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 orientedA learning experienceTeam 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 organization’s 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.