Bridging the gap between Accounting and Operations to improve the odds for a successful Lean journey

Presented By:

Jerry Solomon

Session Abstract:

The operational strategy proven to be most effective in achieving world-class performance levels is Lean.  Unfortunately, accounting can be a major obstacle to an effective Lean conversion.

Accounting must become a major contributor and participant in the Lean journey.  Accountants typically do not understand Lean, have not been taught how to support Lean, do not know how to measure Lean improvements, do not have time to devote to it, and generally have not been asked to participate in Lean activities that usually focus exclusively on the shop floor.

On the other hand, operations’ professionals typically achieve great gains on the production floor but are surprised that their efforts are met with a yawn in accounting with little to no evidence of improved operating results.  Since accounting has its own language that is somewhat foreign to the rest of the company, a significant disconnect develops between the functions.  Furthermore, typical accounting metrics promote non-Lean behavior creating a potential obstacle to a successful Lean journey.

Manufacturing must understand why their successful efforts at improving flow, reducing inventory, improving customer service and creating capacity will potentially lower earnings.  Manufacturing must be able to explain this, in advance, so accounting is not surprised when quarterly results are prepared.  As long as operational improvements remain invisible on financial reports, accounting will be stymied in supporting operational improvements and manufacturing will be frustrated in knowing their efforts are not appreciated.

It is imperative that manufacturing and accounting work together to develop new metrics and “plain English” financial reporting.  This session will illustrate the disconnect between accounting and operations and what should be done to eliminate it.

Learning Objectives:

“In this session you will learn…”

  • Why shop floor improvements will likely be invisible to accounting
  • Why current metrics will not illustrate Lean improvements
  • What manufacturing practitioners can do to create an alliance with accounting
  • Why your company’s cost system likely promotes non-Lean behavior

About the Facilitator:

Jerry has over 35 years of experience working in a variety of industries where he has held the CFO & Vice President of Operations positions. He led Lean transformations achieving dramatic improvements in inventory turns, lead-times, customer service, income and cash flow. He has authored 3 Lean books, two of which won the prestigious Shingo Award: Who’s Counting? and Accounting for World Class Operations as well as Leading Lean. He was the Maryland Lean Leader of the Year in 2013.  He is a founding thought leader and subject matter expert in Lean Accounting and has been teaching and practicing Lean Accounting for the last three decades. Jerry is a long time board member of the Maryland World Class Consortia and a frequent speaker at industry conferences.