Accounting for Lean Manufacturing - by Kay Carnes &Scott Hedin
VOL.7 NO.1
Accounting for Lean Fall Manufacturing: Another 2005 Missed Opportunity?
B Y K AY C A R N E S , P H . D . , C PA ,
AND
SCOTT HEDIN, PH.D.
MANY
COMPANIES ARE IMPLEMENTING LEAN ACCOUNTING TECHNIQUES, YET THE
MANAGEMENT ACCOUNTING LITERATURE AND CURRICULA LAG BEHIND IN THEIR COVERAGE OF THESE TOPICS. THE MANAGEMENT ACCOUNTING FIELD FACES A SEVERE CHALLENGE TO CATCH UP OR RISKS LEAVING GRADUATES UNPREPARED FOR THEIR CAREERS.
EXECUTIVE SUMMARY While much has been written in the operations management and engineering fields about the benefits and processes involved in lean manufacturing, very little has been written by accountants about the specifics of adapting accounting systems to better serve lean operations. An evaluation of management and cost accounting texts revealed continued heavy emphasis on traditional absorption cost accounting with only spotty coverage of the accounting techniques needed for lean manufacturing. We propose some reasons for the lack of accounting contributions by practicing accountants and educators, concluding that the career of management accounting faces severe challenges and that university accounting programs do a poor job of preparing graduates for careers in management.
I
n recent years, many companies have significantly changed their production strategies. To meet increasing competitive pressures, these companies have moved from producing large batches of uniform product to creating individual products or small batches modified to the demands of individual customers. To be successful in this shift of emphasis, firms have adopted a set of processes called lean manufacturing, a term that seems to have arisen from the work of Eiji Toyado and Taiichi Ohno of Toyota Motor Company.1 Over the past two decades, many companies have implemented lean manufacturing techniques, including concepts such as just in time, the Theory of Constraints, Six Sigma and other quality measures, value-stream management,
Accounting for Lean Fall Manufacturing: Another 2005 Missed Opportunity?
B Y K AY C A R N E S , P H . D . , C PA ,
AND
SCOTT HEDIN, PH.D.
MANY
COMPANIES ARE IMPLEMENTING LEAN ACCOUNTING TECHNIQUES, YET THE
MANAGEMENT ACCOUNTING LITERATURE AND CURRICULA LAG BEHIND IN THEIR COVERAGE OF THESE TOPICS. THE MANAGEMENT ACCOUNTING FIELD FACES A SEVERE CHALLENGE TO CATCH UP OR RISKS LEAVING GRADUATES UNPREPARED FOR THEIR CAREERS.
EXECUTIVE SUMMARY While much has been written in the operations management and engineering fields about the benefits and processes involved in lean manufacturing, very little has been written by accountants about the specifics of adapting accounting systems to better serve lean operations. An evaluation of management and cost accounting texts revealed continued heavy emphasis on traditional absorption cost accounting with only spotty coverage of the accounting techniques needed for lean manufacturing. We propose some reasons for the lack of accounting contributions by practicing accountants and educators, concluding that the career of management accounting faces severe challenges and that university accounting programs do a poor job of preparing graduates for careers in management.
I
n recent years, many companies have significantly changed their production strategies. To meet increasing competitive pressures, these companies have moved from producing large batches of uniform product to creating individual products or small batches modified to the demands of individual customers. To be successful in this shift of emphasis, firms have adopted a set of processes called lean manufacturing, a term that seems to have arisen from the work of Eiji Toyado and Taiichi Ohno of Toyota Motor Company.1 Over the past two decades, many companies have implemented lean manufacturing techniques, including concepts such as just in time, the Theory of Constraints, Six Sigma and other quality measures, value-stream management,