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Abstract
ean management philosophy must use all human, physical and
time resources and facilities to maximize the wealth of the
owners and beneficiaries. The basis of Lean management philosophy is
Abstract
1*
Corresponding author: Faculty Member of Islamic Azad University, Miyaneh Branch, arr_iau@yahoo.com.
2
Faculty Member of Islamic Azad University, Miyaneh Branch
37 Academic Journal of Research in Business & Accounting
Vol. 2, No. 4, April 2014
Introduction
The Lean term refers to production management approaches of companies and meets exactly what
customers want namely minimum cost without loss and waste (McCarron, 2006). In fact, lean
manufacturing philosophy (Lean) is based on the Toyota Production System (TPS) that is obtained
over decades by engineers and leaders of this company like Eno and Shingo. Lean was the solution of
Toyota for scarce resources and difficult economic conditions that Japanese companies faced after
World War II. However, many authors such as Pettersen (2009) in an attempt to define the lean
concluded that there is no clear definition of it. Some authors like Pettersen (2009) in the definition of
lean focused on tools and efforts that were particularly used in lean companies. Others, such as the
Bhasin and Burcher (2006( and Bhasin (2011) focused on its philosophical characteristics but most
authors believe and agree on the combination of both. Lean essentially is a set of ideas and tools that
make a system that has two visible and invisible parts. Its visible part includes procedures, tools, and
principles, and its invisible part includes management of thinking and ways of thinking (Rother,
2010).
Womack and Jones (1996) define value as the ability and the capacity created for the customer at
the right time and the right price. From the customer's perspective, Value is what the customer buys.
Value has been basic starting point for lean thinking and can only be defined by the ultimate customer.
Final customer is the consumer of product compared to other clients. Dimensions of valuation occur in
value stream and value is meaning only when it can be expressed in terms of a specific product. The
value stream in lean thinking is a set of specific activities required to design, set up and produce a
specific product with the concept of setting up and delivering raw materials to customer. According to
Womack’s definition, value is defined by three main features of quality, cost of ownership and time.
Slack (1998) argued that according to Womack’s definition, equal to the ideal Value is without
wasting and permanent conditions that costumer is sensitive to his needs in a whole range of market
and compares similar products with each other. He also studied two other features of value related to
lean principles including beneficiaries’ value and staff value in addition to costumers’ value. Three
types of activities in value stream are as follows (Womack and Jones, 1996):
1- Added value are activities that cause value without any ambiguity, 2- The first type of Muda are
activities that do not create any value but are inevitable with technology or current tools of production,
3- A second type of Muda are activities that do not generate any value and can be avoided.
Lean literature has mostly been focused on losses and wastes (Muda) that can be easily differentiated
in processes and removed using various lean approaches. But focusing on the elimination of losses and
wastes in processes leads to other problems like manpower and equipment (without reason) surplus
(Muri) and development of unstable processes (Mura). Muri can be seen at the extreme front of Muda
range. Elimination of Muda from processes can lead to greater pressure on workers and the creation of
Muri (Liker, 2004).
Kanban, is a small marker board that has been main control tool for JIT manufacturing and has
services such as instructions for production and transport, means for visual control, control of extra
production, outside processing speed detection criteria and tools for kaizen. In fact, Kanban is a card
attached to the box of parts that transfers signals and marks of requests and demands of pulling stream
of work from one section to the downstream sector. In other words, is a method to maintain a regular
stream of materials, identifying the material order points, the amount of material needed, places that
materials ordered and where materials must be delivered. Kanban is visual cues or signals that takes
place through transfer of a set of instructions to withdraw or production parts. Generally, kanban is a
card which moves between processes and transfers data to figure out what parts need materials and
components.
of value stream. Managers of value stream are very interested in the description of value stream
instead of using resources, efficiency of individual and collection of overhead (Baggaley & Maskell,
2003). Value stream costing is one of the essential elements of lean organizations and collects cost by
value chain.
