KAIZEN, What kind of sushi is that?

Kaizen is a roll of sushi, that contains of unagi, salmon belly, and ikura. Sounds yummy, rite? I won’t give you the recipe here, because this is not a food blog and Kaizen is NOT a sushi.

Kaizen is a Japanese word “kai”, which means change, and “zen”, which means good. If we combine it, the definition is “Continous Improvement”. Generally, Kaizen can be applied in any segment of organization, one of them  is in costing. Kaizen Costing focuses on cost reduction target in production stage. Kaizen Costing is a derivative of Target Costing, which commonly used by Japanese companies.

These days, companies around the world are competing to improve the efficiency and effectiveness of their production. One of the main consideration in their decision-making is their production cost. Actually, there are some techniques to manage their costing, such as Activity Based Costing, Cost of Quality Calculation in Support of TQM, Target Costing, Theory of Constraints, Throughput Accounting, Integrated Management Accounting, Balanced Scorecards, and (this is what we’re gonna talk about) Kaizen Costing.

On target costing, they are more focused on cost standard setting and how to achieve those standards. While in Kaizen Costing, they are more focuses on continous cost reduction. The actual cost already achieve the target if they meet the Kaizen Target. Here are the differences between Target Costing and Kaizen Costing.

	Traditional Target Costing	Kaizen Costing
Costing techniques	Cost control to meet standard cost	Cost reduction, to achieve cost reduction standard
Condition in making the target	Static condition	Dynamic condition
Time to set standard	Annually or semiannually	Monthly
Cost variance analysis	Comparing actual to standard cost	Comparing actual cost reduction to target kaizen cost
Employees roll in the process	Viewed as the cause of unfavorable variances (because only managers & engineers who develop the standards)	Viewed as the source of continous improvement (because workers are closest to the process and know about the production better)

Kaizen costing is commonly implemented in companies that produce a long life cycle products and has a mature market. Basically, kaizen is trying to make sure everyone in the company to consider how they’re dong their work and think about the other way which more effective and efficient.

References

Sani, Alireza. Allahverdizadeh, Mahdi (2012). Target and Kaizen Costing – World Academy of Science, Engineering and Technology. Retrieved from http://www.waset.org/journals/waset/v62/v62-10.pdf

Management Accounting and Control Systems for Strategic Purposes : Assessing Performance Over the Entire Value Chain. Retrieved from http://maaw.info/ABKYBook/ABKYChapter9.htm