What is Kaizen Costing?

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 managem...

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...pany. Hence, it leads to premature termination of a new management style that would have been favourable for the adoption and operationalization of Kaizen Costing technique.

Works Cited

Malea Fashion District, Concept 13.5: Kaizen Costing, Retrieved on March 2, 2014 from http://www.maleafd.com/index.php?option=com_content&view=article&id=98&Itemid=96&lang=en

Kaplan Financial Knowledge Bank, Kaizen Costing, Retrieved on March 2, 2014 fromhttp://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Kaizen%20Costing.aspx?mode=none

Rizvana Mazvoor, Understanding its Advantages and Disadvantages, Retrieved on March 2, 2014 fromhttp://ezinearticles.com/?Kaizen---Understanding-Its-Advantages-and-Disadvantages&id=7406404

Management Accounting, What is Kaizen Costing, Retrieved on March 2, 2014 from http://managerial-accounting.blogspot.com/2012/09/what-is-kaizen-costing.html