Using adapted budget cost variance techniques to measure the impact of Lean – based on empirical findings in Lean case studies

Thomas Borup Kristensen

    Research output: Contribution to book/anthology/report/conference proceedingArticle in proceedingResearchpeer-review


    Lean is dominating management philosophy, but the management accounting techniques that best supports this is still not fully understood. Especially how Lean fits traditional budget variance analysis, which is a main theme of every management accounting textbook. I have studied three Scandinavian excellent Lean performing companies and their development of budget variance analysis techniques. Based on these empirical findings techniques are presented to calculate cost and cost variances in the Lean companies. First of all, a cost variance is developed to calculate the Lean cost benefits within the budget period by using master budget standards and updated standards. The variance between them represents systematic Lean cost improvements. Secondly, an additional cost variance calculation technique is introduced to assess improved and systematic cost variances across multiple budget periods. This is needed in Lean as the benefits are often created over multiple periods and not just within one budget period. Traditional cost variance techniques are not able to trace these effects. Moreover, Time-driven ABC is adapted to fit the measurement of Lean improvement outside manufacturing and facilitate the requirements of Lean companies. In general all these developments should enhance the measurement of cost improvements on both direct costs and indirect costs made by implementing Lean. The adaptions and techniques presented can be used by other Lean companies, because they are highly applicable and can easily be replicated. I have formalized the findings to make the accessible for researchers and practitioners.
    Original languageEnglish
    Title of host publicationPOMS 2015 PROCEEDINGS : Production and Operations Management Annual conference 2015
    PublisherProduction and Operations Management Society
    Publication date2015
    ISBN (Electronic)0-692-40830-4, 0-692-40830-8
    Publication statusPublished - 2015
    EventPOMS 26th Annual Conference – Washington D.C, USA – 8-11. May 2015 - Washington D.C., United States
    Duration: 8 May 201511 May 2015


    ConferencePOMS 26th Annual Conference – Washington D.C, USA – 8-11. May 2015
    Country/TerritoryUnited States
    CityWashington D.C.

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