Lean Accounting
Several studies in relation to lean accounting in a JIT environment is published during the 1980s,
before the advent of so-called lean organization and lean accounting. Accounting system in a JIT
environment focuses on direct traceability cost, reducing number of cost centers, less emphasis on
traditional materials, labor and overhead variance and reduction of number and detail in reporting of
sales. In addition, cost planning and cost reduction is started and emphasized before production, and
simplification of all Activities. Lean accounting includes simple accounting, visual and observational
performance measurement, value stream, value stream costing, Target costing, Visual Management,
score box of decision making, implementing Hoshin’s policies and procedures 3p (providing
production process for planning and stronger internal controls. Lean Accounting as a philosophy can
provide a powerful context to measure results of lean processes (Maskell & Kennedy, 2007). If lean
accounting is used, it is rarely needed to know cost of a product unit because the importance of
reporting and decision-making process is done at value stream level rather than the product level.
Product stream rate is the primary stimulus of conversion cost. In lean accounting, accounting systems
should be lean themselves. In fact, lean accounting transactions, as inventories are for lean production
and should be reduced as much as possible. That is all accounting transactions are waste and should be
eliminated systematically. Therefore, as in lean production that waste should be reduced by
minimizing inventories, also in lean accounting should be moved towards lean accounting processes
by reducing and minimizing accounting operations.
Lean production
Lean production is a multi-dimensional approach that includes a wide range of operations like
just-in-time manufacturing, quality systems, working systems, cellular manufacturing, supply
management and other cases wholly (Shah & Ward, 2003). Lean production is made based on the
principles of lean thinking and five principles of lean thinking are applied in the implementation phase
of the lean manufacturing and lead to fundamental changes in the organization. To progress towards
lean manufacturing, organizations must take steps to simplify and make efficient production process
not according to the forecast, but it is done according to customer demand. Basic principles of lean
manufacturing include the elimination of waste and focusing on customer (Darabi, 2011). Lean
production has integrated the benefits of a manual system and mass production and avoids high cost of
the former and flexibility of latter, and uses machine that are automated and flexible. Using JIT,
41 Academic Journal of Research in Business & Accounting
Vol. 2, No. 4, April 2014
emphasis on the prevention of defective product, responding to customer needs, Kaizen, horizontal
communication system, increasing integration of tasks, Total Quality Management (TQM) and
collaborative workforce and six-sigma are characteristics of lean manufacturing. But the most
important difference between mass production and lean production are differences in final goals of
lean manufacturing and mass production. Mass production target is limited to well-being, namely
acceptable number of defects, the highest level of the acceptable inventory and certain range of similar
products, but the idea of lean manufacturing is perfection; that is continuous decline in prices, zero
inventories, and endless product variety (Farrokh, 2001). Also, the learning curves of lean
manufacturing systems are steeper than learning curves in mass manufacturing firms. In order to
assess the changes toward lean production, following components should be considered:
1- Waste elimination (Namely anything that a customer will not pay for it), 2- continuous
improvement by the quality circles and proposed system, 3- Zero defect which is required for quality,
4- pulling system instead of pushing system, 5- multi-functional teams, being up-date, 6-
Decentralized responsibilities and integrated tasks, 7- Quality control during processing, 8- Quick
adjustment of devices, 9- supply network, 10- Comprehensive preventive maintenance system, 11-
Flexible Resources, 12- Customer Satisfaction, 13- JIDOKA Systems, and 14- Cellular settlements.
Hoshin Kanri
Hoshin Kanri means a way to determine the direction of policy, strategy or arrangement and was
created as part of total quality management which roots in Japanese Deming Prize for quality
measures in 1950. In other words, Hoshin Kanri is a strategic planning approach which integrates
leadership and management procedures. Lean planning begins with Hoshin’s policy of arrangement
and continues with the process of sales, operations and financial planning (SOFP). Hoshin Kanri is
planning system which helps organizations in strategic classification and high-level action plan.
Japanese term Hoshin means shining metal, compass, or goniometer and Connery means to manage or
control. In Hoshin Kanri, organizational goals are updated and revised annually by senior
management. Akao (1991) knows Hoshin Kanri as the planning, implementation and evaluation of
systems change management. In the late 1980s, western companies, including Hewlett-Packard and
Xerox started to use their own versions of Hoshin Kanri. Nowadays, Hoshin Kanri’s planning as
established techniques can help organizations to focus on the efforts and goals. Hoshin Kanri does not
replace other management strategies but it connects continuous improvements and developments.
