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Kaizen Costing for Manufacturers

Kaizen costing is a Japanese approach to cost reduction that focuses on continuous incremental improvements. It involves forming teams to identify small issues that can be addressed to gradually reduce production costs over time. The key principles are that improvements are continuous and participatory. Kaizen costing aims to maintain current costs for existing products through systematic efforts to reduce waste and achieve desired cost levels through small, ongoing changes. It differs from target costing in that employees identify solutions and cost reduction occurs via continuous rather than pre-set improvements. Implementing kaizen costing faces challenges like lack of management support and cross-functional cooperation.

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109 views17 pages

Kaizen Costing for Manufacturers

Kaizen costing is a Japanese approach to cost reduction that focuses on continuous incremental improvements. It involves forming teams to identify small issues that can be addressed to gradually reduce production costs over time. The key principles are that improvements are continuous and participatory. Kaizen costing aims to maintain current costs for existing products through systematic efforts to reduce waste and achieve desired cost levels through small, ongoing changes. It differs from target costing in that employees identify solutions and cost reduction occurs via continuous rather than pre-set improvements. Implementing kaizen costing faces challenges like lack of management support and cross-functional cooperation.

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rbconsulting_trading
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Kaizen Costing

PREPARED BY : GURSHARAN SINGH


SAINI
KHALSA COLLEGE PATIALA , 147001
Introduction

Kaizen is known as " Genkakaizen " in Japanese


companies. It is used in manufacturing stage of
the existing products as cost reduction process.
Kaizen is derived by Japanese automobile
companies
Concept of Kaizen
Costing
KAI
CHANGE
ZEN GOOD
Change for Good
DEFINITION

Yashihuro Moden defines kaizen


costing as "the maintenance of present
cost levels for products currently being
manufactured via systematic efforts to
achieve the desired cost level."
KC is applied to product that is already under
Production For Cost Reduction
Cost Can be reduced through estimation of seven types
of waste :-
oover production
oInventory
oWaiting
oDefective
oMotion
oTransportation
oOver Processing
NOTIONS OF KAIZEN COSTING

o KAIZEN is Continuous

o KAIZEN is incremental in
Nature

o KAIZEN is participative
Implementing Kaizen-
few rules

o List your own Problems


o Grade problems as to minor, difficult and
major
o Start with the smallest minor problem
o Move on to next graded problem and so on
o Remember improvement is part of daily
routine
o Never accept status quo
o Never reject any idea before trying
o Eliminate tried but failed experiments
o Highlight problems rather than hiding
Procedure
For Implementation

[Link] small groups from 6-10 persons


[Link] them numbers-Kaizen 1,Kaizen-2…
[Link] an evaluator of the group
4,Arrange weekly meetings of group (6-12
months)
[Link] progress of improvement in writing
[Link] each member to express
[Link] disturbance when others are speaking
[Link] Clarifications can be sought
instantantly
Evaluation

0 - Marks for no improvement made


0 to 30 - Marks depends upon improvement tried but
failed
30 to 50 - Marks for small to moderate improvement
50 to 75 - Marks for good improvement
> 75 - Marks for extraordinary improvement
Kaizen Philosophy

Approach to Traditional Organisation Kaizen Environment

1 Attitude Let it go Continuous


Improvement

2 Employees Cost Assets

3 Information Restricted Shared

4 Interpersonal Commercial Human


Relationship

5 Managerial Belief Routine Change


6 Management Culture Bureaucratic Participative

7 Management Function Control Supportive

8 Management Stress Functional Cross Functional


Advantages of Kaizen Costing

• Customer Satisfaction
• Process Centered
• Create Work Teams
• Cross-functional
• Increasing Employees Moral
• Reduced Errors
• Promote openness
• Acknowledge Problems
openly
Disadvantages

•Requires Permanent change of Management System


•Does not Produce Required Results
•Difficult to Convince People
Lack of interest and support
from management

Lack of training of
Listening skills, Presentation Skill,
Communication Skill

Criticism of failure from fellow


members

Ignoring Basic Concept


( Improvement is part of daily routine)

Work Pressure -sidelining


the Kaizen

Lessons
for
Failure
Difference Between Target & Kaizen
Costing
Kaizen Costing is typically based on the following :
- Employees are the source of solutions
- Cost reduction is achieved by continuous
improvement
- Cost reduction targets are set every month

But Target Costing is estimated


selling price - TARGET COST =
desired level of profit. It is an
integral part of a strategic profit
management system.
Strategic Based Cost Challenges

[Link] OF ENVIRONMENTAL
UNCERTAINTY
2. VOLATILITY
3. COMPLEXITY
[Link] GLOBAL PRESENCE
[Link] OVERLOAD
6. AMBIGUITY

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