Value stream costing
Value stream costing was introduced when a company’s lean manufacturing methods were introduced. It is a process of identifying and establishing costs that is required to provide value to the customer. Value stream costing is an effective method as it provides relevant and timely information. The costing method determines how much value is added in each step of the process. Value stream costing offers a unique view across functions and departments which enables a business to understand the costs that provide value to the customers, to measure resource capacities and utilizations, to identify process bottlenecks and to perform what-if scenarios based on changing market (or patient) volumes and demographics.
The value stream activities are an easy process to understand. The process of value stream involves costing the various value streams backwards from the customer to their source is more revealing than what is provided by traditional cost accounting systems. Activity based costing is a tool that helps in the value stream costing. Value stream costing shows the path from where to start in order to maximize savings, increase process (or patient) flow and improve operational safety.
Value stream costing does not require wasteful tracking of the information as the financial data is gathered and reported in summary from for each of the value stream. The value stream costs are reported each week using up-to-date cost information. The value stream cost is calculated weekly and takes into account of all the costs. All the direct and indirect costs are included. The production material costs are calculated from the material purchased. Support costs like spare parts are bought for the value stream.
The Value stream costing method provides better information and contains the real cost of the value stream. The average cost information provides value stream performance measurements which are used to improve value stream. This cost information can be readily and reliably used for day-to-day decision making.
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