This Statement on Management Accounting (SMA) by Jd Marhevko, senior vice president of QLMS and EHS for Accuride and American Society for Quality (ASQ) Fellow; Gary Cokins, part-time IMA (Institute of Management Accountants) executive-in-residence; and Pem Smith, retired finance and business operations executive and certified Six Sigma Green Belt through the ASQ, describes Hoshin Kanri, a tool for organizations seeking to achieve the benefits of a lean enterprise. This tool provides a disciplined process to flow strategic objectives into organizations’ functional areas, develop operational performance indicators (OPI), and assign appropriate resources to initiatives.

The authors recommend organizations develop a strategy map, linking strategic objectives with cause-and-effect relationships. Communicating strategy throughout the organization and aligning departmental and individual objectives with that strategy are imperative. Using a simplified Hoshin Kanri matrix, they are able to show how to link:

  • Strategy and initiatives
  •  Initiatives and tactics
  • Tactics and KPIs (key performance indicators)
  • KPIs and Balanced Scorecard

To demonstrate how to implement lean concepts, they present a Hoshin Kanri functional example and discuss the business case for incorporating lean initiatives with strategies. These include:

  • Faster response to changes in the market demand signals with shorter cycle times
  • More competitive pricing with reduced unit costs
  • Internal capacity to meet new opportunities through increased productivity of existing resources
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About the Authors