KAIZEN COSTING

GROUP-1
Akanksha Bhatnagar-102
Himanshu Kamat-22
Sandeep Singh-12
THE TERM - KAIZEN
 Japanese word.
 Literally means
improvement.
 Kaizen means continuous
and gradual development by
small betterment activities.
 Continuous
improvement is nothing
but continuous
elimination of wastes.
 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
Waste in the workplace is defined as activities that
add cost but do not add value.

Overproductio Delays
Transportation
n (waiting time)

Defective
Inventories
product
 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.

KAIZEN STRATEGY
KAIZEN STRATEGY

 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 STRATEGY
KAIZEN Contd….
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.

 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
BUDGET FOR FIXED COST
COST

KAIZEN VALUE

KAIZEN BUDGET

COMPARISON OF BUDGET & ACTUAL

FIGURES
 BUDGET – Target Profit and Volume of
Production

VARIABLE COST FIXED COST

UNCONTROLLABL
CONTROLLABLE E
Example - Example – purchased
equipment
Metrics of Financial Measurements

Budget
Hours per Vs
part (HPP) Actual
Costing
 Factors for Successful
Implementation

1. Cost reduction targets are established.

2. Respective work cell is held accountable.

3. Kaizan process needs to be consistent and

repeatable.
 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.