Lean manufacturing implementation efforts are being met with resistance due to misleading performance measures. This is a confounding situation because lean manufacturing is defined as the elimination of waste, which should be desirable within a manufacturing operation (Merchant et al., 2005). Accepted accounting practices, most of them developed around the turn of the 20th century, provide an inaccurate view of the operational improvements realized through the implementation of lean strategies. Many researchers have identified the negative impact that accounting methods have on reported profits as inventories are being reduced (Johnson and Kaplan, 1987; Cooper and Kaplan, 1988; Kaplan, 1994; Garrison and Noreen, 1994; Drury and Tayles, 1997; Lere, 2001; Womack and Jones, 2003; Cunningham and Fiume, 2003; Soloman, 2003). Using simulation, this research explores the magnitude and duration of the negative impact on reported profits experienced during a lean manufacturing implementation.

The problem is addressed through a multi-period simulation model. The model is designed to emulate the operation of a manufacturing facility through a series of months of operation. Material requirements planning (MRP) functionality is employed through the incorporation of production planning and control functionality, as a means of controlling finished goods inventory levels through the series of simulated periods.

This book documents the details of the methods and tools employed in the development and execution of the model manufacturing operation. Also discussed are the data evaluation methods and subsequent results of the study.