Kaizen costing

Kaizen costing is the process of continual cost reduction that occurs after a product design has been finished and is now in production. Cost-cutting measures might include collaborating with suppliers to minimize costs in their operations, introducing less expensive product re-designs, and lowering waste expenses. These decreases are required to allow the seller to lower prices in the face of growing competition later in the life of a product.

Characteristics

Kaizen is establishing standards and then continuously improving those standards in order to create long-term sustainable improvements.

The emphasis is on reducing waste, optimizing processes and systems, and increasing productivity.

Involves all workers and business departments.

Kaizen costing is a cost-cutting method. According to Yasuhiro Monden, kaizen costing is “the maintenance of present cost levels for products currently being manufactured via systematic efforts to achieve the desired cost level.” Kaizen is a Japanese term for constant improvement.

Monden identified two categories of Kaizen costing:

Asset and organization-specific kaizen costing actions are developed based on the needs of each agreement.

Product model-specific costing activities are carried out in customized initiatives, with a focus on value analysis.

Kaizen pricing applies to items that are already in production. Target costing is used before kaizen costing when items are in the development stage. After objectives have been established, they are constantly revised to reflect previous and predicted (expected) progress. Adopting Kaizen pricing necessitates a shift in the way of creating standards. Kaizen costing emphasizes “cost reduction” rather than “cost control”.

types of expenditures under consideration

Kaizen costing considers expenses connected to the production step, including:

Costs of the supply chain

Legal expenses

Manufacturing expenses

Waste

Recruitment expenses

Marketing, Sales, and Distribution

Product Disposal

5S for Kaizen Costing

Seiri (Sort): Begin by scanning all tools in the workplace and evaluating their usefulness. Only required equipment should be kept in the workplace, and unnecessary stuff should be eliminated to conserve space and improve the working environment.

Seiton (Strengthen): The idea that tools and materials should be kept in their designated areas with suitable labeling or classifications. The most commonly used object should be placed near us, while the least utilized should be kept in the corner. We will save time looking for each exact item.

Seiso (Shine): The workplace must be kept clean and neat every day. All of the tools are in working order, and there is plenty of room for future projects. It will increase the employee’s productivity.

Seiketsu (Standardize): We must prevent the workplace from reverting to its prior status. There must be a sign, banners, or board to ensure that everyone knows and practices as part of the everyday operation.

Shitsuke(Sustain): The last stage is to tell all personnel and departments about the need of practicing this culture on a daily basis. It is a continuous job that must be completed over an extended period of time.

Principles

Reduce waste: This strategy focuses on reducing all types of waste, including product design, manufacturing, and after-sales services.

Improve employee satisfaction: Employees are responsible for identifying and reducing non-value-added tasks. They will be capable to

Improve work commitment: All levels of personnel will be committed to their job because they understand the company’s goals, which include continuous development at all levels. They will fall behind if they do not improve, which motivates them to try more to archive it.

Increase competitiveness: It would be advantageous if we can increase the quality of our product while selling it at a reduced price. We will earn greater market share and profit in the long run.

Advantages

Waste Reduction

Kaizen removes waste in corporate operations. This is another significant kaizen benefit. Kaizen is everyone’s duty. As a result, management and employees are accountable for identifying areas of waste in the business process. They can identify and address the underlying cause of waste by adopting continuous improvements. By doing so, waste is eliminated from the business process, while costs are decreased.

Improved Standard Work Document

Implementing adjustments during kaizen yields a new and better Standard Work Document. Standard Work Documents, often known as standardized work, are tools that serve as the basis for kaizen improvements. It provides the current best practices for leading a firm. Sometimes this is the primary goal of adopting kaizen. In addition, the Standard Work Document serves as a foundation for future enhancements. It also functions as a tool for evaluating employee performance and teaching new staff on ways to improve.

Improved safety

Improving workplace safety provides a kaizen benefit for businesses. Businesses that apply strategies to clean up and organize their workspaces increase workplace safety. Employees now have more control over business process equipment. Employees are also urged to recommend ways to enhance workplace safety. This helps to reduce accidents and other injuries. As a result, workers improve their efficiency and time management skills. However, management also has responsibility for safety.

Increased employee satisfaction.

Another benefit of Kaizen is that it increases employee satisfaction. Kaizen includes workers in the implementation of improvements. Employees may provide proposals and innovative feedback for modifications via a suggestion mechanism, such as team meetings. When workers participate in decision-making, they get a feeling of belonging and value.

Improved teamwork

One of the most significant kaizen benefits is greater collaboration. Kaizen is a quality improvement technique based on cooperation. It benefits all parties engaged in the business process, not just a chosen few. As the kaizen team tackles issues together, they form bonds and cultivate team spirit. As a result, personnel may operate with a fresh viewpoint, an open mind, and no bias.

Improved efficiency

Improved efficiency is a significant kaizen gain. Kaizen improvements increase the quality of services. It enables firms to introduce new process innovations, increase efficiency, and improve time management. Toyota Manufacturing Company, for example, uses kaizen across its manufacturing process. First and foremost, they use muscle memory training to teach their staff how to construct an automobile. Muscle-memory training enables them to provide correct outcomes. As a result, their personnel can operate with more accuracy.

Kaizen develops leadership capabilities.

Every Kaizen team must have a leader. The team leader is in charge of organizing the kaizen team and supervising implementation. The kaizen team leader ensures that everyone is fulfilling their responsibilities effectively. The team leader is also in charge of enlisting assistance when more resources are necessary. Nonetheless, he or she does not need to be in a managerial position to be considered a team leader. Another kaizen benefit is that it gives workers the chance to take on leadership responsibilities.