Accounting Software 411 View Cart | Login / Register
Ei Dynamics Banner

FREE Accounting Software Search...
I am seeking software for ...


News Directory
All News
  Top News
  Mergers & Acquistions
  Product News
  AS411 News
Feature Articles
Events Calendar
 News Feeds

Jonas Construction Buyer Guide Block

  Find Software
  Find a Consultant
  Find Answers/Discuss
  List Your Company
  The Insider
  About Us
  Contact Us

Sponsor Message
Ei Dynamics Sky

Date Posted: 10/4/2006

Lean Accounting for Manufacturers

By Thomas R. Cutler

Lean accounting cost management provides a fresh way to look at accounting for operations in manufacturing companies. Lean cost management provides the tools that help staff to understand the changing physical operations in the plant. Traditional accounting is not spoken by the staff on the shop floor who have to use the information to improve. Accounting information must be translated, easy to understand, actionable, and timely.

Keep Score: Lean Accounting

Manufacturers determine the operational elements in the value stream to track. Those elements are shown in the top half of the scorecard; in the bottom half of the scorecard financial performance is shown. This includes common elements such as sales per employee, inventory turns, variable margin, and gross margin.

Operational items are displayed on the top of the scorecard because it is where people have to focus. If the operational scorecard is improved, the financial scorecard will also improve. To test the efficacy of the operational parameters, improvements are made on the operational side that do not improve the financial picture were the wrong operational parameters.

A traditional profit and loss (P&L) statement illustrates sales, cost of sales based on standard costing, labor variance, material variance, overhead variance, and labor rate variance. None of these data provide actionable responses in a lean accounting environment. In lean accounting, manufacturers look at the variable costs each month and decide which cost categories should be the focus for continued process improvement.

The Role of the Demand Driven Supply Chain in Lean Accounting

“The central hallmark of demand driven supply chain is a digital kanban system which achieves savings in several key areas,” according to Stephen Parker, CEO of North Carolina-based Datacraft Solutions.

• It reduces the need to build inventory. All production is initiated based on the immediate needs of customers. Inventory turns for digital kanban parts are optimized (a definition of lean accounting.)
• Time spent by customer service communicating on expedited parts issues is practically been eliminated through a demand driven supply chain. Often customer service staff members spend 40% of their time expediting part orders prior to digital kanban implementation.
• Sales have increased with the benefit of the e-kanban program because the copper manufacturer no longer uses capacity to build parts without an order to buy NOW. 100% of production capacity is utilized to build parts that are already sold as soon as they hit the shipping dock.

Parker insists, “Capacity is expensive and a demand driven supply chain via digital kanban provides lean accounting efficiency and elimination of waste.”

Business Process Efficiencies Translate into Lean Accounting

Business process efficiencies increase with digital kanban, since orders are no longer run through the scheduling department, cutting shop orders and batching them. Demand driven supply chain replaces a very long chain of events in the order entry and scheduling function. Customer needs are displayed in real time. Everyone, including the customer, can see the status of any digital kanban at all times.

This scorecard methodology along with digital kanban assists all manufacturing staff to understand the business and see the impact of their efforts manifested in better results. People want to know what they can do to make the business better, and link what they do to the financial results. Lean accounting provides a sense of ownership. Manufacturing staff now can understand what is occurring on the shop floor and make the appropriate changes.


Author Contact:
Thomas R. Cutler, CEO
TR Cutler, Inc

About Author
Thomas R. Cutler is the President & CEO of Fort Lauderdale, Florida-based TR Cutler, Inc., the largest manufacturing marketing firm worldwide – Cutler is the founder of the Manufacturing Media Consortium of twenty seven hundred journalists and editors writing about trends in manufacturing. Cutler is also the author of the Manufacturers’ Public Relations and Media Guide. Cutler is a frequently published author within the manufacturing sector with more than 300 feature articles authored annually; he can be contacted at


Email Page

Sponsor Message
Jonas Construction Buyer Guide Sky


Company Info | Privacy Policy | Terms of Service | Advertise With Us | List Your Company | Contact Us | Help |
Copyright © 2006-20011 Accounting Software 411, LLC. All rights reserved.