Thursday, October 20, 2011

Lean Works

Its not new that companies fail to show bottom line improvement numbers immediately with a lean initiative. It is a large undertaking to change a mindset and to introduce a phylosophy where the people doing the work are accountable to not only perform the work, but to improve the work as well. Most companies are looking for experts or silver bullets to introduce that change.

In most companies I work with, it takes about a year before the management with the accounting people step forward to say "we hear things are better, we see improvements in flow and a reduction in WIP (work in process) but we don't see the savings in the bottom line".

If you are a lean leader in your company, you should do some research on lean accounting. Sooner or later you will be asked the question. Its best to get the accounting and financial group on board at the start. Traditional accounting does not support lean. The truth is that if you are using traditional accounting methods, it will appear as though your unit cost is increasing in the short term with lean.

If your lean consultant cannot explain this to you - get a new consultant. Otherwise, within a year this will kill your lean initiative - regardless of the improvements that your production folks claim they are seeing.

NBI - Making sense of business improvement - Blogged