to reflect the strategic objectives inherent to lean manufacturing (e.g., Ahlstrom and Karlsson, 1996; Chiarini, 2012; Johnson and Kaplan, 1987; Li et al, 2012; Maskell et al, 2012; Ruiz‐de‐Arbulo‐Lopez et al, 2013). We show that strategically integrating both lean manufacturing and lean MAP provides a greater return to the firm (in the form of increased operations and financial performance) than does the implementation of only a lean manufacturing strategy, consistent with the notion that lean is a holistic business strategy (e.g., Camacho‐Minano et al, 2013).…”

Divergence between Value Stream Mapping Western Understanding and Material and Information Flow Chart Principles: A Japanese Automotive Supplier’s Perspective

“…VSC is compatible with other tools, as shown by study cases on VSM [29] and CTP [28]. In both cases, VSC was indicated as a great supporter of lean initiatives [31].…”

“…Differences between direct and indirect costs disappear when value stream costing is applied; all costs within the value stream become direct, and costs outside of the value stream map are not included [28]. Metrics and future states presented by [29] [32] reflect the improvement achieved after value stream costing. A drawback of VSC is that a methodology that treats all items as equal might work well for short-term performance measurement and short-term decisions, but not when considering the long term [29].…”

“…VSC aims at capturing the cost of materials, labor, and every resource directly within the value stream, with little or no overhead cost allocation. The VSC-based lean manufacturing system creates an understandable and timely way of costing a product family (at an intermediate level of detail), thus driving CI and decision-making in combination with nonfinancial performance measures [29].…”

“…Metrics and future states presented by [29] [32] reflect the improvement achieved after value stream costing. A drawback of VSC is that a methodology that treats all items as equal might work well for short-term performance measurement and short-term decisions, but not when considering the long term [29].…”