PROMOTING AWARENESS IN MANUFACTURING STUDENTS OF THE NEED FOR SIMULTANEOUS IMPLEMENTATION OF LEAN SIX-SIGMA AND ACTIVITY BASED COSTING

摘要

Most present day discrete product manufacturing companies make a wide range of products and are continuously seeking to be the best they can be. In the globally linked supply chains of today, the best approach they can take is to reduce variation and waste of all resources utilized in their processes through the adoption of Lean Six-sigma principles. The central premise of Lean Six-sigma is to only give the customer what they want, when they want it. In doing so, manufacturers need to allocate the correct cost for resources consumed to their customers to stay competitive. Trying to apportion the correct cost to customers is not possible utilizing the standard costing method that most discrete manufacturing companies presently utilize. To rightly charge customers for the services provided to them, Lean Six-sigma requires that the customers be charged based only on what all processes were utilized to satisfy them. Applying Lean Six-sigma principles in discrete manufacturing, hence absolutely requires that firms adopt activity based costing (ABC) or Lean costing, but this fact is not brought forth to students when teaching about Lean Six-sigma. This paper elaborates on why the connection between Lean Six-sigma and ABC or Lean costing is important if firms are to achieve the promise of creating world-class processes. It also shows how the two concepts should be simultaneously brought to the attention of students to enhance their understanding of waste elimination and variation control in the real world. Teaching the concept of Lean Six-sigma without ABC is detrimental since without the right capture of costs it is difficult to ascertain whether the improvement has been worthwhile or not.