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Abstract Abstract Academic Journal of Research in Business & Accounting www.newscienceseries.com Vol. 2, No. 4, April 2014, 36-45 ISSN: 2311-326X Lean and its Basic Components 1* 2 Amir Reza Ramezani and Mohammad Mahdloo 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 that total performance of the organization should move toward a single act and logical system that its sole purpose is to deliver value to customers and indicates that lean process alone cannot be the creator of all benefits. Studies show bigAbstr differences between lean companies in terms of performance compared with traditional companies and it is necessary to note that lean procedures should be integrated with the overall organization system. Present article, deals with research and explanation of various aspects of Lean, based on theoretical principles and comprehensively with a certain look and a new perspective. The main findings of the present study are providing scientific principles, different aspects and tools used in lean. Keywords: Lean accounting, Lean manufacturing, Lean thinking 1* Corresponding author: Faculty Member of Islamic Azad University, Miyaneh Branch, [email protected]. 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). Culture and Lean Thinking Lean thinking as a management principle means that managers and leaders need to think that there should be a possibility of process improvement, even if it is not obvious. In the 1980s, the main focus was on reducing waste and producing qualified products that lead to the cost management. The foundation of lean thinking state that organization resource should be focused on activities that will lead to the creation of value for all beneficiaries, delete activities without added value, and integrate parallel activities in the organization. In general, with this thinking, management must delete activities without added value, integrate parallel activities in the organization, and design and set up value-added activities. Lean thinking is an attitude to increase productivity, sustained value creation and minimum cost and waste. Two basic concepts in lean thinking are waste elimination and value creation. Waste elimination in lean thinking perhaps can be considered in a row with independence in auditing which is so important that overshadows all elements. According to Womack and Jones (1996) Lean thinking involves five stages. 5-stage process in the lean thinking book is named as a guide for managers to be through the lean transformation and they are also called lean principles: 1- Exact valuation of any given product or valuation from final customer's point of view, 2- Identifying the value stream of the product and value stream map of product, 3- Making uninterrupted movement in the value, 4- Make it possible for customers to stretch the value of upstream activities, and 5- Pursuit of Perfection. Value and Value Stream 38 Ramezani and Mahdloo 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). Pulling and Pushing System Fourth principle in lean concept is pulling. This principle is useful in the whole of value stream and this means that upstream should not apply to produce until downstream demand any goods or services. This principle enables companies to design, plan and produce goods and services at the request of the customer and what the customer wants while reducing inventory (Womack and Jones, 1996). While in pulling system, each station takes the product of the previous station according to its needs. Results of final operations are done based on customer demand or comprehensive planning. So, pulling system is carried out in response to the demand of the next process. In pulling system for efficient monitoring on pulling process, kanban is used. Table 1: Differences of pulling and pushing systems description Pull system Push system Signs of production increase According to customer demand According to schedule 39 Academic Journal of Research in Business & Accounting Vol. 2, No. 4, April 2014 Scheduling In time of need Before need Planning horizon Very short-term Relatively long Demand balance Usually yes no Lack of prior planning, lack of Excessive inventory, The lack of attention to customer demand at visual control, long term timing Negative points of system the beginning of the product life and planning need to much cycle, Excessive inventory at the information. end is visible. visibility Visible Not visible Pressure to improve Many Few Source: (Panero, 2011: 27). 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. Value Stream Costing Value stream costing involves easier collecting methods of costs and reduced number of cost centers. Total cost of value stream is considered as direct cost. Cost of value stream includes manufacturing pay, manufacturing materials, manufacturing support, machinery and equipment, operational support, maintenance and other costs of value stream. Value stream costing (VSM) is the process of allocating actual costs of an organization to value stream instead of products, services or departments. In the early stages of lean manufacturing application, backflush costing (delayed) is used to calculate product cost without tracking products while they are manufactured that this process can gradually be removed and replaced with VSM because it has provided relevant information for decision making that its understanding and application is simple. Lean Production and thinking violate the assumptions of mass production. Overhead cost is related to whole value stream and is not related to time and work required for manufacturing and profit maximization leads to maximization of manufacturing stream by value stream in a pulling system of costumers. Cost of each specific product, in the first place depends on its stream rate through value chain especially in the operational bottleneck 40 Ramezani and Mahdloo of value stream.
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