The 5 Core Principles
The 5 core principles of a Lean Organization were first written about in a book entitled: Lean Thinking by James P. Womack and Daniel T. Jones. The 5 core principles are widely accepted as a means implementing and establishing a lean organization. The 5 core principles have been adapted from the 5 original principles that were defined by Dr. Womack and Daniel T. Jones:
Last in First Out (LIFO)
LIFO is a method used for cost flow assumption purposes in the cost of goods sold calculation. The LIFO method of inventory valuation assumes the most recent products or, "last in" products of a company’s inventory have been used first.
Have you ever heard the question, what lot size should we order? Or, what’s the lot size of the inventory? In this lecture we will demystify this question and provide some clarity on what a Lot Size is.
Lean is a continuous improvement strategy that a company embarks on to maximize customer value and minimize waste. The term "Lean" was first used in the book The Machine That Changed the World by James Womack. A lean organization focuses on providing complete value or Value added activities to their customers. One of the ways that lean accomplishes this is through the complete and total elimination of any form of waste.
Lean Six Sigma
Lean Six Sigma is a designation given to a continuous improvement focused organization which combines the two strategies Lean and Six Sigma.
The longitudinal scope refers to the “length” of a projects process. The most common method of defining the longitudinal scope is from “starting point to ending point.”
Lead time is the total amount of time it takes from the initial receipt of a customer request for an order to the fulfillment of their request.
Little's law was named after Mr. John Little who was a professor at MIT's Sloan School of Management. The law states that by reducing work in progress and maintaining a processes average completion rate the lead time will be reduced too. On the same note, according to little's law increasing the average completion rate while maintaining the same level of work in progress will reduce also reduce the lead time.
How to calculate?
Little's law can is expressed with the following equation:
- Lead time = Amount of work in progress / Average completion rate
The Apics dictionary 2015 defines logistics as:
Among the primary objectives of logistics are:
Because logistics plays such an important role all throughout the value stream there are enormous opportunities with reducing cycle times, improving "changeover of vehicles" and improving the overall flow of activities that fall within logistics.
The purpose of Lean Accounting is to support the lean enterprise as a business strategy. It seeks to move from traditional accounting methods to a system that measures and motivates excellent business practices in the lean enterprise. Applying Lean principles is part of this system.
The Vision for Lean Accounting
Ref: Wikepedia, Lean accounting
Lead Time Ladder
A lead time ladder is the timeline shown on the bottom of a value stream map. The lead time ladder is used to calculate the production lead time.
Line Haul Costs
Line haul costs are the basic costs of carrier operation. This includes driver's wages, wear and tear or usage depreciation of the vehicle and any costs associated moving containers or materials. The costs often vary or change based on mileage, distance shipped and the amount of weight that is carried. Click on the link below to download a free line haul cost template for your organization.
The lateral scope of a project refers to the "width" or the "breadth" of a project. These can often times be the various "layers" a project may contain.
In the flowchart above the longitudinal scope stretches from step 1 to step 5. The lateral scope is defined as employee level to GM but not beyond.
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