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.