Kaizen costing is a Japanese term for continuous improvement that focuses on cost reduction. It involves setting of standards and constantly improving on them to achieve long-term sustainability. Usually, the focus of Kaizen costing is on waste elimination and improvement of processes to increase productivity. To achieve these objectives, there is the need to pull in ideas from every employee as each contribution is necessary in ensuring gradual improvements. Each employee’s contribution will have a significant impact on cost reduction when management takes into account all other ideas. Similarly, an organization should always seek perfection, but since perfection is far-fetched, the focus should be on improving on the current processes.
Ways of waste Elimination
In a bid to reduce cost, an organization needs to take into considered several ways of waste elimination:
To begin with, doing away with Over-production is important when it comes to cost reduction. There is the need to do away with excessive production that exceed demand of the product. This goes a long way in saving on the cost of raw materials and labor cost. Likewise, managing the number of defective units is vital in reducing cost of production. In as much as defects are not easy to do away with completely, management should ensure that they keep them on check. There is also a need to find an alternative use of the defective product parts if recycling is not feasible.
Similarly, cost reduction requires an element of inventory management. The focus here is on acquiring the right quantity and quality of raw materials at the right time. This eliminates wastage through perishability of inventory and reduction of storage costs. Another important thing on inventory management is about transportation of inventory in and around the factory. The design of a factory layout should encourage free movement of products and inventory without wasting a lot of time.
Likewise, management of Idle-time ensures cost reduction. There is a need for a smooth production process. Hence, this calls for elimination of delays in between production processes. Management should consider highly favoring continuous production method as opposed to batch production technique. On the same note, constant movement of staff and equipment is not necessary as it also results into time wastage. Line managers should also eliminate any production process that is not value adding.
Advantages of Kaizen Costing
Kaizen costing is a process centered. It helps in identifying where mistakes are and minimize waste...