Traditional Accounting Lacuna’s
The difference in Thinking!
So as the lean journey Proceeds
Result from Traditional accounting
- Due to higher labor input on drilling machine, the overhead cost and hence the total product cost will show an increase.
- Reduced inventory may give a short-term negative impact.
- Could lead to additional cost for monitoring and tracking higher number of small batches
But traditional accounting will not show:
- Created additional capacity on CNC machines
- Reduced lead time and increased on time delivery
- Enhanced flexibility for product change due to reduced batch size
- The impact of enhanced cash flow due to reduced inventory on the product cost
Acknowledgement: Brian Maskell