The Five Principles Of Lean Thinking Essay

The Five Principles Of Lean Thinking Essay

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1. Lean thinking is focused on eliminating waste throughout the company. It also places emphasis on looking through the customer’s point of view and providing value to them.

2. The five principles of lean thinking are:
a. Define value – this focuses on defining what the customer’s value in different products and services provided by the company. The emphasis is on the customer and how the company can provide value to them.
b. Identify the value streams – this requires company’s employees to see how the organization functions through the eyes of the customer. The company must identify all value added activities that go into delivering a quality product/service to the customer.
c. Make the value stream flow – rather than the traditional mass production style of operations, a lean approach should be taken. Lean uses a cellular work arrangement that pulls together people and equipment from specialized departments. Employees are trained to perform all steps within the process. This creates a continuous, one piece flow, of production.
d. Implement a pull system – this means that the customer demand mandates production levels. This system is highly automated and does not require any paperwork. When a component bin is empty, the system will signal the corresponding link in the value chain to replenish the item. To implement this system a takt time should be calculated in order to ensure production consistently meets demand
e. Strive for perfection – this give employees empowerment to make decisions for themselves rather than having to rely on upper management. If an employee sees a flaw in the process, they are able to take the means necessary to improve it.

3. Contradiction between lean manufacturing and traditional accounting:
a. Whe...

... middle of paper ...

...ely. These factors can show improvements in company performance.

5. Value stream income statement:
a. More understandable to non-accountants due to simplicity
b. Attaches actual costs to each component of the value stream
c. Isolates the impact of inventory reductions on profits better than absorption accounting method
d. Separates organization sustaining costs and corporate allocation from value stream profitability

6. Cost-pricing may not work in today’s society because it assumes that the customer will pay what a company deems appropriate based on its cost structure. Cost pricing does not allow a company to view its costs as a set of inputs that must be aligned profitably with the expectations of the customer. The solution for this is target costing, which makes the customer’s needs the premise for pricing and continued process improvements within the company.

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