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Promoting Awareness in Manufacturing Students of the Need for Simultaneous Implementation of Lean Six-sigma and Activity Based Costing

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Conference

2011 ASEE Annual Conference & Exposition

Location

Vancouver, BC

Publication Date

June 26, 2011

Start Date

June 26, 2011

End Date

June 29, 2011

ISSN

2153-5965

Conference Session

Manufacturing Process Education

Tagged Division

Manufacturing

Page Count

11

Page Numbers

22.1194.1 - 22.1194.11

Permanent URL

https://peer.asee.org/18825

Download Count

15

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Paper Authors

biography

Merwan B. Mehta East Carolina University

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Merwan Mehta, Ph.D., is an Associate Professor at East Carolina University in the Technology Systems Department in Greenville, NC. Prior to joining academics in 2004, he has over twenty years of experience in business and industry working as an industrial/methods engineer, machine tool design engineer, manufacturing engineer, technical partner, project director, vice-president and consultant. His present research interests are enhancing manufacturing and business processes through lean principles and theory of constraints, and the pursuit of quality and variation control through six-sigma. Merwan has conducted two-day post conference value stream mapping workshops for the Institute of Industrial Engineers (IIE) for their Lean/Operational Excellence Conference since 2001 at various companies all over the US. He is an ASQ Certified Six-Sigma Black Belt and a SME Certified Manufacturing Engineer.

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Abstract

Implementing Activity Based Costing as an Essential Lean Six-sigma Tool in World-class Manufacturing Enterprises Manufacturing Engineering DivisionAbstract:Most companies are embarking on a path to reduce variation and waste in theirmanufactured products through the adoption of Lean Six-sigma principles. Thefundamental principle of Lean is to only give the customer what they want, and hence itstands to reason that they be rightly charged only for products and services they desireand are ready to pay for. To achieve this, most companies use standard costing as theprevalent method for costing products. This method works fairly well if a company hasonly a few types of products. Today, companies are manufacturing a very wide range ofproducts in terms of technological complexity and customization.Utilizing standard costing in companies where the range of value-added work performedis wide, results in straightforward and simple products being assigned disproportionatelyhigher cost than customized or special products. Companies that do not identify this trendand continue to use standard costing tend to attract customized and special productsaway from their competitors which they have ended up under-costing (and under-pricing),and divert the straightforward easy to manufacture products to competitors which theyhave over-costed (and over-priced). This is a sure recipe for entering a death spiral for amanufacturing business.To avoid this from happening, Lean companies need to adopt Lean accounting which is amethod for costing products based on the concept of activity based costing (ABC). In thispaper, how ABC should be implemented in a manufacturing company along with a casestudy will be presented.

Mehta, M. B. (2011, June), Promoting Awareness in Manufacturing Students of the Need for Simultaneous Implementation of Lean Six-sigma and Activity Based Costing Paper presented at 2011 ASEE Annual Conference & Exposition, Vancouver, BC. https://peer.asee.org/18825

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