Financial Models and Tools for Managing Lean Manufacturing

Financial Models and Tools for Managing Lean Manufacturing
Sameer Kumar , David Meade
Contents
Key Features of This Book . xi
Preface . xv
Acknowledgments . xvii
About the Authors xix
Contribution of This Book .xxi
1 Introduction 1
Historical Background of the Problem . 2
Objectives of the Study . 5
Important Questions for the Study . 6
Importance of This Study 7
References 8
2 Impact of Management Accounting Methods on Lean
Implementation 11
Management Accounting . 11
Transition in Focus from Internal to External 14
Difficulties Presented by the Current Forms of Financial Reporting 16
JIT and Lean Manufacturing Practices 18
Related Studies and Missing Elements 20
Problems with Previous Studies . 23
Contributions of This Study 23
References . 24
3 Multi-Period Simulation Model of a Factory with Lean
Manufacturing .27
Experimental Design, Statistical Hypotheses,
and Data Analysis 28
Experimental Design . 28
Proposed Hypotheses . 29
Data Analysis 30
Methods Diagrams . 30viii
Contents
Experimental Factors 32
Generation of a Random Sales Demand . 32
Inventory Policy 33
Management Accounting Method . 34
Full Absorption . 34
Direct (Variable) . 35
ABC . 35
TPC . 36
Order Activity . 36
Detailed Description of Data Generation Process 37
Simulation Model Design 48
Simulated Factory Parameters . 49
Model Manufacturing Operation . 49
Production Planning Tool 56
Calculation of the Coming Month Production Schedule . 57
Tracking of On-Hand Inventories . 57
Calculation of Income Statements by Accounting Method 58
Model Execution — Data Generation 59
Technical Issues with the Simulation Model 60
References . 61
4 Analytical Findings from Lean Manufacturing Factory
Operation 63
Raw Data and Descriptive Statistics . 63
Tests of Hypotheses 64
Hypothesis 1 . 66
Hypothesis 2 . 66
Hypothesis 3 . 68
Hypothesis 4 . 68
Hypothesis 5 . 69
Hypothesis 6 . 69
Hypothesis 7 . 70
Hypothesis 8 . 70
Hypothesis 9 . 70
Results by Performance Measure and Period . 71
Gross Profit 71
ANOVA Results . 71
Evaluation of Gross Profit Mean Values . 72
Net Profit . 78
ANOVA Results . 78
Evaluation of Net Profit Mean Values 79
Sensitivity to Sales Variability 85
Service Level . 85
Sensitivity Analysis . 87
References . 90Contents
ix
5 Conclusions and Implications of Lean Manufacturing
Factory Operation 93
Summary of Research Findings . 93
Comparison to Previous Studies . 97
Implications for Practice . 98
Limitations . 101
Suggestions for Future Research . 102
Expansion of Time Horizon 103
Expansion of the Number of Inventory Reduction Policies
Modeled per Dataset . 103
Customer Service Level Measures 103
Reduction in Reporting Cycle 103
Expansion of Income Statements . 104
Use of Distributions Other Than Normal . 104
Further Development of the Order-Activity Product Costing
Method 105
References . 105
6 Impact of the Pareto Distribution on Product Cost
Calculations .107
Definition of Problem . 109
Research Questions . 111
Methods . 112
Results . 114
Discussion . 116
Conclusions and Implications of This Research . 119
References . 121
Appendices
1 Simulation Data: Inventory Reduction Policy 1 —
No-Reduction; Maintain Finished Goods Inventory Levels
throughout the 12-Month Evaluation Period 123
2 Simulation Data: Inventory Reduction Policy 2 — ModerateReduction; 50 Percent Reduction in On-Hand Finished
Goods Inventory Levels over a 12-Month Period .145
3 Simulation Data: Dataset 3 — Inventory Reduction
Policy 3 — Aggressive-Reduction; 50 Percent Reduction in
On-Hand Finished Goods Inventory Levels over a 6-Month
Period and No Further Reduction through the Remainder
of the Evaluation Period 167x
Contents
4 Simulation Data: Dataset 4 — Sample Income Statements
Utilizing the Mean Values of the 35-Replication Datasets
under Each Accounting System and 25 Percent Sales
Stochasticity 189
Index
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