Manufacturing
Ready for Lean Admin?
By James E. Merklin, CPA,
CFE, M.Acc.
 Lean
manufacturing is no longer an exotic concept. Thousands of U.S. companies
have adopted the Toyota production principles, both on the shop floor and
beyond.
In addition to these improvements in their manufacturing processes, many of
these companies are streamlining administrative areas as well.
A Diet for the Back Office, Too
Administration, in its broadest definition, includes all of a company's
operations except manufacturing and distribution: accounting, IT, sales and
marketing, etc. In applying lean principles to these functions, companies seek
two benefits:
- First, they increase capacity - the primary goal of all lean initiatives—by reducing waste in the functions themselves. A company must decide—just
as it must decide on the production floor—how to use this newfound
administrative capacity. Should it undertake ambitious sales campaigns to
increase revenue, or streamline call centers to reduce costs?
- Second, and more importantly, these companies are transforming their
administrative organizations to support lean manufacturing—the fundamental
transformation taking place in production.
Lean administration, like its counterpart on the shop floor, begins with a
value stream map. This "current state" snapshot shows the flow of
materials—not cold-rolled steel coils, but invoices or bills of lading. If
it's complete and accurate, the snapshot reveals bottlenecks and wasted energy.
Help the Troops Help You
To develop a value stream map, a business analyst draws knowledge from
employees who perform the tasks in question. If you make it worth their while,
they'll help you find the waste—and end it.
For example, when a team of telecom billing reps examined their
dispute-resolution procedures in detail, they found several that technology had
made redundant. The reps themselves insisted that the wasteful practices be
retired.
By working through the "current state" map, the company creates a
"future state" map—how things should work. This map is developed by
carefully walking through a production or office process, backward and forward,
end to end. Managers can use this process to streamline the entire work flow.
The mapping process—and the transition to the future, lean state—requires
a continuous back-and-forth conversation between managers, analysts and
employees. The implementation must drill down to details at every level, make
the right decisions at high levels, forge these into a plan and put it into
practice.
The decision to undertake lean administration should not be made casually.
Cutting out waste is no easier in an IT department than it is in a foundry.
Wasteful practices can disappear from process flows—but the telecom
referenced above found some of its old billing practices in use a year later.
Remember how stubborn the old machinists were? Don't take the back office for
granted. Manage change intelligently.
James
E. Merklin, CPA, CFE, M.Acc. is a Partner and Director of Manufacturing/Distribution Services for Bober, Markey, Fedorovich
& Company and also serves as the Chairman of the Manufacturing / Wholesale Distribution Committee of PKF North American Network, an international association of accounting firms with over 90 members in North America and nearly 250 member firms worldwide in over 115 countries. PKF member firms include over 1,700 partners and have gross fees of nearly $1.1 billion worldwide.
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