October 22 - November 6, 1997
Prof. Yasuhiro Monden and Prof. Kazuki Hamada explained the key points in Toyota’s Cost Management System in book entitled “Toyota Management System: Linking the Seven Key Functional Areas”.
In the text of the book the authors talk about the basics of Target Costing (Toyota calls it Genka Kikaku) and Kaizen Costing (Genka Kaizen). Toyota puts a lot of work into planning the cost and monitoring actual costs associated with a vehicle. Just as industrial engineers watch every second on the shop floor to identify waste, every dollar in a component is analyzed for improvement in vehicles as well. Accounting and measurement alone will not produce results. Measurement is just a piece of the improvement process just as “Check” is only a part of the Plan-Do-Check-Action cycle for improvement. A critical piece of Toyota’s strength in terms of financial results lies in the realm of the overall cost planning process and the structured VA, VE, & VI activities that occur during the life cycle of the program.
https://www.theleanedge.org/2386-art-smalley-financial-benefits/ Not available now.
In the Japanese language Kaizen Costing is called ‘Genkakaizen’ with ‘genka’ meaning ‘cost’, ‘kai’ meaning ‘change’ and ‘zen’ meaning ‘good’. In other words Kaizen means change to good ways and good results. In english it is termed continuous improvement. Imai (1986) in his glossary of terms defines Kaizen in relation to the workplace as meaning ‘continuous improvement involving everyone – managers and workers alike’. Imai (1986) argues that a Kaizen strategy involves relatively small improvements. Monden and Hamada (1991, p. 17) suggest that ‘Kaizen Costing is the system to support the cost reduction process in the manufacturing phase of the existing product … Kaizen refers to continuous accumulations of small betterment activities rather than innovative improvement’. They also argue that target costing and Kaizen Costing can be linked together and ‘constitute the total cost management system of Japanese companies’
Kaizen eno Yon Dankai - Improvement in 4 Steps - History of Kaizen in Japan
Kaizen costing is variant of standard costing. Standard costing specifies a cost target for the production team for the coming period. Normally standard cost is set for an year. It will be revised every year. It is constant for an year as a planning device. Any variances from it are examined and the reasons are identified and understood.
Kaizen costing is cost planning that incorporates kaizen philosophy or philosophy of continuous improvement and implementation of the principles of learning effect.
According to learning effect principle, the average cost of an item is certain percentage of average cost of earlier volume. It is expressed as volume of production and sales doubles(X becomes 2X), the average cost of total sales (2X) is say, 90% of the average cost of producing and selling X units. There is a learning effect in every activity undertaken by the organization right from the lowest cadre employee to the CEO and Board and cost comes down.
Japanese implemented this cost reduction philosophy in a systematic manner. They made planned reductions in the standard costs of an item every year. So the production and sales team have to plan their department and activity cost to achieve reduction in standard cost. The idea was extended by them to monthly costs. They said we cannot achieve cost reduction in one day. So having a standard cost for an year and then asking for reduction in it next year is not the right approach for cost reduction. They came with a reducing cost target for every month. Such a reducing cost target for every month demands some effort on cost reduction by departments every month. Hence cost reduction is on the monthly agenda of every department in the company. Kaizen costing is providing the monthly cost target information and accounting for actuals during the month.
KAIZENshiro Budgeting
KaizenShiro Cost = Cost of Non-Productivity = Cost of Not-Improving-Productivity
Total cost of an organization has KaizenShiro Cost. If KaizenShiro cost is estimated, plans to identify projects that reduce it can be developed and implemented. Kaizen cost management is driven by KaizenShiro projects. Project identification and formulation is driven by KaizenShiro cost.
KAIZENshiro Budgeting is the new paradigm for planning and developing synchronous and profitable operations for Speed-Based Target Profit Planning (SBTPP). KAIZENshiro Budgeting is budgeting the projects to cost of losses and waste, which are feasible to be improved for the year for which the budgeting is done. Improvement is achieved by developing and implementing the most effective and efficient Strategic KAIZEN and KAIKAKU projects, supported by daily improvements of Gemba kaizen. Thus engineering inventions and innovations are utilized as well as ideas of shop floor operators, supervisors and engineers who are focusing on delivering to market demand utilzing the shop and supply chain capacity.
Kaizen Cost Management
Rules for Successful Kaizen Management
For More Detailed Reading
Kaizen Costing and Value Analysis
B. Modarress; A. Ansari; D. L. Lockwood, “Kaizen costing for lean manufacturing: a case study” International Journal of Production Research, Volume 43, Issue 9 May 2005 , pages 1751 - 1760.
Included in Knol Handbook of Industrial Engineering - 2019
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Originally published on Knol
http://knol.google.com/k/narayana-rao/kaizen-costing-and-kaizen-cost/2utb2lsm2k7a/ 381 7500+ page views
Updated on 9.11.2024, 8 May 2019, 27 January 2012
Included in Knol Handbook of Industrial Engineering - 2019
Index of articles on Cost Accounting, Costing and Cost Management
Full List of Articles on Kaizen
Kaizen eno Yon Dankai - Improvement in 4 Steps - History of Kaizen in Japan
Rules for Successful Kaizen Management
Kaizen - Engaging Front-Line Staff in Continuous Improvements - Industrial Engineering
Leading and Managing Kaizen Events
Agile Kaizen
Kaizen - The Japanese Style Productivity Improvement Methodology
Industrial Engineering is Kaizen in Engineering
Kobetsu Kaizen - Focused Improvement of Machine and Machine Work in TPM
Front Line Kaizen for Product and Process Industrial Engineering
Gadget-based improvement is widespread as improvement activities that can not only eliminate losses but also inspire the workplace.
Karakuri Kaizen - Introduction
Industrial Engineering is Kaizen Engineering
Toyota Kaizen Methods: Six Steps to Improvement - 2010 - Book Information
Kaizens - Production Improvement Ideas Implemented - India - Kaizen Eye
Kaizen Assembly: Designing, Constructing, and Managing a Lean Assembly Line - Book Information
Kaikaku: The Power and Magic of Lean : a Study in Knowledge Transfer - 2004 - Norman Bodek - Book Information
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Originally published on Knol
http://knol.google.com/k/narayana-rao/kaizen-costing-and-kaizen-cost/2utb2lsm2k7a/ 381 7500+ page views
Updated on 9.11.2024, 8 May 2019, 27 January 2012
