SOX costs $6.1 billion in 2005

What a huge opportunity to implement some lean thinking! According to a report issued November 29 by AMR Research, SOX compliance cost $6.1 billion in 2005, and is expected to cost $6 billion in 2006.

Without getting into the argument for or against the need for SOX ‘type’ legislation to protect investors against malicious corporate activity (inherently non-value add), this is a huge expense that we all as consumers and investors must bear. There are some compliance management and continuous controls monitoring software applications that are becoming available to help ease the burden of compliance, but to the lean thinker there is so much more!

Lets start with the obvious. Lean processes that use pull systems and visual controls to manage minimal inventories definitely have an easier time maintaining and verifying an accurate count of that inventory than those who do not. It would be interesting to compare the SOX compliance costs a lean Vs a non-lean facility that are otherwise comparable in size, function, complexity etc. But I think this is just the beginning.

Specifically to SOX verification activities, leveling out the workload may ease the cost of compliance by providing an opportunity to stop and correct problems as they are found. This way SOX activities can ensure that all manufacturing, accounting and other processes are correctly following their standardized work plans – and that those work plans adequately prepare companies for necessary audits without any additional ‘non-value add’ activities to prepare.

These are just some quick ideas. I’m sure there are also many wastes that can be found and eliminated by looking specifically at the compliance process and setting up some teams to work through the value stream.

Any other ideas out there?

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Luke Van Dongen

Luke, an auto industry engineering veteran, blogged here from 2005 to 2006.

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