In: Operations Management
9-18. Hammaker Manufacturing: Lean Production/Lean Accounting
HMC continues to be profitable. Although Denise and Lloyd Rowland mapped several business processes 5 years ago to determine whether HMC should work on process improvements or consider business process reengineering, they never really finished that effort nor did HMC decide whether to outsource any processes. Hammaker still thinks that HMC could be more efficient and more profitable, but he’s not really sure how the company can achieve this “next level” of excellence. About a year ago, Denise started reading books and trade journals on the topics of business strategy, lean production, and lean manufacturing. So, when Dick approached her regarding his intent to improve the company, she began to share with him some of the insights she had gained over the past year on business strategy and how their current AIS might not be capturing the most useful metrics for optimal decision-making. Denise mentioned that the next Lean Accounting Summit will be in September and suggested that she and her three financial analysts go to the 4-day conference to gain a better understanding of lean production and accounting concepts to determine how they might be able to better support HMC and Bob's goal of improving the company.
Requirements
If Bob decided to adopt the business strategy of lean production, what changes might he and his managers consider?
If HMC decides to adopt the business strategy of lean manufacturing then his managers have to first understand the concept and there after implement the process. Basically lean manufacturing create more value for customers with fewer resources. The major focus on lean manufacturing process remains on wastage control. The wastage should be at zero level. The ultimate goal of the concept is to provide perfect value to customer through a perfect value creation process that has zero waste. The major lean process tools which need to be implemented are as under
- 5 S - It is work place management.
- JIT - Just in time concept for inventory
- kaizen - Continuous improvement.
- bottleness Analysis - to understand the bottleness in the manufacturing process.
- Contineous flow of WIP ( Work in process)
- Partial Automation - since it will not be much costlier than full automation.
- KPI (Key performance Indicators) - to be finalized for individual employee.
- Waste - Any thing that do not have value from customer perspective.
- PDCA methodology - (Plan, Do, Check, Act)
- Error proofing - Error detection and prevention in manufacturing process to achieve zero defect.
- Root Cause Analysis- It is a process to analyse the root cause and then implement preventive and corrective action.
- TPM - Adopt total preventive maintenance concept to have zero break down.
- Visual Factory - Visual indicators, displays and controls used throughout the factory to improve communication of information.
Explain how HMC might benefit from implementing lean production/manufacturing concepts.
HMC will be benefited a lot by impleting the lean manufacturing process concept.
- It controls process waste to zero level, zero defects, zero machine break downs. as a result
a. the productivity gets improved.
b. improvement in Quality
c. Increased effeciency
d. inproved visual management
e. manpower reduction
f. Problem elimination etc
It ultimately provides perfect value to the customer.
Why would it be important for Denise and her financial analysts to attend the Lean Accounting Summit? What benefits would you expect them to acquire from this conference that would be useful at HMC?
Lean Accounting will support the Lean Manufacturing Enterprise as a business strategy. It seeks to move from traditional accounting methods to a system that measures and motivates best business practices in lean enterprise.Once the HMC adopts the lean manufacturing processes, it becomes more important for the accounting team to understand lean accounting system so that they can support to the company. Therefore, Denise and her team should attend the Lean Accounting Summit.
The benefits which the team may acquire from the conference are summerised as under -
a. Lean Accounting provides better information for decision making like standard cost etc., which helps in deciding the prices of the products to make it more competitive in the market.
b.It clearly identifies the financial impact of lean improvements.
c. It saves money and reduce cost.
d. It motivates for long term lean improvements once we come to know the financial impacts.
Thus, we can say that by implementing lean manufacturing process and lean accounting system, the goal of improving the HMC will be achieved.