kaizen costing

KAIZEN COSTING

GROUP-1Akanksha Bhatnagar-

102Himanshu Kamat-22

Sandeep Singh-12

Japanese word. Literally means

improvement. Kaizen means

continuous and gradual development by small betterment activities.

Continuous improvement is nothing but continuous elimination of wastes.

THE TERM - KAIZEN

MEANING & CONCEPT

Kaizen means continuous and gradual development by small betterment activities.

Process of cost reduction during the manufacturing phase of an existing product.

Rather than large or radical improvement made through innovation or large investments in technology.

Management sets the cost reduction targets for the product.Kaizen is primarily a reactive process where you "check" to see if anything is wrong, then go about fixing it. It is a daily activity and always under the control of a supervisor.Improves productivity by daily monitoring and elimination of wastes.

TYPES OF WASTES

Overproduction

Delays (waiting

time)

Transportation

Inventories Defective product

Waste in the workplace is defined as activities that add cost but do not add value.

TRADITIONAL APPROACH

1. Analyses every part of a process down to the smallest detail.

2. Sees how every part of the process can be improved.

3. Looks at how employees’ actions, equipment, and materials can be improved.

4. Looks at ways of saving time and reducing waste.

In English the term Kaizen is interchangeably

used as Continuous Process Improvement(CPI).

 Kaizen aims to improve productivity in the

work place by minimizing and eliminating

waste.

Kaizen helps in standardizing thus making it

better way of operating.

KAIZEN STRATEGYKAIZEN STRATEGY

KAIZEN STRATEGY Contd….

“Better way" of operating involves many elements,

five of which are mentioned specifically. They are:

1) Teamwork

2) Personal discipline

3) Improved morale

4) Quality circles

5) Suggestions for improvement.

KAIZEN STRATEGY Contd….

How to implement kaizen?

To implement kaizen the following steps are followed: Create a work standard for your product. Identify what measure exists that tells how well the

process is currently operating. Learn about your target work process. Identify the various wastes involved. Design a strategic approach, after taking the

suggestion of every worker from the CEO to the cleaners, to avoid the wastes in their respective fields.

Document the scope of the kaizen applied.

HOW ARE KAIZEN COSTING GOALS MET ?

The continual and relentless reduction of non-value-added activities and costs, the elimination of waste, and improvements in manufacturing cycle time all contribute to the effort.

In addition, the improvement suggestions and kaizen efforts of all employees are taken seriously and implemented when appropriate.

The result is a continually more efficient and cost-effective production process.

Toyota production system is known for kaizen, where all

line personnel are expected to stop their moving production

line in case of any abnormality and, along with their

supervisor, suggest an improvement to resolve the

abnormality which may initiate a kaizen.

LONG TERM PROFIT TARGET

SHORT TERM PROFIT TARGET

ESTIMATED VARIABLE COST

BUDGET FOR FIXED COST

KAIZEN VALUE

KAIZEN BUDGET

COMPARISON OF BUDGET & ACTUAL FIGURES

BUDGET – Target Profit and Volume of Production

VARIABLE COST

CONTROLLABLEExample -

FIXED COST

UNCONTROLLABLE

Example – purchased equipment

Metrics of Financial Measurements

Hours per part (HPP)

BudgetVs

Actual Costing

1. Cost reduction targets are

established.

2. Respective work cell is held

accountable.

3. Kaizan process needs to be

consistent and repeatable.

Factors for Successful Implementation

CRITICISM

Works fine for small scale processes which is easy to analyze on a day to day manner.

Difficult to implement in a large scale process where analyzing the process takes a lot of time.

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