COST MANAGEMENT IN THE LEAN PRODUCTION ENVIRONMENT: VALUE STREAM COSTING

Yıl 2013, Cilt: 13 Sayı: 25, 57 - 86, 01.06.2013

Rabia Aktaş

Öz

A great number of companies have been trying to implement a new production
strategy called “Lean Production” that embraces many methods in recent years. Lean
production aims to provide products to company’s customers with the features they desire
and at the time and quality they want by eliminating all wastage in the company in a
continuous improvement approach.
It is reported that in most companies moving to lean production applications,
traditional management and cost accounting systems are insufficient to evaluate and
measure operational improvements and to provide true cost information. Management and
cost accounting system should support the lean transformation by carrying out the
changes required for lean operational processes in those companies. Information produced
by management accounting system should meet managers’ needs, be accurate and
provided on time.
As a result of the search for a new management and cost accounting system
compatible with lean production applications, “Lean Accounting” as a management
accounting system and “Value Stream Costing” as a costing method have been emerged.
Lean accounting is a general term used to express required changes in a company’s
accounting, control, measurement, and management processes to support lean production
and lean thinking (Maskell, 2004: 1). Being a broad concept, lean accounting is not
complicated and has four basic principles (Lean Accounting Report, 2008: 21): (i) To
continuously decrease wastage in accounting and other supporting functions, (ii) To
provide users with accurate and timely information to support lean, (iii) To focus on costs
related to value streams instead of departments or products, and (iv) To support decision
making processes.
Companies would attain better decision making information as a result of lean
accounting applications. Furthermore, companies would have simple and timely reports
that could be easily understood by everybody in the company and they would understand
the financial effects of lean modifications. While lean accounting provides a focus for
creating value for costumers, it will also ensure management accounting’s participation in
lean transformation. This, in turn, will help the growth of company, value creation for
costumers, increase in cash flow and shareholder value (Maskell and Kennedy, 2007: 73).
Utilizing traditional costing methods in companies that transform to lean production
creates a danger for sustainability of lean production philosophy. This is because
traditional costing methods have been developed and suitable for environments where a
limited number of products are produced in mass quantities. However, assumptions of
traditional mass production and traditional costing methods developed accordingly
contradict with lean production philosophy.
An efficient cost management should provide proper and true cost, product, and
profitability information and should save that information from discretionary allocation of
fixed costs. Additionally, it should set forth casual relationships explicitly and provide
that all employees could see the opportunities towards improving value streams. And all
these should be achieved in minimum time and effort (Hilker, 2011: 19). Most efficient
methods to ensure this is value stream costing.
Value stream costing is a method that could be used by companies organized on the
basis of value streams. Value stream includes all activities starting with designing the product, taking orders from customers, producing the product, delivering it to customers
and all after-delivery activities. All employees assigned to a value stream could see the
value stream as a whole and contribute to eliminate wastage as they distinguish value
creating and non-value creating activities in lean companies that are organized on the
basis of value streams.
Value stream costing keeps track of costs on the basis of value streams. Since the cost
object is no longer product or departments, it is value streams. All costs related to a value
stream (labor costs, raw material costs, machine costs, setup costs, etc.) are directly
accepted to the value stream in this method. Therefore, cost allocations, shown as an
important reason for not reflecting true cost information, are either not made or made very
little.
Unit product cost in value stream costing is calculated by dividing total value stream
cost to the number of products delivered to customers. Instead of number of products in
inventory, using the number of products delivered to customers in denominator leads
employees to decrease the inventory level. Delivering more products than produced ones,
therefore low inventory level, causes a lower product cost. Delivering less products than
produced ones leads to a higher product cost. The last case is producing products without
taking orders from customers. This certainly does not suit lean principles (Kennedy and
Huntzinger, 2005: 36).
Value stream costing is simple compared to traditional costing methods because
detailed cost follow ups, standards, cost records, and allocations are not needed.
Traditional cost accounting collects costs on products and order level, brings them
together, and reports on income statement. This requires a system that is complicated to
manage and sustain because of the number of products and services companies provide.
Nowadays the number of products increases rapidly and sometimes companies have to
develop standards for products that will only be produced once. On the other hand, value
stream costing collects costs at the highest level of organization and eliminates the need
for a complicated product costing system. Eliminating the need for retention of traditional
cost accounting creates an opportunity for removing a lot of action related to traditional
cost accounting (Maskell and Katko, 2007: 163).
Income statements are also prepared at the value streams level in lean companies
organized at value stream levels. While product costs and period costs are classified as
functional in a traditional income statement, there is a classification and a presentation
based on value streams in a value stream income statement. The value stream income
statement, prepared weekly as to be understood easily by everybody in the value stream,
presents important information to interested parties on time that could not be in traditional
income statement such as weekly inventory changes and information about capacity
utilization.
Every value stream is accepted as a single business unit in lean companies. Value
stream manager is responsible for increasing the value created by the value stream,
eliminating wastage, and increasing profit of the value stream (Baggaley, 2003: 27).
Preparing and presenting cost information at value streams level provide information to
managers assigned to a value stream to satisfy their responsibilities.
Lean companies have to perform their analyses as a whole on the basis of value
stream’s profit not on the basis of products while making business decisions. Using
traditional standard cost information is extremely dangerous for lean companies. Standard
costs almost always lead to wrong decisions. It is necessary to take profitability of value stream as a whole into account in financial analyses for decisions such as accepting
customer orders, do it yourself-purchase decisions, capital investments, new products, and
rationalization of customers and products (Maskell and Katko, 2007: 173).
The prerequisite of successful implementation of value stream costing used in lean
companies to control costs and provide healthy cost information is to eliminate common
utilization of resources among value streams. If this prerequisite could not be satisfied,
allocations impairing cost information would still be made and this would hinder the
efficient functioning of the method.
The main purpose of this study is to investigate value stream costing concept in detail
that is an important aspect of lean accounting applications. For this purpose, the
importance of evolution of management accounting in the lean production environment
has been underlined and lean accounting applications have been stated. Subsequently,
value stream costing, which is an important component of lean accounting and the
elementary topic of this paper, has been analyzed in terms of basic concepts, its contents,
features, processes, and application conditions.

