Lacuna in Traditional Accounting

Lacuna in Traditional Accounting

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

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