Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices

• Author: Sally K. Widener,Frances A. Kennedy,Rosemary R. Fullerton
• Date: 01 November 2014
• DOI: http://doi.org/10.1016/j.jom.2014.09.002
• Published date: 01 November 2014

Journal

of

Operations

Management

32

(2014)

414–428

Contents

lists

available

at

ScienceDirect

Journal

of

Operations

Management

jo

ur

nal

ho

me

pa

ge:

www.elsevier.com/locate/jom

Lean

manufacturing

and

firm

performance:

The

incremental

contribution

of

lean

management

accounting

practices

Rosemary

R.

Fullertona,∗,

Frances

A.

Kennedyb,1,

Sally

K.

Widenerb

aJon

M.

Huntsman

School

of

Business,

Utah

State

University,

Logan,

UT

84322-3540,

USA

bClemson

University,

Clemson,

SC

29634-1303,

USA

a

r

t

i

c

l

e

i

n

f

o

Article

history:

Available

online

11

September

2014

Keywords:

Lean

manufacturing

Lean

accounting

Operations

and

financial

performance

Survey

analysis

Structural

equation

modeling

a

b

s

t

r

a

c

t

Manufacturing

firms

operating

in

rapidly

changing

and

highly

competitive

markets

have

embraced

the

continuous

process

improvement

mindset.

They

have

worked

to

improve

quality,

flexibility,

and

cus-

tomer

response

time

using

the

principles

of

Lean

thinking.

To

reach

its

potential,

lean

must

be

adopted

as

a

holistic

business

strategy,

rather

than

an

activity

isolated

in

operations.

The

lean

enterprise

calls

for

the

integration

of

lean

practices

across

operations

and

other

business

functions.

As

a

critical

component

for

achieving

financial

control,

management

accounting

practices

(MAP)

need

to

be

adjusted

to

meet

the

demands

and

objectives

of

lean

organizations.

Our

aim

is

to

help

both

researchers

and

practitioners

bet-

ter

understand

how

lean

MAP

can

support

operations

personnel

with

their

internal

decision

making,

and

operations

executives

and

business

leaders

in

their

objective

of

increasing

lean

operations

performance

as

part

of

a

holistic

lean

enterprise

strategy.

We

use

survey

data

from

244

U.S.

manufacturing

firms

to

construct

a

structural

equation

model.

We

document

that

the

extent

of

lean

manufacturing

implementa-

tion

is

associated

with

the

use

of

lean

MAP,

and

further

that

the

lean

MAP

are

related

in

a

systematic

way:

simplified

and

strategically

aligned

MAP

positively

influences

the

use

of

value

stream

costing,

which

in

turn

positively

influences

the

use

of

visual

performance

measures.

We

also

find

that

the

extent

of

lean

manufacturing

practices

is

directly

related

to

operations

performance.

More

importantly,

lean

manu-

facturing

practices

also

indirectly

affect

operations

performance

through

lean

MAP.

These

findings

are

consistent

with

the

notion

that

lean

thinking

is

a

holistic

business

strategy.

In

order

to

derive

the

greatest

impact

on

performance,

our

results

indicate

that

operations

management

cannot

operate

in

a

vacuum.

Instead,

operations

and

accounting

personnel

must

partner

with

each

other

to

ensure

that

lean

MAP

are

strategically

integrated

into

the

lean

culture.

In

sum,

lean

MAP

provide

essential

financial

control

that

integrates

with

and

supports

operations

to

achieve

desired

benefits.

©

2014

Elsevier

B.V.

All

rights

reserved.

1.

Introduction

Manufacturing

firms

operating

in

the

rapidly

changing

and

highly

competitive

market

of

the

past

two

decades

have

embraced

the

principles

of

Lean

thinking.

In

doing

so,

they

reorganize

into

cells

and

value

streams

to

improve

the

quality,

flexibility,

and

cus-

tomer

response

time

of

their

manufacturing

processes.

Decisions

previously

made

by

managers

are

instead

made

by

those

teams

close

to

the

work

processes.

The

organization

is

transformed

from

a

traditional

structure

characterized

as

top-down

with

project-

driven

improvement

led

by

middle

managers

into

one

where

∗Corresponding

author.

Tel.:

+1

435

881

8739;

fax:

+1

435

797

1475.

E-mail

addresses:

Rosemary.Fullerton@usu.edu

(R.R.

Fullerton),

fkenned@exchange.clemson.edu

(F.A.

Kennedy),

kwidene@clemson.edu

(S.K.

Widener).

1Tel.:

+1

864

656

4712.

continuous

improvement

is

conducted

throughout

the

company

by

locally

empowered

teams.

This

change

in

manufacturing

strategy

is

associated

with

increased

operational

efficiency

and

effective-

ness,

which

positively

impacts

firm

performance

(e.g.,

Fullerton

and

Wempe,

2009;

Hofer

et

al.,

2012;

Kaynak,

2003;

Yang

et

al.,

2011).

The

Shingo

Prize,

which

awards

world-class

companies

for

their

adherence

to

lean

principles,

evaluates

companies

that

have

achieved

a

“cultural

transformation

through

the

integration

of

principles

of

operational

excellence

across

the

enterprise

and

its

value

stream

to

create

a

complete,

systemic

view,

leading

to

con-

sistent

results”

(Shingo

Prize,

2010,

5).2It

supports

lean

as

an

2The

Shingo

Prize

is

an

annual

award

that

recognizes

operational

excellence.

It

is

based

on

the

lean

management

approach

and

model

taught

by

Dr.

Shigeo

Shingo,

and

is

awarded

to

companies

per

their

effectiveness

in

transforming

their

orga-

nizations

through

the

application

of

specific

lean

principles,

systems,

and

tools.

Those

principles,

systems,

and

tools

are

carefully

outlined

in

a

set

of

guidelines,

http://dx.doi.org/10.1016/j.jom.2014.09.002

0272-6963/©

2014

Elsevier

B.V.

All

rights

reserved.