ABSTRACT
This chapter considers measuring capacity one of the most vital components of a lean management accounting system. Aligning measuring capacity with lean requires new numbers, based on how lean companies view the use of time. Measuring capacity aligns with the economics of lean and gives users the ability to measure both the short-term and long-term impacts of lean in box scores. Value added activities are those which must be performed to deliver a tangible product or an intangible product or to complete a service. Value added activities must be performed to meet customer requirements. Understanding the differences between value added and non-value added activities is necessary when collecting the data to do the calculation of capacity. Measuring capacity of bottlenecks can greatly reduce the data collection effort. As a Lean chief financial officer, it is important to understand that measuring capacity establishes the true cause–effect relationships between lean operating practices and financial performance in a lean management accounting system.
