Research Paper: Health Care -- Lean Philosophy

Pages: 15 (3801 words)  ·  Bibliography Sources: 1+  ·  Level: Master's  ·  Topic: Business - Management  ·  Buy This Paper

SAMPLE EXCERPT:

[. . .] Completion of Transformation

The transformation from bloated to lean is completed by disbursing the Lean Philosophy throughout the organization's management and beyond. This is accomplished by changing the organization's leadership from top-down structure to leadership rooted in questioning, teaching and coaching. In addition, management must adopt the scientific method of planning a step, either performing or having employees perform that planned step, checking the performance, then acting on the information gained. Finally, the organization must spread the Lean Philosophy beyond its parameters by creating a global strategy and convincing suppliers/customers to adopt the Lean philosophy, as well (Lean Enterprise Institute, 2009).

Benefits of Lean Philosophy

The Lean Philosophy ideally creates a customer-oriented human system. This system defines "value" from the perspective of customers, reducing effort, cost, time and space while improving customer service. These focused activities make the organization more readily responsive and adaptive to customers and other external elements. In addition, the necessarily increased employee involvement creates an organizational culture in which the employee is accountable and empowered, employee-management relations are improved, and processes are continually refined for increasingly effective productivity and innovation (Berk & Associates, 2011). The benefits of Lean Philosophy have made it so successful in manufacturing that it has spread globally to other fields, such as government, professional services and health care.

Lean Accounting

Background of Lean Accounting

As mentioned above, installation of the Lean Philosophy within an organization necessarily involves establishing a new accounting system. After the establishment of the Lean Philosophy, companies attempting to mesh that Philosophy with traditional accounting practices found those practices to be "anti-lean" (Maskell & Baggaley, 2006, p. 35). In comparison to the deliberately customer-oriented, value-centric Lean Philosophy, traditional accounting proved to be bloated, encouraging large batch production and high inventory, incapable of accurately measuring improvements created by Lean Philosophy, producing reports that many employees cannot understand, and leading organization to make poor business decisions (Maskell & Baggaley, 2006, p. 35). As a result, the Association for Manufacturing Excellence (AME) sponsored a Lean Accounting Summit in 2005 to define and document Lean Accounting, its principles, techniques and tools (Maskell & Baggaley, 2006, p. 35). Throughout their presentation, it is clear that Lean Accounting proactively finds methods to quality improvement and cost reduction.

Vision of Lean Accounting

In keeping with Lean Philosophy's intent to create value-centric, customer-oriented company processes that are continually refined to increase value while reducing costs, Lean Accounting's vision statement asserts that it will:

"1. Provide accurate, timely, and understandable information to motivate the lean transformation throughout the organization, and for decision-making leading to increased customer value, growth, profitability, and cash flow.

2. Use lean tools to eliminate waste from the accounting processes while maintaining thorough financial control.

3. Fully comply with generally accepted accounting principles (GAAP), external reporting regulations, and internal reporting requirements.

4. Support the lean culture by motivating investment in people, providing information that is relevant and actionable, and empowering continuous improvement at every level of the organization" (Maskell & Baggaley, 2006, p. 36).

Principles, Practices and Tools of Lean Accounting

In their summary of the 2005 Lean Accounting Summit meeting, Maskell and Baggaley assembled a table illustrating the relationships among the principles, practices and tools of Lean Accounting, and shown below:

(Maskell & Baggaley, 2006, p. 37).

Lean and Simple Business Accounting

This principle focuses the Lean Philosophy on the accounting process itself by continuously streamlining accounting processes, reports and methods through value stream mapping both the current and desired accounting processes, dedicating itself to continuous improvement and the Plan-Do-Check-Act problem-solving method described above. Acknowledging and distinguishing between "muda (source of waste) type 1," which is waste that cannot be immediately elimination, from "muda (source of waste) type 2," which is waste that can be immediately eliminated, the streamlining waste reduction process can be accomplished relatively rapidly. The rapidity with which streamlining can be accomplished, along with the realization that some improved processes will eventually be eliminated, frees up accounting personnel to also focus on applying these leaner principles to other company processes (Maskell & Baggaley, 2006, p. 36).

Accounting Processes Supporting Lean Transformation

The organization's transformation from bloated to lean processes entails three practices: management control & continuous improvement; cost management; customer & supplier value and cost management. Management control and continuous improvement is accomplished by the tools of: constant improvement; target costs; linkage of metrics, value streams and plant/corporate reporting to the lean business strategy; projects for continuous improvement and breakthroughs, charted by value stream performance boards, typically updated on a weekly basis; value stream performance illustrated by box scores (Maskell & Baggaley, 2006, p. 36). An example of a box score for performance is illustrated below. As the box score illustrates, this tool enables the reviewer to examine the weekly financial, capacity and operational processes at a glance.

(Maskell & Baggaley, 2006, p. 39).

