CIMA P2 Syllabus A. Managing The Costs Of Creating Value - Kaizen Costing - Notes ^{7 / 10}

KAIZEN is a Japanese term for continuous improvement in all aspects of a company’s performance, at every level. ’

Typical KAIZEN principles

1. Small incremental improvements instead of large innovations

2. Applied during manufacturing stage on ongoing basis

3. Focused on cost reductions through increased efficiency

4. Every worker is involved

CONTINUOUS IMPROVEMENTS involves a constant effort to

• eliminate waste

• reduce response time

• simplify the design of both products and processes

• improve the quality and performance of activities that in turn will result in an increase in customer satisfaction.

Tools used in the Kaizen process

1. The five why process

   This process seeks to identify the root cause of a problem by encouraging the employee to ask ‘Why’ to generate a symptom.

2. Fishbone diagrams 

   These are cause and effect diagrams used to analyse all causes (or inputs) that result in a single effect (or output). A map in the form of a fishbone is created and the route of continuous improvement is drawn.

3. Pareto analysis (80/20 rule) 

   Pareto analysis is based on the idea that 80% of an outcome is dependent on only 20% of the work (inputs or processes).

4. Plan-do-check-act (PDCA) 

   The use of a PDCA cycle to encourage continuous improvement. 

   Plan: Plan the process 

   Do: Execute the process 

   Check: Check the outcome of the process 

   Act: Feedback to improve the process