Anahtar Kelimeler

Lean Production, Lean Accounting, Value Stream Costing

YALIN ÜRETİM ORTAMINDA MALİYET YÖNETİMİ: DEĞER AKIŞ MALİYETLEME

Öz

Bir üretim stratejisi olarak yalın üretimi benimseyen işletmelerde, yönetim muhasebesi bilgi sisteminin hem bu yeni stratejiye geçişi destekleyecek hem de yeni stratejinin uygulamasını ve sürdürülebilirliğini sağlayacak şekilde yeniden dizayn edilmesi gerekmektedir. Bu gerekliliğin sonucu olarak yalın muhasebe geliştirilmiştir. Yalın muhasebenin birbiriyle ilişkili çeşitli konuları bulunmaktadır. Değer akış maliyetleme bu konulardan biridir. Değer akış maliyetleme, değer akışları düzeyinde örgütlenen yalın işletmelerde maliyetleri değer akışları temelinde takip eden, hesaplayan ve raporlayan bir maliyetleme sistemidir. Yöntemde maliyetler değer akışlarına direkt kabul edildiği için, maliyet bilgilerini bozan dağıtımlara ihtiyaç ya hiç olmamakta ya da çok az olmaktadır. Bu çalışmanın amacı, yalın üretim ortamında yöneticilere ve tüm çalışanlara doğru maliyet bilgisi sunan değer akış maliyetlemenin yalın işletmelerdeki yeri, önemi ve işleyişi hakkında örneklerle bilgi vermektir.

Anahtar Kelimeler

Yalın Üretim, Yalın Muhasebe, Değer Akış Maliyetleme