Lean Accounting or Accounting for Lean? · 10/27/2017 6 Turning point for Steve Turning Point (from...
Transcript of Lean Accounting or Accounting for Lean? · 10/27/2017 6 Turning point for Steve Turning Point (from...
10/27/2017
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The Great Recession!
This Photo by Unknown Author is licensed under CC BY-SA
Something Has to Change– Visuals!
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Turning point for Steve Turning Point (from Steve) Lost 40m/yr business in the
downturn (in the RV Supply business)
Sold off assets and saw all of the mistakes with much clearer vision
Had dabbled with lean some in other business
Saw many of the same issues at ATC
First Lean Steps
We did our first production Kaizen (change for the good) in the weld shop.
Very quickly we tackled some office procedures. Created visual board for tracking orders
Uncharacteristic to attack the office process this early in a lean transformation. We realized quickly this was much of our waste was.
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Inventory Results 2009- Raw material value $1,200,000
2009- Turns 5x
After Triple production/sales
2016-Raw material value $1,250,000
2016-19x
Value Streams
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Tracking Costs in a Value Stream ATC never used standard cost (but we did have
assumptions for material, labor and overhead)
Problem is costs get allocated across all product lines whether factual or not (e.g. our mid-line trailers)
Much simpler. Know 100% of costs for value stream. No more guessing or allocating.
Makes pricing decisions easier
Simpler to understand. Trying to get value stream members engaged in financial aspects of the business
Shared Services
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Profitability or Score A3 A3 assignment was given to me
out of strategy deployment A3 lays out history of
profitability for the organization Sets out goals for Value Streams
for 2017 and 2018 Identifies potential gaps and
countermeasures Have a monthly tier 5 meeting
with the VSLs to review how we are doing
Value Streams all have business plans which they developed to support the overall targets (will show some examples in next couple of slides)
Mix Planning
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Forecast
What is Tier 5 Meeting will be for accountability and request for cross
functional help
Think of it as the check meeting in a PDCA cycle. Planning is Strat Op, VS Mapping generates the actions steps, this meeting is a check and we will regularly adjust as needed
Common questions: If there is a gap, what are your countermeasures?
What obstacles are you facing?
How can we help?
Logistics: 2nd Tuesday after fiscal month end (same day as company report outs)
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Lean Accounting
First Steps for Accounting (metrics) Accelerated use of metrics Have always had some metrics. Emphasized visual v.
viewing on a computer. Posted result metrics both at line level and in the office. Examples of some: Productivity by hour worked;
continuous improvement sheets, invoiced by hour worked, raw material turns
Metrics started out being driven by me, early on we figured out that we needed to push down so operators have control of their own.
One of our lesson’s learned was measuring process v. results
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Metrics Examples
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VS Quest buildable backlog
Days Target
Days Andon
VS2 $ Backlog
Days Backlog
Financial Statement Reporting Report by Value Stream
Assign costs directly to the value stream as much as possible
Put people costs within the value stream for which they are doing the work.
Avoid allocations! Allocations make it harder for Value Stream leaders to have visibility over what they can impact
Other examples of costs directly attributable to the value streams: depreciation, warranty, benefits, supplies, etc.
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Financial Statement Reporting cont Increased frequency of reporting:
Weekly P&L’s Allows managers and value stream leaders to see results more
quickly v. waiting until end of the month More detail at value stream level, but rolled up into a one page
snap shot
Quarterly close Prepare reconciliations and workpapers quarterly now v.
monthly Can close quarter in one day Less errors since P&L is reported on weekly
Book labor and overhead annually v. quarterly now on WIP and FG inventory
P&L Example
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Hurdles to a Weekly P&L
System has to be in lockstep. There were two big areas for us that have to be tied out on Monday morning: Previous Week’s payroll Previous Week’s shipments
Standard Journal Entries for recurring expenses Split into 52 weeks instead of 12
Will have expense spikes in weeks as monthly bills come in. Have to balance standard entries to smooth those out to just
allowing spikes to hit May have slight quarterly adjustments depending on when
expenses come in
Have to live with a balance sheet quarterly Not everyone would have to live with this
Lessons Learned