Hoshin Kanri and Japanese style of TQM are naturally related to each other. In fact Japanese believe
that Hoshin Kanri show us anything we're going to do it, and TQM means a device for close
relationship between current performance and target performance. Hoshin Kanri has four components:
42
Ramezani and Mahdloo
HO means movement direction; SHIN refers to focus; KON means Settings; and RI means Reason
and Logic (Hutchins, 2008).
JIDOKA
JIDOKA or automation with the human senses is another concept that is an integral part of lean
manufacturing. Toyota Production System model is often a cell with two columns that one of these
columns shows just-in-time manufacturing and the other is the concept of JIDOKA and cell without
these columns will not stay stable. But there are still many that regardless of this mechanism are
related to columns which hold the whole system, focus on the mechanism of using one part of stream,
pulling production and standard work. JIT system is relatively well understood, but many unsuccessful
applications can be traced in the second pillar of this building. In JIDOKA which is also called
autonomation, Machine diagnoses the problem and instead of continuing to produce a bad product,
stops production. Basic principles of JIDOKA return to the year 1902 that Toyota provided a simple
but clever mechanism which diagnoses problem and turns off devices automatically. This invention
allows operators to monitor up to 12 devices, while maintaining excellent quality. Of course, this
system has progressed and exceeded. If the JIT and JIDOKA are used together, they will be like a
Kaizen engine which causes the system work better. In fact JIDOKA is automation with a human
element and describing design characteristics of machine under the influence of JIDOKA principles is
called autonomation. Autonomation means automation with human senses and its origin returns to the
ability of a device to stop, when the standard condition exists, and over time, it has taken a broader
meaning and often refers to ease of diagnosis. Diagnosing abnormal situation requires identifying
normal conditions. In ancient Japan, JIDOKA has been a term for autonomation, and related to the
principle of automatic stop in difficulties. The main purpose of an autonomation process is to
eliminate the human element and replace it with a system that allows all line to work automatically or
with minimal human involvement which in result, number of production line labor are reduced and
workforce does the work of more than one station at the same time.
Andon system is one of the constituent elements of the JIDOKA concept. Andons are like traffic lights
that are installed in each production line of Toyota and are part of the Toyota visualization. When
production path is smooth, the light is green; but when a worker works in a production line, status can
even be changed to yellow; and when the problem is diagnosed, the condition can even be modified to
Red and Line is stop. Andon is a type of visual control which indicates the current status of the work,
for example, unusual circumstances, the structure of the work, and progress information. In fact,
Andon is one of the main tools of JIDOKA which is in the form of electronic boards containing lights
to show the status of the current operations.
43 Academic Journal of Research in Business & Accounting
Vol. 2, No. 4, April 2014
Conclusion
It can be said that, lean is a management philosophy which has originated from car industries and
its practical solutions have expanded to nonproduction processes and at the present according to its
situation, it has application in other levels such as information technology, client services and
administrative operations. Main idea of lean is maximizing costumers’ value with minimum waste. In
other language, lean means making more value for costumers with minimum resources. In other
words, lean is a manufacturing philosophy that focuses on added value activities or waste removal
processes with the aim of better responding to customer needs. Lean provides companies responding
to what costumers exactly need in a complete response approach with minimal use of resources
(Womack & Jones, 1996). The most important element of the lean system is communication with
customers (Farrokh, 2001). It is said that lean concept deals with 3 main drivers of people, processes
and technology, namely the primary drivers of lean thinking and employee involvement, uninterrupted
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Ramezani and Mahdloo
processes or stream in production chain and resource waste elimination, and finally technology which
is a tool in service of people and processes. Finally, the implication and direction of these drivers are
toward customer satisfaction as a basic principle (Saffar, 2008). Lean is a commitment. Continuous
improvement process which can influence the competitiveness of organization significantly. Lean has
been a strategic tool for solving different problems of organization and can change running priorities
of business environment. Lean must be influenced by culture not imposed (Womack & Jones, 1996).
In other words, lean is not a tool but a way of thinking. Lean approach influences in broad circles of
operation and leaks into it and stops in best procedures and changes into warp and woof of business
(Corbett, 2007).
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