Modeling a Management Accounting System for Lean Manufacturing Firms

50 Pages Posted: 8 Aug 2009

See all articles by Rosemary Fullerton

Rosemary Fullerton

Utah State University - School of Accountancy

Frances A. Kennedy

Clemson University - School of Accountancy & Legal Studies

Date Written: August 7, 2009


Lean thinking is rapidly becoming the dominant paradigm in manufacturing. Traditional management accounting fails to provide relevant information to decision makers in a Lean organization. A relatively new management accounting approach better suited to supporting lean initiatives is emerging. Popularly termed Lean accounting (LA), the information generated by this system is portended to be simpler to prepare, easier for shop-floor decision makers to understand, and more useful for decision making. Although the advantages of this emerging management accounting paradigm are becoming more widely understood, a clear definition and theoretical basis is lacking. The purpose of this exploratory study is to identify some of the most critical characteristics of firms that have changed their accounting systems to support their lean production The SEM results from 259 U.S. survey respondents suggest that companies accounting for Lean operations with value stream costing (VSC) have the following characteristics: 1) top management that is highly supportive of change and lean initiatives; 2) workers who are trained in quality issues and empowered to make decisions; 3) considerable use of lean manufacturing tools such as reduced setup times, cellular manufacturing, 5S, Kanban, and Kaizen events; 4) information that is visual, aligned with strategic objectives, and readily available on the shop floor; 5) elimination of inventory tracking and allocation of labor and overhead; and 6) a simplified and streamlined management accounting system that is aligned with strategic goals. The analyses of these results suggest that accountants are beginning to understand the different types of informational needs of Lean environments.

Keywords: Lean accounting, value stream costing, lean manufacturing, structural equation modeling, survey analysis

JEL Classification: M46, G31

Suggested Citation

Fullerton, Rosemary and Kennedy, Frances A., Modeling a Management Accounting System for Lean Manufacturing Firms (August 7, 2009). Available at SSRN: or

Rosemary Fullerton (Contact Author)

Utah State University - School of Accountancy ( email )

Jon M. Huntsman School of Business
Logan, UT 84322-3540
United States
435-797-2332 (Phone)
435-797-1475 (Fax)

Frances A. Kennedy

Clemson University - School of Accountancy & Legal Studies ( email )

Clemson, SC 29634
United States

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