ABSTRACT
Lean manufacturing typically generates impressive operating benefits, but companies frequently find that financial benefits are not immediately forthcoming to the same degree. In this chapter, we look at measuring and managing financial benefits from an operations perspective to predict the impact of Lean improvements on the financial results. Many teams are unable to answer this question satisfactorily as traditional accounting does not provide the necessary information. The approach to measurement developed in this chapter provides a way for the team to communicate to upper management what the impacts of Lean are likely to be. It also provides a structured method for evaluating the financial benefits from alternative strategies for taking advantage of the increased operating capability. The chapter is organized into four sections:
1. The Problem 2. Creating the Box Score 3. Managing Capacity 4. Making Money from Lean Manufacturing
When Lean is introduced in a company, executives and employees expect to see tangible financial improvement. Often, there is no short-term financial
improvement, and sometimes the opposite occurs. This causes comments such as the following from dismayed executives: “We see wonderful results in operations, but they don’t show up in the financial statements. If Lean is so great, why doesn’t it hit the bottom line?”
