Lean and Waste

Posted by Aaron Juckett, CPA, CPC, QPA, QKA on Sun, May 25, 2008
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What is this thing called LEAN ACCOUNTING, an article in the May/June 2008 edition of On Balance, discusses how lean principles revolve around a relentless pursuit to eliminate waste. It defines Lean and waste:

"Lean is a methodology that eliminates waste, simplifies operations and provides customers what they want, when they want at reasonable prices. Lean is not a cost reduction method. It practices shrink cycles and lead times and expedite cash collection. It does not require huge capital investments, plus it focuses on simple common sense, engages all employees and draws on their creativity."

"Waste is anything that adds costs to a product without adding value. Waste can be found anywhere and everywhere. According to lean experts, about 70 percent of work done at most businesses is waste because it does not add value to customers."

The article also discusses how eliminating waste requires an understanding of what the waste it and where to find it, and defines eight categories of waste:

  • Over production
  • Waiting
  • Transportation
  • Unnecessary Motion
  • Over processing
  • Excess inventory
  • Defects
  • Underutilization of Personnel

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Aaron Juckett, CPA, CPC, QPA, QKA
Written by Aaron Juckett, CPA, CPC, QPA, QKA

Aaron is President and Founder of ESOP Partners and provides implementation, administration, and consulting services to hundreds of companies. He is a member of The ESOP Association (TEA) and the National Center for Employee Ownership (NCEO).

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