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29 pages/≈7975 words
Accounting, Finance, SPSS
Lean Manufacturing (Dissertation Sample)
The task was to write the first part of a thesis on Lean Manufacturing. The paper was supposed to show the relationship between Lean Manufacturing and Activity Based Costing (ABC). This is only the first part. Client is supposed to give a go ahead for the remaining two parts.source..
The Relationship Between Lean Manufacturing, Activity Based Costing (ABC) and Financial Performance in “World-Class” Manufacturing Organizations.
Mention people who have helped you in the course of working on this dissertation.
Insert as appropriate, a statement to the effect that you acknowledge the university’s non-plagiarism policy. Also, state that the dissertation is your original work. Mention contributions that did not originate from you e.g. something written by your professor but you chose to adopt it.
Table of Contents
TOC \o "1-3" \h \z \u HYPERLINK \l "_Toc392330280" ABSTRACT PAGEREF _Toc392330280 \h 7
HYPERLINK \l "_Toc392330281" 1. INTRODUCTION PAGEREF _Toc392330281 \h 8
HYPERLINK \l "_Toc392330287" 1.1 Background PAGEREF _Toc392330287 \h 9
HYPERLINK \l "_Toc392330288" 1.2 Objectives PAGEREF _Toc392330288 \h 12
HYPERLINK \l "_Toc392330289" 1.3 Research Questions PAGEREF _Toc392330289 \h 12
HYPERLINK \l "_Toc392330290" 2. LITERATURE REVIEW PAGEREF _Toc392330290 \h 13
HYPERLINK \l "_Toc392330293" 3. METHODOLOGIES PAGEREF _Toc392330293 \h 18
HYPERLINK \l "_Toc392330295" 3.1 Research PAGEREF _Toc392330295 \h 18
HYPERLINK \l "_Toc392330296" 3.2 Questionnaires – What they are PAGEREF _Toc392330296 \h 20
HYPERLINK \l "_Toc392330297" 3.3 Validity of the questionnaire PAGEREF _Toc392330297 \h 21
HYPERLINK \l "_Toc392330298" 4. LEAN MANUFACTURING PAGEREF _Toc392330298 \h 22
HYPERLINK \l "_Toc392330299" 4.1 The history of Lean Manufacturing PAGEREF _Toc392330299 \h 22
HYPERLINK \l "_Toc392330300" 4.2 The principles of lean concept PAGEREF _Toc392330300 \h 23
HYPERLINK \l "_Toc392330301" 4.3 Muda, Muri and Mura PAGEREF _Toc392330301 \h 25
HYPERLINK \l "_Toc392330302" 4.4 The Ideal Lean Enterprise PAGEREF _Toc392330302 \h 27
HYPERLINK \l "_Toc392330303" 5. THE TECHNIQUES AND TOOLS OF LEAN PRODUCTION PAGEREF _Toc392330303 \h 28
HYPERLINK \l "_Toc392330304" 5.1 5S System PAGEREF _Toc392330304 \h 28
HYPERLINK \l "_Toc392330305" 5.1.1 Brief History PAGEREF _Toc392330305 \h 28
HYPERLINK \l "_Toc392330306" 5.1.2 Implementing 5S PAGEREF _Toc392330306 \h 30
HYPERLINK \l "_Toc392330307" 5.1.3 The 5S system in greater detail PAGEREF _Toc392330307 \h 31
HYPERLINK \l "_Toc392330308" 5.2 Just-in-Time technique PAGEREF _Toc392330308 \h 33
HYPERLINK \l "_Toc392330309" 5.2.1 History of JIT manufacturing PAGEREF _Toc392330309 \h 33
HYPERLINK \l "_Toc392330310" 5.2.2 Challenges faced in JIT implementation PAGEREF _Toc392330310 \h 34
HYPERLINK \l "_Toc392330311" 5.3 Kaizen PAGEREF _Toc392330311 \h 35
HYPERLINK \l "_Toc392330312" 5.4 Kanban PAGEREF _Toc392330312 \h 36
HYPERLINK \l "_Toc392330314" 5.4.1 Single and double kanban systems PAGEREF _Toc392330314 \h 37
HYPERLINK \l "_Toc392330317" References PAGEREF _Toc392330317 \h 39
HYPERLINK \l "_Toc392330329" Annexure PAGEREF _Toc392330329 \h 41
Lean manufacturing is the ability to produce goods against a background of changing conditions. These changes are unpredictable and constant. The aim is to be responsive to changing customer needs. This model operates on the strength of principles that help improve quality, increase productivity and shorten lead time. Ultimately, the goal is to reduce wastage through kaizen or change. In the end, the end consumer gets a product that is free from defects, at the right time and in required quantities.
