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Executive Summary for Accounting

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The purpose of this article is to describe the implementation of value stream management and lean accounting at Watlow Electric Manufacturing Company. Value stream management and lean accounting are designed to support lean manufacturing where value is defined from the customer's perspective, work is organized by value stream, supply flow is defined in terms of demand pull, and employees are empowered and focused on quality and continuous improvement. Rather than organizing by functional departments (i.e., the traditional approach associated with responsibility accounting), a company using value stream management develops an organization structure based on value streams, where a value stream includes everything involved in creating value …show more content…

Another step would be developing value stream financial statements focused on a one-page summary called a box score. Next would be changing the chart of accounts structure to focus on a few value stream groups, rather than functional departments. Next would be to stop collecting standard cost labor and overhead variance information and replaced it with visual live hourly and daily operator-generated reports acted on daily by the value stream teams. Last, would be separating collecting standard cost labor and overhead variance information and replaced it with visual live hourly and daily operator-generated reports acted on daily by the value stream teams. Some results of these implementations have led to the functional departments that remain to combine into a general support group in the general ledger. This has been resisted by some, but has greatly reduced the number of ledger accounts. Although fully burdened standard costs are no longer used, standard materials costs are based on a detailed bill of materials, and inventory is valued at the end of the month at average conversion cost per day multiplied by the number of days of inventory on hand. Many employees displayed some apprehension at first when responsibility shifted from department managers to value stream members, but they rapidly took ownership of their value stream measurements. The changes in inventory costing were a concern to

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