KAIZEN COSTING

KAIZEN COSTING
KAI means

Change or the action to correct

ZEN means Good
Kaizen is small incremental changes made for
improving productivity and minimizing wastes.
Kaizen costing offers something new to all
organizations, and tries to implement the
strategies to handle difficult situations up with
the increasing competition in the global market.

KAIZEN COSTING

The concept of kaizen, meaning improvement in small

steps was developed within quality assurance technology.
Kaizen costing is applied to a product that is already
under production.
The time prior to kaizen costing is called target costing,
which involves searching for a target cost for a product
before it reaches the market.

FEATURES OF KAIZEN
Widely

applicable
Highly effective and result oriented
A learning experience
Team based and cross-functional

NEED FOR KAIZEN COSTING

As a result of globalization and ever increasing

competition, the industries are under increasing pressure
to cut costs. It requires tracing out non-value-adding
activities in their manufacturing and supplying chain to
offer the products and/or services at lower prices.
Kaizen costing is the maintenance of present cost level for
products currently being manufactured via systematic
effort to achieve the desired cost level.

NEED FOR KAIZEN COSTING

Kaizen

costing should be start at the time of the

product, till the end of the product, which satisfies
the need of the end customers.

KAIZEN COSTING SYSTEM

It is a cost reduction system to reduce final estimations to a level lower

than standard costs.
It continuously reviews existing production conditions in order to reduce
costs.
Kaizen costing has to deal with small, step-by-step continuous
improvements.
It emphasizes the reduction of waste in organizations system and
processes.
In term of industrial applications, it encourages them for higher
performance standards in terms of customer satisfaction and quality
improvement.
Kaizen costing can be applied to a product, which is already in existence.

EMPIRICAL CASE STUDY

The following section discusses the theoretical framework

of kaizen costing and its empirical implementation done
by Toyota motor co. ltd as a representative empirical case
study of kaizen management. Toyota has the most
systematic and strongest cost management, and it has
successfully implemented kaizen costing.

ELIMINATING MUDA

To stand in the competitive market, they have applied

kaizen costing in practice, by analyses of every part of a
process down to the smallest detail, looked for each and
every part of the process to save time, and improve over
MUDA
MUDA IS EVERYTHING THAT IS WASTEFUL.
The workers, executives, officers, managers including the
design staff members have applied this approach in many
small ways.

FIXING A TARGET COST

When an introduction of a new or revised vehicle is

finalized, its sales price and target or desired profit per
vehicle is fixed by top management after taking into
consideration the willingness if the customer to pay. THIS
COST IS KNOWN AS THE TARGET COST
Target costing allows the profitability of a product to be
determined before it is produced, allowing adjustments to
be made in design and process capability prior to
production.
It allows control over the cost of future products.

MANAGING LABOUR COST

The

labour cost management for

application of kaizen is very complex.
The labour cost is calculated on the basis of
production efficiency.

ORGANIZING ACTIVITIES
TOYOTA has

used kaizen activities for improving

the working process in the organization of tasks of
a whole production line.
About this kind of kaizen there is a divison of
labour amongst group leaders, chief leaders,
working unit leaders and engineers.
Toyota also allows the workers to give attention to
product quality, productivity, costs, and security

TACKLING LABOUR CRISIS

During the bubble economy in 1987-91, demand for cars

increased, which accelerated the diversification ofcar models. It
provoked a crisis of work , that is, labour force shortage. Toyota
engaged in radical revision to its production management and
human resources management in order to solve this labour crisis.
Toyota began to improve assembly lines with a human friendly
assembly line where aged workers could work. Toyota also
decided to change working conditions so that high school
graduated female workers and aged workers may be willing to
work provide support in reduction costs.

QUALITY CONTROL
Each

segment also has a quality checking post so

that a worker and also a working group as a whole
can assure quality.

BENEFITS OF KAIZEN

Kaizen reduces waste - like inventory waste,

time waste and workers motion
Kaizen improves space utilization and product
quality
Results in higher employee moral and job
satisfaction
Teaches workers how to solve every day
problems.

TRANSFORMING KAIZEN IN
PRACTICE
Kaizen

is a team concept that means continuous

and incremental improvements at all levels.
The workers, machine operators, middle manager,
and even the C.E.O are part of the process

Continuous improvement can be ensured through the

following activities: 1.Ennoblement:-

analyze the operations in depth

and eliminate the wasteful activities or operations.
2.Customer focus:- focus on the need of
customers.
3.Removal of MUDA:- be vigilant and keep the
MUDA away, e.g. waste of motion, time delays,
unnecessary transportation and material handling,
over processing, etc.

 4.Team

working:-set up the terms with clear focus on

higher productivity, more new ideas, greater
employees satisfaction and motivation, higher and
more consistent performance, thus kaizen improves
the moral of employees.
5.Problem solving through employees participation:to avoid negative reaction, the company should
construct good human relationship by encouraging
supervisors to mingle with workers and even seek
their assistance, if need be.

 6.Communications:-

it means sharing if ideas

and/or views between two or more people. The
very best form of effective communication is
usually face to face meeting.

The kaizen activities infer four effects:

Paying

attention to the quality and

productivity,
acquiring problem solving ability,
perceiving the work place as their own,
and understanding the meaning of kaizen.