Advertisement

Flow Accounting: The Next Challenge for 21st Century Lean Businesses

  • John Darlington
  • Pauline FoundEmail author
  • Mark Francis
Chapter
Part of the Measuring Operations Performance book series (MEOP)

Abstract

Traditional management accounting conventions do not support the Lean paradigm and, whilst numerous alternative accounting approaches have been developed over the last 25 years, there is still dissatisfaction amongst academics and practitioners in developing an alternative approach to address this issue. This paper presents a framework for such an approach that the authors call Flow Accounting. This has been developed over a number of years of empirical research at several large test sites and is advanced as an improved management accounting approach for more effective performance assessment and operational decision-making within the Lean enterprise. This paper further presents an empirical case study of an application of the technique within the aerospace industry. In particular, it discusses the findings derived using a new holistic mapping technique called Big Picture Financial Mapping that helps target improvement initiatives and quantifies the financial potential.

Keywords

Lean Standard costing Lean accounting Throughput accounting Decision making Flow accounting 

References

  1. Ansari S, Bell J, Klammer T, Lawrence C (1997) Management accounting in the age of lean production. McGraw-Hill, New YorkGoogle Scholar
  2. Badem AC et al (2013) Is standard costing still used? Evidence from Turkish automotive industry. Int Bus Res 6(7):79–90CrossRefGoogle Scholar
  3. Bicheno J (2000) The lean toolbox, 2nd edn. PICSIE Books, BuckinghamGoogle Scholar
  4. Cooper R (1995) When lean enterprises collide. Harvard Business School Press, BostonGoogle Scholar
  5. Corbett T (1998) Throughput accounting. North River Press, Great BarringtonGoogle Scholar
  6. Corbett T (2000) Throughput accounting and activity-based costing: the driving factors behind each methodology. J Cost Manage 37–45 (Jan/Feb)Google Scholar
  7. Cornick M et al (1985) A survey of budget-related planning and control policies and procedures. J Account Educ 3:61–78. doi: 10.1016/0748-5751(85)90007-7 CrossRefGoogle Scholar
  8. Cox JF, Spencer MS (1998) The constraints management handbook. St Lucie Press, Boca Raton, FLGoogle Scholar
  9. Darlington J et al (2008) Flow accounting in application: big picture financial mapping in the aerospace industry In: Proceedings of the 13th international symposium on logistics, Bangkok, Thailand, 6–8 JulyGoogle Scholar
  10. Darlington J, Moar C (1996) MRP rest in peace. Manage Account 74(9):14–25Google Scholar
  11. Drury C (1999) Standard costing: a technique at variance with modern management? Manage Account 77(10):56–58Google Scholar
  12. Eisenhardt KM (1989) Building theory from case study research. Acad Manag Rev 14(4):532–550Google Scholar
  13. Ellram LM (1996) The use of the case study method in logistics research. J Bus Logist 17(2):93–138Google Scholar
  14. Gilmore T et al (1986) Action Based modes of inquiry and the host-researcher relationship. Consult Int J 5(3):160–176Google Scholar
  15. Goldratt EM, Cox J (1984) The goal. Gower, LondonGoogle Scholar
  16. Harrison GC (1921) Cost accounting to aid production: a practical study of scientific cost accounting. The Engineering Magazine Co, New YorkGoogle Scholar
  17. Innes J, Mitchell F (1991) Activity based costing: a review with case studies. The Chartered Institute of Management Accountants, LondonGoogle Scholar
  18. Johnson HT, Kaplan RS (1987) Relevance lost: the rise and fall of management accounting. Harvard Business School Press, BostonGoogle Scholar
  19. Johnson HT (1992) Relevance regained: from top down control to bottom-up empowerment. The Free Press, New YorkGoogle Scholar
  20. Johnson HT (2007) Management by financial targets isn’t lean. Manuf Eng 1–5Google Scholar
  21. Kaplan RS (1984) The evolution of management accounting. Account Rev 59(3):390–418Google Scholar
  22. Kaplan RS (1988) One cost system isn’t enough. Harvard Business Review 85–92 (Nov–Dec)Google Scholar
  23. Maskell B, Baggaley B (2004) Practical lean accounting: a proven system for measuring and managing the lean enterprise. Productivity Press, New YorkGoogle Scholar
  24. Meredith J (1998) Building operations management theory through case and field research. J Oper Manage 16(4):441–454CrossRefGoogle Scholar
  25. Monden Y (1989) Total cost management systems in Japanese automobile corporations. In: Monden Y, Sakurai M (eds) Japanese management accounting: a world class approach to profit management. Productivity Press, Portland, pp 15–33Google Scholar
  26. Monden Y (1992) Target costing and kaizen costing. Working Paper Series, University of TsukubaGoogle Scholar
  27. Periasamy P (2009) Financial management 2E. Tata McGraw-Hill, New DelhiGoogle Scholar
  28. Silverman D (2000) Doing qualitative research: a practical handbook. Sage Publications, LondonGoogle Scholar
  29. Sousa R, Voss C (2008) Contingency research in operations management practices. J Oper Manage 26(6):697–713CrossRefGoogle Scholar
  30. Taylor FW (1903) Shop management. American Society of Mechanical Engineers, New YorkGoogle Scholar
  31. Voss C et al (2002) Case research in operations management. Int J Oper Prod Manage 22(2):195–219CrossRefGoogle Scholar
  32. Womack J, Jones D (1996) Lean thinking: banish waste and create wealth in your corporation. Simon & Schuster, New YorkGoogle Scholar
  33. Yin RK (2003) Case study research—design and methods, 3rd edn. Applied social research methods series, vol 5. Sage Publications, LondonGoogle Scholar
  34. Yoshikawa T, Innes J, Mitchell F, Tanaka M (1993) Contemporary cost management. Chapman & Hall, LondonGoogle Scholar

Copyright information

© Springer International Publishing Switzerland 2016

Authors and Affiliations

  1. 1.Buckingham Lean Enterprise Unit (BLEU), Buckingham Business SchoolUniversity of BuckinghamBuckinghamUK
  2. 2.Cardiff School of ManagementCardiff Metropolitan UniversityCardiffUK

Personalised recommendations