Of all the tools in the Lean Accounting tool kit I am convinced that the most critical one is strategic pricing. In the face of such a down economy just about every manufacturer has capacity to spare, and using standard costs to set prices just compounds the problem. Ya gotta look at pricing and costs holistically or you are going to drive yourselves out of business.
Consider the following overly simple example:
Let's say manufacturer A - that's you - go through some sort of annual budgeting exercise and take your $24,000 fixed costs and spread them over the hours needed to meet the forecast on whatever machine is the capacity constraint in the value stream, then roll them back up into standard costs for each unit that is run on the machine. You come up with some number and that standard cost number gets goosed up to cover SG&A and the profit goal into a price.
Now let's say manufacturer B - your competitor across town - has the same machine constraining the same value stream set up and the same annual fixed costs. The only difference is that his forecast is higher than yours. He goes through the exact same standard cost and pricing arithmetic and comes up with his numbers. For absolutely no good reason other than a more optimistic forecast, his costs and prices are lower than yours.
Guess what? Your low forecast and his high forecast will very probably become self-fulfilling prophecies because your prices are higher - even though your basic cost structure is exactly the same. When you build fixed expenses into standard costs, this condistion can easily spiral out of control. Your standard costs keep going up and up because you keep trying to charge customers for more and more capacity they are not using.
Now this is a problem everywhere in which standard costs are being used, but it is a very serious problem when you have unsold capacity on your constraint - like just about everyone does in the current economy. You are very apt to be out beating your head against the wall trying to wring another nickel out of direct labor, or trying to squeeze a few pennies out of some poor supplier's prices, while you are leaving whole dollars on the table due to unused capacity. Ya gotta stop doing that!
It is in areas like this that lean accounting, coupled with focusing on factory flow drive real bottom line results. Kaizens on the shop floor won't get you to where you want lean to take you unless the accounting and sales folks are on board - the difference between lean manufacturing and lean enterprise.