week 4 discussion post

Sample post

Chapter 5 DB Topic #4 - Donna Zuiderweg

Lean manufacturing is the step-by-step process of minimizing or eliminating all unnecessary steps, time, and materials used in the production of a unit of product. The process can have many positive affects including decreased labor and product costs and increased capacity. It also results in decreased inventories since a company begins to produce only enough units to meet demand. This, in turn, means fewer units are warehoused and fewer units are carried over from month to month or year to year.

 

Since there are fewer units stored in inventory; there are fewer units that need to be tracked on the company’s income statement. Since the net operating income in variable costing doesn’t acknowledge the fixed manufacturing costs associated with inventories and the fixed manufacturing costs associated with inventories in absorption costing decreases as inventories decrease, then the difference between the results of the two income statements becomes much less. Basically, the fewer inventories, the closer the results of variable costing and absorption costing are when computing net operating income (loss).

 

While I’ve never worked for a company that produced a product, we did go through a lean process improvement in a marketing department at a nonprofit organization where I worked. The nonprofit produced and printed a lot of printed pieces used throughout its 21 locations. The goal was to reduce the printing costs, wasted overage and storage necessity for all of the printed materials. The lean system was a remarkable success; however, the biggest drawback was that it was harder (if not impossible) to react to a spike in demand. There were no inventories to fall back on. If the organization ran out of a particular brochure, then there was a minimum of 24 hour turnaround before a new brochure could be printed and supplied to the location. A company with little to no inventory to insulate it from a spike in demand runs the risk of losing sales or make customers unhappy.