Title: A comparison between time-driven activity-based costing and value stream accounting in a lean Six Sigma manufacturing case study

Authors: Andrea Chiarini

Addresses: Chiarini & Associates, Via Di Corticella, 181/3 – 40128 Bologna, Italy; University of Ferrara, Via Saragat, 1 – 44100 Ferrara, Italy

Abstract: Many companies have implemented lean and/or Six Sigma to improve processes and reduce the cost of a product. At the same time, managers have tried to measure how these improvements can affect the cost of product. In the recent past, two relatively new accounting systems have been implemented along with lean and Six Sigma improvements. The first is called value stream accounting; it stems from lean accounting or lean costing and requires processes to be reorganised to fit value streams. The second is time-driven activity-based costing which derives from the older activity-based costing and proposes a precise and analytic pattern for calculating costs. Although the literature in general claims that both are suitable for lean Six Sigma environments, there is a lack of comparison between the two accounting systems. Through the findings of a case study carried out in a medium-sized manufacturing company, this research for the first time shows that there are significant differences in implementing the two accounting systems. The comparison has been made using the calculations of the cost of products within a reorganised value stream. The differences are very useful for those managers and practitioners who want to understand in which situation it is better to implement one system rather than the other one. Further research is needed in order to understand whether or not the findings can be generalised.

Keywords: lean production; quality management; time-driven ABC; activity based costing; value stream accounting; lean six sigma; lean manufacturing; case study.

DOI: 10.1504/IJPQM.2014.064472

International Journal of Productivity and Quality Management, 2014 Vol.14 No.2, pp.131 - 148

Received: 08 May 2021
Accepted: 12 May 2021

Published online: 26 Aug 2014 *

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