Kaizen costing is a method that many Japanese companies havefound effective in r

Question

Kaizen costing is a method that many Japanese companies havefound effective in reducing costs. From a behavioral point ofview, aswer these questions: Discuss the similarities anddifferences in the process by which cost reduction under bothsystems occurs. Be specific in your answer. a. What are the biggest problems in using Kaizencosting? b. How can managers overcome these problems. Kaizen costing is a method that many Japanese companies havefound effective in reducing costs. From a behavioral point ofview, aswer these questions: Discuss the similarities anddifferences in the process by which cost reduction under bothsystems occurs. Be specific in your answer. a. What are the biggest problems in using Kaizencosting? b. How can managers overcome these problems.

Explanation / Answer

a. What are the biggestproblems in using Kaizen costing? a. What are the biggestproblems in using Kaizen costing?       ===================================== The biggest problemwith Kaizen costing is similar to the one that faces targetcosting, and that is the system places enormous pressure onemployees to reduce every conceivable costs. The results of thispressure are internal conflicts among various parties and a greatdeal of employees burnout. b. How canmanagers overcome these problems.      ===============================

To address the problem, some automobile companies use a graceperiod in manufacturing just before a new model is introduced. Thisperiod, called a cost sustainment period, provides employees withthe opportunity to learn any new procedures before the companyimposes Kaizen and target costs on them. Another solution relatesto the kinds of penalties that employees face as a result of notattaining cost targets. In Japan, for those employees with lifetimeemployment, there is virtually no chance of losing one’s job,however, there are ‘social penalties’ such as loss offace, letting down the company, etc., associated with not achievingtargets. The last thing North American managers would want to do isto threaten job loss to those who did not achieve targets. Thiswould simply exacerbate the problem. In the final analysis, Kaizencosting has to be understood as a tool for change, but not as ahammer.

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