How Lean maturity simplifies Financial Control
Torbjorn Netland (1) explores how Lean Manufacturing affects Financial Control systems and finds that they change after Lean implementation.
One of the pillars of the Toyota TPS (Toyota Production System) house is to empower individuals (autonomy) and let teams make decisions on the shop floor instead of remote managers, which optimizes time and operational costs.
Companies that are more mature in Lean Manufacturing and Lean Accounting (Value Stream Costing) simplify reporting, inventory tracking and update traditional cost calculation methods.
- Lean requires a pull production management and encourages Financial Controllers to communicate more often with shop floor operators, allowing continuous updating of Financial Control matrices.
- Lean also promotes visual management to identify and eliminate waste and make continuous improvement more effective.
- The performance indicators of the processes tend to align with the objectives and matrices of the Financial Control. This alignment is faster in a Lean mature company than in a company with a more centralized Top-Down control style.
Waste elimination involves efficient and prepared meetings. In a Lean system of daily visual management routines (Focus Point, War Room, Dojos, etc.), shop floor operators are both receivers and transmitters of information to simplify and speed up the decision-making process and the levels of controls, which are often too heavy in large stratified structures.
“The implementation of Lean Manufacturing leads companies to abandon complex cost allocation systems in favor of simpler systems, which accumulate costs at the level of the value chain or Value Stream Costing.”
Brian Maskell (2)
A Complex Relationship : Simplification, Alignment and Time lag
This simplification of decision-making management allows a simplification of Financial Control systems, which are also in continuous improvement.
Since Financial Control is not one of the tools or origins of Lean, we cannot link the simplification of Financial Control to the implementation of Lean but simply admit that the efficiency of Lean on the company system allows an improvement of the Financial Control systems.
However, some more recent studies from Sandra Tillema and Martijn Van der Steen (3) highlight the difficulty of simplifying inventory tracking, even in business contexts with high Lean maturity levels.
The reason for this lack of correlation is the time lag between the time taken to mature the quality of the company’s processes and the alignment of the Financial Control matrices for shop floor operators and their feedback to decision-makers in charge of operational and strategic steering.
Setting up a Lean Manufacturing type organization requires implementing tools specific to the Toyota TPS Production System such as: just-in-time, Value Stream Mapping, risk analysis, root cause analysis, 5M, 5 whys, 5S, Poka Yoke, 3M (Muda, Mura, Muri)…
These tools require a major training plan for all employees and change management reflected in the company’s Strategic workforce planning (forward-looking management of jobs and skills).
Tillema and Van der Steen (3) show that a minimum period of one year is necessary to raise awareness and train employees on Lean Manufacturing tools.
The speed of adaptation of Financial Control systems is therefore correlated with the speed of Lean deployment and acceptance by the teams.
In summary, How to achieve Lean simplification and financial alignment ?
Lean management :
- changes Financial Control systems after implementation (Netland, 2015). (1)
- empowers individuals and teams, simplifies reporting and cost calculation, and promotes visual management and continuous improvement.
- aligns performance indicators with Financial Control objectives and matrices, especially in mature companies.
- simplifies decision-making and Financial Control systems, but does not directly cause this simplification.
- faces challenges in simplifying inventory tracking, due to time lag between process quality and Financial Control alignment (Tillema and Van der Steen, 2015). (3)
- requires specific tools and training for employees, as well as change management and strategic workforce planning.
- depends on the speed of deployment and acceptance for Financial Control adaptation.
“The implementation of Lean Manufacturing leads companies to abandon complex cost allocation systems in favor of simpler systems, which accumulate costs at the level of the value chain or Value Stream Costing.”
Brian Maskell
References :
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