Production Methods
 Craft
 Mass
 Lean
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Mass versus Lean -- Process
Differences
1
2
3
4
Mass
Top down control of
employees
Supplier relationships
arms length
Limited relationships
with customers
Linear design process
1
2
3
4
Lean
Empowered workers
Cooperative
relationship with
suppliers
Customer focused
organization
Concurrent design of
product and process
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Mass versus Lean -- Structure
Differences
Mass
1 Inflexible single
purpose equipment
2 High setup time for
equipment
3 Simple tasks and low
skilled labor
Lean
1 Flexible multi-use
equipment
2 Low setup time for
equipment
3 Complex tasks and
skilled labor
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Mass Production Assumptions
 Volume



decreases cost
Product variety increases cost
Quality equals higher costs
Time to market increases costs
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Mass Production Environment
 Stable
Environment - Cost accumulation
 Large inventory - Inventory focus
 Labor specialization - Labor reporting
 Top down control - Budget and standard
costing
 Manufacturing - Cost assignment issues
 Single entity
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Lean Production Assumptions
 Free
product variety
 Quality reduces costs
 Time to market equals profitability
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Lean Production World
 Competitive
Environment - information
share
 Small inventory - availability
 Flexible workers - decision data
 Actual cost - timely data
 Process
 Value chain - life cycle
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Mass versus Lean -Management Accounting
Systems
1
2
3
4
Mass
Relationship of volume
to cost
Responsibility
accounting - Unit
focus
Inventory driven reporting & control
Labor reporting
1
2
3
4
Lean
Relating “drivers” to
cost
Process accounting Value Chain Focus
No inventory reporting
Indirect cost reporting
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Mass versus Lean -Cost Strategy of a Mass Producer
 Mass
to:
producers rely on economies of scale
– Spread set up costs over larger number of units
– Spread indivisible capital costs over larger number of
units
– Create learning effects to bring costs down
– Lower their process complexity costs (Procurement,
scheduling, deliveries)
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Mass versus Lean -Cost Strategy of a Lean Producer
Design costs out before production
 Reduce set-up costs by:

– Mechanical redesign
– Software based Numerically Controlled Machines
Invest in “divisible” capital equipment
 Increase rate of learning by using:

– Robotics
– Skilled & trained work force

Manage complexity costs through:
– Process redesign
– Supplier partnerships
– Cross-functional teams
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Technical Attributes
1
2
3
1
Mass
Decision Relevance
Short run decisions
Internal efficiency
Single responsibility
unit focus
Process Understanding
Not emphasized
1
2
3
1
Lean
Decision Relevance
Long run cost
structures
External environment
focus
Cross functional and
value chain focus
Process Understanding
Primary emphasis
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Behavioral Attributes
Mass
Lean
Assumptions
Assumptions
1 Strong control of workers, 1 Empowered responsible
suppliers
workers, suppliers
2 Individual accountability 2 Team responsibility
3 Monetary motivation
3 Multiple motivational
factors
4 Accountant as team player
4 Accountant as control
agent
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
Mass versus Lean -Cultural Attributes
1
2
3
4
Mass
Beliefs and Values
Individual
responsibility
Competition and
market efficiency
Pro-capital and
management
Managerial power
1
2
3
4
Lean
Beliefs and Values
Team responsibility
Cooperation
Work for common
good
Knowledge based
power
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.