Corcoran J. Summary of Baggaley, Maskell Value Stream Managment for Lean Companies (2)
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Baggaley, B. and B. Maskell. 2003. Value stream management for lean companies, Part II. Journal of Cost Management
(May/June): 24-30.
Summary by Jodi Corcoran
Master of Accountancy Program
University of South Florida, Fall 2004
JIT Main Page | Lean Accounting Main Page | Value Chain Main Page
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This is the second article in a two part sequence1. In this article, Baggaley and Maskell promote value stream costing as a more appropriate costing method for lean companies than standard costing. The paper includes a brief discussion of the shortcomings of standard costing from the lean enterprise perspective, a description of value stream costing, an explanation of how value streams are managed with reference to two types of reports created with value stream costing information, and a discussion of the environment needed for value stream costing to work effectively.
Shortcomings of Standard Costing
1. Standard costing allocates all overhead to products and relates the overhead to
direct labor hours.
2. Standard costing encourages non lean behavior by focusing on utilization of resources, people’s individual efficiencies, and overhead allocations.
3. Standard costing calls for elaborate and wasteful data collection systems; the opposite of lean thinking.
4. Standard costing does not provide the data needed to support and encourage lean manufacturing. Value Stream Costing
Value stream cost are typically calculated weekly.
No distinction is made between direct or indirect costs. All costs of the value stream are considered direct costs.
Costs included in the value stream are production labor, production materials, production support, machines and equipment, operation support, facilities and maintenance, and all other value stream costs. (See the adaptation of Exhibit 1 below). Value stream costing includes a
Home
About
Contents
Main Bib
Topics
Summaries
Textbook
Journals
Search
Baggaley, B. and B. Maskell. 2003. Value stream management for lean companies, Part II. Journal of Cost Management
(May/June): 24-30.
Summary by Jodi Corcoran
Master of Accountancy Program
University of South Florida, Fall 2004
JIT Main Page | Lean Accounting Main Page | Value Chain Main Page
[AD]
This is the second article in a two part sequence1. In this article, Baggaley and Maskell promote value stream costing as a more appropriate costing method for lean companies than standard costing. The paper includes a brief discussion of the shortcomings of standard costing from the lean enterprise perspective, a description of value stream costing, an explanation of how value streams are managed with reference to two types of reports created with value stream costing information, and a discussion of the environment needed for value stream costing to work effectively.
Shortcomings of Standard Costing
1. Standard costing allocates all overhead to products and relates the overhead to
direct labor hours.
2. Standard costing encourages non lean behavior by focusing on utilization of resources, people’s individual efficiencies, and overhead allocations.
3. Standard costing calls for elaborate and wasteful data collection systems; the opposite of lean thinking.
4. Standard costing does not provide the data needed to support and encourage lean manufacturing. Value Stream Costing
Value stream cost are typically calculated weekly.
No distinction is made between direct or indirect costs. All costs of the value stream are considered direct costs.
Costs included in the value stream are production labor, production materials, production support, machines and equipment, operation support, facilities and maintenance, and all other value stream costs. (See the adaptation of Exhibit 1 below). Value stream costing includes a