Lean Six Sigma in Relation to Managerial Accounting



Lean Six Sigma in Relation to Managerial Accounting

Introduction

In this research paper about the Lean Six Sigma in relation to Managerial Accounting, the first thing that will be discussed is Lean. When one talks about Lean it is basically a philosophy dealing with corresponding practices. It focuses on, elimination of waste, making the process run more efficiently and effectively, delivering higher customer value and it also eliminates the non value added activities (NVAs). NVAs are those activities that add on cost without adding any value to the product or the client. A firm that is systematically Lean will eliminate NVAs from its operations in order to get the job completed timely by reducing labor, cash, machinery and space. In order to enhance the value added activities (VAs), U.S. firms focus more on productivity and cost improvement. The technological advancement and creative innovation can help the performance of a firm and it is done by eliminating NVAs and achieving quality output. When NVAs are eliminated companies will realize the most cost improvement. In a Lean principle model the value is identified immediately (Tarantino & Cernauskas, 2009). Secondly includes mapping out a value stream that understands the current process and the needs of the customers. This can be accomplished by creating a work flow that eliminates the poorly performing steps in the process. The next stage includes establishing pull that produce what is needed and when it is needed, and the final stage is seeking for perfection. Lean accounting on the other hand is a method for controlling and measuring the financial information which supports and also drives non-stop improvement in an accounting firm. Lean accounting helps eliminate wasteful transactions. It focuses on value rather than cost (Tarantino & Cernauskas, 2009).

Six Sigma is a process that was started at Motorola by an engineer named Bill Smith in the year 1980 (Basu, 2011). At that time the growth in Motorola was stagnant and the firm was spending almost 20 percent of its revenues in order to correct the poor quality. With up to $ 900 million every year going towards finding and redressing abandons, executives at Motorola came to accept the fact that higher quality items require less focus to create a quality product. Six Sigma was started as an endeavor to lessen the expenses of unfortunate quality that came about because of rejected material, revamp, assessment forms, lost income, and other hidden costs connected with not doing it right the first run through. Basically outlined, Six Sigma is a methodical approach to lessening changes within the processes (Basu, 2011). The Sigma word itself is derived from a Greek letter which is used in statistics in order to explain inconsistency and change. A sigma quality level is utilized as a marker of how regularly defects are liable to happen. The higher the sigma quality level, the more improbable a procedure is to make surrenders. A Six Sigma quality level, which is acknowledged world class, is more or ...