ABSTRACT
As your company moves from traditional thinking and batch processing to lean thinking and one-piece flow, you will find that a lean business management system is needed to accurately convey the impact of lean improvements. As stated earlier, traditional standard cost systems result in financial statements that disguise the improvements achieved from continuous improvement. In fact, the profit and loss (P&L) often initially shows degradation in profits due in large part to reduced inventory levels. Without a better accounting system for identifying the gains achieved as a result of lean methods, upper management may question the advisability of continuing the lean journey. Lean accounting isolates the effects of inventory changes on the P&L at a company-wide level, and because it makes operational improvements and capacity gains achieved from process improvement efforts more visible, upper management will be able to better assess the benefits from lean initiatives.
