A Suggested Framework for the Integration of Activity-Based Costing (ABC) in a Lean Environment to Enhance Companies Competitive Position- A Case Study in Egypt

In today's global market, a change in strategic and manufacturing practices to a more customer focused system such as the lean manufacturing/lean management system becomes crucial to help companies achieve a good competitive position. At the same time, the current traditional costing system is almost obsolete with respect to lean manufacturing systems. The development of a lean accounting system may have resolved the problems faced by lean firms due to their traditional costing systems. However, the suggested lean accounting Value Stream Costing (VSC) tool proposes another dilemma with respect to the conditions required for its effective implementation especially when it comes to the necessity of eliminating shared resources. Also, very few has been written on the management accounting tools to be used in a lean environment, which indicates that the management accounting literature seems to lag behind lean transformation. This study sets a framework that integrates Activity-Based Costing (ABC) in a lean environment in a condition where shared resources are still present. This has the objective of computing accurate product unit costs in order to assist a lean manufacturing system enhance organizational competitive stand. A case study is conducted on one factory of a multinational manufacturing company operating in Egypt which has recently moved to lean manufacturing. The suggested ABC framework is used to compute the product unit cost for one of the factory products. Within the implementation of the suggested framework different approaches to product costing in lean firms are being compared from which various empirical implications are being discussed. The findings of the study gives positive implications of the use of ABC, in the studied factory - given a condition of shared resources- which shall help the Company's studied factory to achieve a good competitive position