In lean there are eight types of waste. These wastes are seen within the whole organisation and within the accounting function. I have outlined the eight wastes below in Exhibit 1
Exhibit 1 The eight wastes that need tackling
|Eight types of waste||The eight wastes within the accounting function|
|1. Over-production (Building batches of products larger than the customers’ immediate need. Printing marketing brochures in advance)||Our reports too large and go into too much detail|
|2. Waiting (Production operators waiting because a machine has gone down or a component is not available. Operators “minding” machines).||The processing of batches of AP or AR transactions where these batches wait for hours or days before processing. Also the month-end, year-end, annual planning processes have much waiting time.|
|3. Transportation (Moving materials around the factory. Buying raw materials and components from distant suppliers).||The finance team is always shuffling information around team members.|
|4. Extra processing (Processes that appear productive but are unimportant to the customer. Painting and finishing components that are not seen. Designing additional features into a product that the customers do not use e.g. many features in Excel).||The chart of accounts, the month-end, year-end, annual planning processes all have extra processing within them.|
|5. Excess inventory (Having materials, components, work-in-process, and finished goods levels above the immediate need).||The way we have transferred this period’s sunk costs into next period production costs has created a blow –out in inventory.|
|6. Waste of motion searching for tools, parts, or forms.||The finance function needs a make-over in time and motion. We all need to know where everything is filed and be disciplined in maintaining this.|
|7. Defects, scrap and rework in production. Complex inspection steps to overcome poor processes or poor design.||Accounting function generates many spreadsheets that have a dubious function. They are completed because they were completed last month.|
|8. Unused employee creativity||Based on Toyota, we would need to have 10 innovations implemented per team member per year within the finance function.|
|“Most business process are 90% waste and 10% value-added work.”|
Dr Jeffrey Liker
Boeing reduced over a trillion of internal transactions through adopting lean.
To understand more about these wastes read Jeffrey Liker’s book, The Toyota Way: 14 Management Principles from the World’s greatest Manufacturer. Liker’s book is well worth the read.