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Lean Manufacturing Lean manufacturing is concerned with eliminating waste in manufacturing processes. Benefits include: reduced lead times, improved quality, improved on-time deliveries, less inventory, reduced
Lean Manufacturing Lean manufacturing is concerned with eliminating waste in manufacturing processes. Benefits include: reduced lead times, improved quality, improved on-time deliveries, less inventory, reduced facility space (or freed up capacity for expansion), less human effort, lower costs, and increased profitability. Lean accounting is a simplified approach to costing that supports lean manufacturing with financial and nonfinancial measures. Lean manufacturing firms are pursuing a cost reduction strategy. Cost reduction is linked to cost leadership, which adds value by reducing waste. Lean manufacturing is similar to many other attempts to streamline processes, reduce waste, and improve profitability. Select "Yes or No" for the following terms which encompass many of the same methods as lean manufacturing: Toyota Production System Standard costing World-class manufacturing Cost-free manufacturing Just-in-time manufacturing Acceptable quality manufacturing It is good to recognize the way in which lean manufacturing fits into the constellation of attempts to streamline production and reduce waste. Select "Yes or No" for th integral parts of lean manufacturing which developed from the Toyota Production System include: Employee empowerment Team structures Departmental responsibility Cellular manufacturing Emphasis on direct labor to allocate overhead Reduced set-up times Small batches Emphasis on inspection and rework We can generalize across these various systems by identifying the five principles of lean thinking: Precisely specify value by each particular product. Identify the value stream for each product. Make value flow without interruption. Let the customer pull value from the producer. Pursue perfection. and sacrifice is Value by product is determined by the customer; it is the difference between realization and sacrifice. Realization is Value is externally oriented. Only value-added features should be produced; non-value-added activities should be eliminated. The value stream is made up of all activities required to bring a product or service from its start point (e.g., initial product concept) to a finished product in the hands of the consumer. Analyzing the value stream helps managers locate non-value-added activities. Value streams may be created for groups of products. Each value stream includes the same (or very similar) activities. People dedicated to a value stream develop ownership of that value stream and are responsible for its improvement. arowth and profitability. Value flow refers to the flow of production through all the processes needed to make the final product, from start to finish. Batch manufacturing entails quite a bit of wait time and move time. These are sources of waste. One way to reduce the non-value-added time of batch manufacturing is to create manufacturing cells which are . Similarly, continuous flow manufacturing reduces wait and move times. Setup times and changeover are also reduced. Example: Layton Manufacturing makes product X using traditional departmental processing. Currently the value flow for one batch of ten units includes the following: Wait time: Machining: Move and wait time: 15 minutes 5 minutes 9 minutes Deburring: 3 minutes Move and wait time: 12 minutes 6 minutes 15 minutes Painting: Move and wait time: Total time to process one batch = Processing time + Move and Wait time = (5 +3 + 6)(10 units) + (15+ 9 + 12 +15) = 140 minutes + 51 minutes = 191 minutes Now suppose Layton creates a manufacturing cell for product X so that production of a unit proceeds continuously from one process to another within the cell. What is the total time to process one batch of ten units? First unit 14 minutes Second unit 17 minutes Tenth unit 60 minutes Total processing time for ten units in the cell is 60 minutes. Time saved over traditional layout is 131 minutes (191 - 60). Total processing time for ten units in the cell is 60 minutes. Time saved over traditional layout is 131 minutes (191 - 60). Lean manufacturing uses demand pull. Demand pull means that the firm produces only This type of approach requires a just-in-time (JIT) purchasing system so that materials inventories will not build up. Long-term contracts are typically used to manage supplier relationships and reduce orders. The supplier base typically shrinks as the firm uses only a few favored suppliers. Fundamental to leaning manufacturing is the pursuit of perfection. To achieve this, firms eliminate waste wherever and whenever it is found. Sources of waste include the following: Defective products. Overproduction of goods not needed Inventories of goods awaiting further processing or consumption Unnecessary processing Unnecessary movement of people Unnecessary movement of goods Waiting Design of goods and services that do not meet customer needs Companies use a variety of methods to eliminate waste. An important part of a waste reduction strategy is employee involvement. Employee involvement requires participation by employees and greater responsibility. The organizational structure flattens and leads to greater communication between levels of management. Total quality control (TQC) is emphasized. TQC is striving for Inventories of all types are reduced as much as possible. Activity-based management and process value analysis are employed to measure the achievement of objectives and to wring out non-value-added activities. Lean Accounting Recall that a well-designed accounting system mirrors the production environment. The changes in environment brought about by lean manufacturing require changes in the accounting system to support the lean efforts. Select "Yes or No" for the following characteristics of each type of accounting system. Traditional Accounting Lean Accounting Characteristics Standard costing Departmental efficiency Value streams Tracing of overhead cost to activities Identification of non-value-added activities Cross-training of employees Demand-pull Value-stream product costing Emphasis on direct labor cost Emphasis on conversion cost Emphasis on variances Direct labor efficiency Product costs collected by cell Product costs collected by department System System Financial measures Operational measures As we see from the above lists, lean accounting is developed to follow and cost the value stream. Direct labor is not a crucial part of this. Because employees are cross-trained and can do a number of tasks needed in the firm, direct labor efficiency is not tracked. Instead, conversion cost is tracked and non-value-added conversion activities are identified and scheduled for elimination. While both traditional and lean accounting use financial measures to assess performance, lean accounting relies more heavily than traditional accounting on operational measures. These are closely tied to strategic objectives, such as total quality control. For example, a factory may track the number of defective units produced, or the hours of rework needed to turn defective items into quality units. While these measures can be expressed in dollar terms (e.g., the cost of the rework hours), it is easier for those actually responsible for production to see the impact of the operational measures
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