In my first article on this subject (The lean-accountant – how the finance professional can add value), the assertion was that the lean-accountant is missing out on a major opportunity to play an active role in an organisation’s lean transformation. By using their unique position and business-wide sense they could become the champion for Lean as a business wide culture.
The comments that this post received highlights the age-old perceived battle between Operations and Finance – possibly a comfort-zone for all those involved. It is clear that there is an onus of responsibility on both the Operations Manager (also Technical, Engineering and General Manager) and the lean-accountant to ensure that the transformation benefits the whole business.
If the Finance professional is not actively involved in the lean transformation, or indeed bemoaning the lack of bottom-line improvement, then the Ops Manager has a responsibility to explain the improvements and how the business can and should benefit and can also point out the “low hanging fruit” that can quickly bolster the bottom line
Create Stability – or pluck the low hanging fruit
The first stage of the continuous improvement cycle is to stabilise the processes before linking and creating flow – this is where the opportunity to remove the big waste lies.
What does stability mean ?
Create a basic level of stability – “stand in the circle” and remove the big waste !
The 8 wastes are typically defined as:
- Unnecessary movement – non value added employee motion eg. Reaching for parts, stacking, walking
- Overproduction – producing earlier or in greater quantities than required
- Waiting (time on hand) – workers watching an automated machine or waiting for a previous operation or waiting for machines to be fixed
- Transportation or conveyance –excessive and unnecessary movement of parts
- Over-processing or incorrect processing – unneeded steps to process the parts, poorly designed process
- Excess inventory – excess material, WIP or finished goods – causes longer lead times and hides quality problems
- Defects – scrap means rework or replacement parts
- Unused employee creativity – by not listening to and engaging your employees
These are the clues to look out for when creating stability. Typically this is where you will find big cost flowing out of the company and where you can find immediate benefit. In companies we have worked in big waste could be described as:
- High levels of machine downtime – created a need for excessive overtime; just to get the equipment functioning again a “sticking plaster” was applied normally at high cost; because of the need to start making product again and quickly, higher levels of scrap were tolerated – when the crisis was over the business breathed a huge sigh of relief and moved on to the next fire.
- High levels of scrap – an obvious source of waste
- A culture of overtime to fix shortfalls – eventually the employees got fed up with having to work 6 or 7 day weeks with no end in sight
- Special transport costs
These issues could be fixed by applying lean tools to the stability phase – once fixed the immediate benefit to the bottom-line was significant.
The lean accountant could see these improvements, even using traditional costing and measurement – explain this and show this and then you have the lean-accountant engaged ready to accept the improvements and look how the real essence of lean can improve the business.
Link processes to remove waste and create capacity
We all know that this is the essence of lean – being able to do more with the same cost is surely a compelling argument.
Traditional accounting costing methods, especially the valuation of inventory is a paradigm to the very essence of lean. Not a easy paradigm to get over, but at least the Operations Manager is starting to win the lean-accountant over. The next step is to get the Sales Manager to accept that he/she will need to have to go and win more business to utilise this extra capacity – a whole new battle, but when this battle is fought and won just imagine what will happen to the bottom line……
Summary
The key for the Operations Manager is to engage the lean-accountant in the lean implementation; the bribery of removing big waste is as good a starting point as any. Then once engaged, it is the responsibility of both functional areas to explore the even greater potential for lasting bottom line improvements through the full implementation of lean and the creation of a true continuous improvement cycle.
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