Cost Control Chapter 16

Front 1

Lean Manufacturing

Back 1

aims to shed waste and excess from operations. It is an operating approach designed to eliminate waste and maximize customer value. It is characterized by delivering the right product, in the right quantity, with the right quality (zero defects), at the exact time the customer needs it and at the lowest possible cost.

Hint 1

Firms that implement lean manufacturing systems are pursuing a cost reduction strategy by redefining the activities performed within an organization. Lean manufacturing has its root in the legendary Toyota Production System. Just-in-time manufacturing shares many methods of the lean manufacturing approach.

Front 2

Lean manufacturing is distinguished by the following five principles of lean thinking.

Back 2

1. Precisely specify value by each particular product.
2. Identify the “value stream.”
3. Make value flow without interruption.
4. Let the customer pull value from the producer.
5. Pursue perfection.

Front 3

1. Precisely specify value by each particular product.

Back 3

Only value-added features should be produced; non-value-added activities should be eliminated

Front 4

2. Identify the “value stream.”

Back 4

A value stream is made up of all activities, both value-added and non-value-added, required to bring a product group or service from its starting point to a finished product in the hands of the customer.
Three types of Value Streams:

Hint 4

1.Order fulfillment value stream- Providing current products to current customers
2.New product value stream-
Developing new products for new customers
3.Sales and marketing value stream-Providing current products to new customers and new products to new customers

Front 5

3. Make value flow without interruption.

Back 5

a.)Reduced Setup/Changeover Times-Reduced setup time enables smaller batches in greater variety to be produced.
b.) Cellular Manufacturing-Cell structure replaces departmental structure because it reduces lead time, decreases product cost, improves quality, and increases on-time delivery

Front 6

4. Let the customer pull value from the producer.

Back 6

Production is triggered by the customer order

Front 7

5. Pursue perfection.

Back 7

Zero setup times, zero defects, producing on demand, increasing a cell’s production rates, minimizing cost, and maximizing customer value.

Front 8

Product Costing facts

Back 8

1. Costs are collected and reported by value stream.
2. Detailed variance by product may not be necessary to signal sources of waste and potential for improvement.
3. Increased traceability of overhead costs