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Accounting for the Lean Transformation

Manufacturing-wasteWaste costs money. Companies lose money on wasted time, wasted effort and wasted material to the tune of millions of dollars per year.

Conversely, removing waste saves money.  And when it comes to keeping things on the right side of the ledger, it's far better to keep track of money saved than money wasted.

The Lean approach, especially as refined by long practice at Toyota and other manufacturers, systematically removes waste, frees up company resources, and increases a company's chance at long-term success. Money saved through Lean transformations can go toward capturing more market share, for instance, by improving existing products or developing new products for new markets.

The Industrial Extension Service at NC State University has more than 55 years' experience in helping companies improve and succeed, and Lean has become one of the leading tools our clients use to transform themselves. At this year’s AICPA Global Manufacturing Conference, Oct. 16 to 18 in Orlando, we will delve into the example of a 200-person hardware manufacturer in central North Carolina that used the Lean principles and tools to save nearly $1.5 million in the first year.

This company recognized that applying Lean techniques could reduce their operating costs and position them to be more competitive in the global marketplace. Company leadership first trained a critical mass of the employees -- since expanded to more than 90 percent of the workforce -- and focused their attention on examples of waste in the factory. They empowered the workforce to identify waste using the Lean principles and to take that waste out of their manufacturing processes. The result was an impressive financial success story that they are driven to improve upon.

In addition to using that example in our conference session to show how Lean improved a manufacturer's margin and bottom line, we will also show how Lean can reduce waste in every corner of any company -- every process and every operational and administrative department -- and how the accounting department can, not only play a key role in the success of company-wide initiatives, but also benefit from the Lean ideas itself.

Robert Crew, Regional Manager, NC State Industrial Extension Service. Robert has been with NC State Industrial Service Extension Service for six years and previously spent 25 years in the pharmaceutical industry in QA, compliance and leadership.

Manufacturing image via Shutterstock

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