The practice of Cost Management is achieved through the accounting tools of value stream costing and value stream income statements. The practice focusing on Customer & Supplier Value and Cost Management is achieved through the accounting tool of target costing, typically collected weekly. Through these tools, lean accounting is able to assist in the organization's lean transformation by effectively focus on value made for customers, thereby continually improving customer relationships, design, pricing and continual process improvement (Maskell & Baggaley, 2006, pp. 36-37).

Clear and Timely Communication

The principle of Clear and Timely Communication is achieved by the practices of: financial reporting; visual reporting of performance measures; decision-making. The practice of financial reporting is aided by the accounting tools of "plain English" financial statement, simple and chiefly cash-based accounting and primary reporting using visual performance boards of corporate functions such as sales and marketing, design, production and administration. The practice of Decision-making is achieved through analysis of profitability and incremental cost via value stream costing and box scores (Maskell & Baggaley, 2006, p. 38).

Planning from a Lean Perspective

The principle of Planning from a Lean Perspective is achieved through the practices of: planning and budgeting; impact of lean improvement; capital planning and investing in people. The practice of planning and budgeting employs the lean accounting tools of Hoshin policy deployment and sales, operations and financial planning. Unlike traditional accounting tools, the Hoshin policy deployment employs a 1-year plan with desired break-through changes, measurements to assess progress and resources required to achieve the changes. Sales, operations and financial planning (SOFP) integrates the organization's game plan and is typically done on a monthly basis, according to each value stream. The practice of Impact of Lean Improvement employs the tools of: value stream cost and capacity analysis; value stream maps of current and ideal future processes; box scores of lean improvements of operations, finances and capacity. The practice of Capital planning employs the tool of value stream box scores of capital expenditure impact, often in conjunction with a 3P analysis for capital expenditures. The practice of investing in people employs the tools of: performance measurements monitoring employees' participation in continual improvement, employee satisfaction and cross-training; profit sharing with employees.

Strengthen Internal Accounting Control

The principle of Strengthening Internal Accounting Control is enacted through the practices of: internal control through lean operation controls; inventory valuation. The practice of internal control employs the tools of: transaction elimination matrix; process maps with controls and SOX risks. The transaction elimination matrix allows a visual of traditional practices that can be eliminated without affecting value. Process maps will show color-coded risks of violating Sarbanes-Oxley regulations, along with controls. By keeping inventory low and visually monitored by the use of such methods as pull systems, partnerships with suppliers and single-piece flow, the practice of inventory valuation can be achieved through the tools of simple methods of valuation (Maskell & Baggaley, 2006, p. 43).

Application of Lean Accounting to Health Care: Supplies Areas

Though Lean Accounting originated in the manufacturing sector, its success resulted in its global spread to service industries, such health care. Health care entails numerous complex processes in delivery of services and finance, both of which can be governed by lean accounting. An example of an accounting issue for health care providers is the supplies area. Lean Philosophy experts have found that supplies storage is often an area of muda (source of waste). Lack of confidence in the inventory process' ability to support their demands for supplies such as abdominal pads sometimes causes nurses to stockpile supplies of abdominal pads at patients' bedsides, in personal lockers or in some other unauthorized area close to where the supply will be used (Jimmerson, 2010, p. 6). As a result, stockers will see a lack of abdominal pads in the designated storage area, fully restock, and there will be a significant overstock of abdominal pads throughout the ward. Multiplying each item in the supplies area by the number of personnel having access to those supplies easily illustrates the potential wastefulness of supplies area processes. Consequently, an area that can be addressed by lean accounting in order to eliminate waste lies… [END OF PREVIEW]

Four Different Ordering Options:

?
Which Option Should I Choose?

1.  Buy the full, 15-page paper:  $26.88

or

2.  Buy & remove for 30 days:  $38.47

or

3.  Access all 175,000+ papers:  $41.97/mo

(Already a member?  Click to download the paper!)

or

4.  Let us write a NEW paper for you!

Ask Us to Write a New Paper
Most popular!

Change Process Term Paper


Eagle Man Term Paper


Nursing Philosophy Term Paper


Assessing Lean Operations in Practice Essay


Personal Wellness Philosophy Term Paper


View 58 other related papers  >>

Cite This Research Paper:

APA Format

Health Care -- Lean Philosophy.  (2012, October 5).  Retrieved March 26, 2019, from https://www.essaytown.com/subjects/paper/health-care-lean-philosophy/6960022

MLA Format

"Health Care -- Lean Philosophy."  5 October 2012.  Web.  26 March 2019. <https://www.essaytown.com/subjects/paper/health-care-lean-philosophy/6960022>.

Chicago Format

"Health Care -- Lean Philosophy."  Essaytown.com.  October 5, 2012.  Accessed March 26, 2019.
https://www.essaytown.com/subjects/paper/health-care-lean-philosophy/6960022.