Intertape Polymer Group Inc. (IPG) is a recognized leader in developing, manufacturing, and selling a variety of paper and film-based pressure-sensitive and water-activated tapes, stretch and shrink films, protective packaging, woven and non-woven products, and packaging machinery for industrial and retail use. Headquartered in Montreal, Quebec, and Sarasota, Florida, IPG employs approximately 3,700 employees with operations in 31 locations, including 21 manufacturing facilities in North America, four in Asia, and one in Europe.
IPG began its lean accounting transformation in 2019 by piloting it in their Water Activated Tape Division (WAT). Nick Katko recently talked with Kevin Publicover, VP of finance manufacturing, and Jarod Hogan, director of finance manufacturing, about how they have structured IPG’s lean accounting transformation “post-pilot.”
Nick: What was your major takeaway from the pilot?
We formed a cross-functional corporate steering team to address the issues and assess the risks of changing the information used in reports, analyses, and decision-making.
Kevin and Jarod: One of our initial lean accounting goals was to move away from using standard costing by turning off labor and overhead rates. When we realized the breadth and depth of how standard costing information is used throughout IPG, we needed to bring the users of this information into the transformation process. We formed a cross-functional corporate steering team to address the issues and assess the risks of changing the information used in reports, analyses, and decision-making.
The steering team decided that keeping the lean accounting transformation moving forward required a methodical, disciplined manner. So, we chose to run in parallel for the near term, where both lean accounting and standard costing information will be available to all users.
Can you give us some examples?
After completing the WAT pilot, we decided to build a lean accounting hierarchy in our financial reporting system. Accounting put in a great deal of effort to ensure the lean accounting hierarchy reconciles with the standard costing hierarchy, so we know the numbers are accurate. In addition, this approach allows users such as FP&A to continue to forecast and do consolidations using standard costing and simultaneously learn how lean accounting will impact these processes.
We have also built a lean accounting template that can be used to separate and identify costs using a lean accounting format.
We have also built a lean accounting template that can be used to separate and identify costs using a lean accounting format. Every location where lean accounting is introduced can now use this template. The template will “pull in” actual costs, then each location’s accounting team can customize the template for their particular needs.
Next up is our data warehouse, which is used to manage the business and contains detailed information regarding customers, products, and plants. Many users across all functions access the data warehouse daily. Our objective is to build the same databases and reports using lean accounting.
What progress have you made in the WAT Division?
We have piloted lean inventory valuation where we value inventory based on actual costs and not standard costs. It took us a few months of running parallel, and working with our internal and external auditors, to “work out the kinks.” As a result, we no longer run in parallel, and we have developed standard work for other locations to follow.
Do you have any final words of advice?
... we realized it would require accounting to put in extra effort to make all this happen, but we realized the benefits of lean accounting will outweigh the cost – our effort.Kevin and Jarod: First, we realized it would require accounting to put in extra effort to make all this happen, but we realized the benefits of lean accounting will outweigh the cost – our effort. Secondly, we realized working on the lean accounting transformation regularly throughout the year made it much easier than trying to do it in a short time.
IPG has committed to lean accounting from the CEO and CFO to lean leadership, and we are making it part of the fabric of our company.
It's not too late, but you must hurry to register! Tomorrow, July 15, at 2 p.m. US Eastern time, Nick Katko and Mike De Luca, two of Lean Accounting's top thought leaders, will present How to Use Lean Accounting to Help Design Profitable Value Streams in a special LEI-BMA co-produced webinar.
On Wednesday, July 21, during their regularly scheduled Lean Accounting Community Chat, they will further explore how Lean Accounting can improve your product development process.