Counting the Beans With Lean

We are in the process of converting to a lean manufacturing environment. I am responsible for the Cost Accounting and Cost Estimating areas and need to identify how we will be able to estimate our products in a lean environment. This will include estimating the material and labor for both end units and spare parts. We will not have any travelers and all of the labor will be charged to a few identified short accounts. There will be no way to track the labor to a specific part. Our products will be grouped under six value streams. All material will be expensed as soon as it comes into the plant. (Some items from non-certified suppliers will need to be inspected first). We are a defense contractor and have needed to supply very detailed estimates to our customers and government auditors in the past. We will still need to support our estimates for government audits and customer fact finds. I would appreciate any information or guidance that you can provide to me.

Generally -- although now always -- the need to track labor and material costs and allocate these costs by unit and SKU reflects compliance requirements associated with government contracting. These regulations demand tracking of costs at the unit level. The logical solution to this compliance issue lies in leveraging MES software. An MES software solution can track the labor as well as the materials that flow into and through a plant. MES can also provide a view of the "standardized work" required for the Lean environment. Lean purists tend to shun software; and Lean purists may consider the effort to track this information NVA (non-value-added) effort. However this is a context where software becomes essential; the problem can't be solved with visual methods and cost allocation is a requirement of the business. This investment in MES also provides additional insight into the profitability of specific products, projects and lines of business.