Executive Summary

LEAN FINANCE
MICHEL BAUDIN and DON HENDRICKSON
At Boeing Portland, management accountants and financial analysts have been helping the lean production effort since its inception in 1995. As shop floor teams design cells and flow lines, reduce setup times, or introduce Kanbans, they document improvements in the language of things - that is, in terms of work in process reductions, operator productivity increases, and lower rework rates. Assigned “cost management focals” from the finance department then process this data together with the project plan into funds flow schedules that provide the cost justification for the projects. The results have prompted redesign on some projects, kept the managers of support groups motivated to help implement, and made top management aware of how valuable lean production is. At Toyota, the philosophy that profits come from squeezing costs is implemented through target costing in preproduction and cost improvement, or “Kaizen costing,” in production. At Boeing Portland, target costing has led to the selection of single-spindle, flexible milling machines that support one-piece flow for parts going into the new generation of 737s. Most of the lean production effort, however, has been spent on improving existing lines, where the individual small-scale shop floor projects roll up to cost underruns in the millions of dollars. The major limitation of this analysis is that it treats delivery performance as an “intangible,” even though it is of paramount importance to the assembly plants that rely on Portland for parts. In this area also, although Portland’s accounting numbers do not reflect it, assembly’s shortage statistics show that Portland’s performance is improving.

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DRAFT 6, 4/7/98

© MMTI, April 1998

How the finance department at Boeing Portland supports the move to lean production

LEAN FINANCE
BY MICHEL BAUDIN AND DON HENDRICKSON
LEAN W HENJapanesePRODUCTION is implemented in a plant, the