Activity based costing (ABC) is, according to CIMA, ‘‘an approach to the costing and monitoring of activities which involves tracing resource consumption and costing final outputs. Resources are assigned to activities, and activities to cost objects based on consumption estimates. The latter utilise cost drivers to attach activity costs to outputs.’’ In this methodology, an organization identifies its activities and assigns costs to them which are then added to other resources resulting in the total consumption per product. This costing approach involves adding more overheads (indirect costs) into direct costs. Examples of indirect costs include salaries to office and management staff.
This paper looks at how lean manufacturing can be implemented under the activity based costing methodology and how doing so leads to an improvement in financial performance and cost control. Of particular interest, are the challenges faced by organizations in their quest to implement lean production policies and activity based cost management.
Keywords: Lean Manufacturing, Activity Based Cost, Cost Control, Management Control, Lean Accounting, Financial Performance, Manufacturing Companies/organizations
Manufacturing concerns, in their quest to produce goods profitably are in a continuous search for ways of utilizing the available resources as efficiently as possible. They optimize their utilization of time, money, factory space and manpower. Most cost improvement techniques in use today were developed eons ago, and specifically, during the manufacturing era. In modern times, these methodologies have had considerable success albeit with challenges. Activity based cost stresses on the need for “doing things right.” Management teams reckon that doing so reduces wastage. Lean manufacturing is a production tool that lays emphasis on following a flow process while removing waste. A lot of research has been done in this area. Nonetheless, it is interesting to note that lean manufacturing can be integrated with other management systems such as activity based costing. The objectives of this research are among others:
To gain a comprehensive understanding of the principles behind lean manufacturing and activity based costing.
To define world class manufacturing, the principles behind it and how companies pursuing this model manage to control costs and achieve improved financial reporting statuses.
To find and define the relationship between lean manufacturing and activity based costing.
To establish the effect of implementing lean manufacturing and activity based costing. Further, to assess its impact on cost control and financial performance.
Lean manufacturing is a way through which firms produce goods by eliminating waste. It also involves the use of flow processing as compared to queuing or batching. The process is also referred to as lean production and was designed by Toyota Motor Corporation. The management process in use today is, therefore derived from the initial Toyota Production System also abbreviated as TPS. This and other techniques had their origin in the Manufacturing era. In this context, firm, company or organization refers to private businesses, government agencies or not-for-profit organizations.
Irrespective of the type of business entity under review, it is evident that companies have been investing in resources meant to improve their activities, provide quality products and make profits. Behind all these activities is the intention by management teams to attain efficiency. While these methodologies have worked with a considerable amount of success, there have been a series of challenges too. When Toyota was developing lean production, it borrowed heavily from lessons learnt in textile factories where broken threads meant that entire cloth production processes had to grind to a halt.
Lean philosophy focuses on reducing seven wastages as proposed by Toyota’s former chief Engineer, Taichi Ohno. In his opinion, once these waste areas were controlled, it would result in improved customer value. Toyota grew from a little known company to be the largest automaker in the world. This steady growth has had researchers and students alike developing a keen interest on how Toyota’s achievements came about. Lean manufacturing has therefore been credited with:
Improving an organization’s productivity
Increased share of the market
Reduction of labor costs
Elimination of processes that add little or no value to the finished product
In essence, the lean manufacturing philosophy has helped achieve more productivity under constraints such as space, money and time. Apart from Toyota Motor Corporation, the philosophy has worked well in other places worldwide.
Activity based costing, abbreviated as ABC. According to Hansen and Mowen (2007), the main objective of activity based costing “…is to manage activities to reduce costs and improve customer value” (48). From a manufacturing point of view, the focus is always to improve efficiency which leads to low production costs. At the same time, while the management is implementing this costing methodology, the other bottom line should be to improve customer value. An organization’s management can choose the type of products the company will produce.
Moreover, managers identify the most appropriate activities that would be necessary for the efficient manufacturing of those products. The overall aim of activity based cost accounting systems is to trace over-allocation of resources. It should be remembered, at this juncture, that activity based costing (ABC) attaches cost to activities not products. Hansen and Mowen further argue that it is the management of activities and not that of costs that leads to successful cost control in advanced manufacturing environments. From the point of view of this dissertation, such environments are duplicated in world class manufacturing organizations. This, therefore, ties...
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