Kaizen costing is a Japanese approach that focuses on continuous, incremental improvements to processes. It aims to reduce costs through small, ongoing changes rather than large, infrequent innovations. Just-in-time is a system that seeks to eliminate waste by producing and delivering only what is needed for production. Life cycle costing estimates the total costs of a product or project over its entire lifespan, from inception to disposal. This allows organizations to understand costs at each stage and make informed decisions.

1. Prepared by:
Neelam Jodhwani
Pinakini Trivedi
Jay Raval
Dept. of Business Admin., Bhavnagar University,
Bhavnagar.
Guided by:
Himanshu Sir
SUBMITTED TO:
Kaizen Costing
Just In Time Approach
Life Cycle Costing

2. KAIZEN COSTING
KIA-----CHANGE
ZEN-----BETTER
CHANGE FOR BETTER
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3. DEFINATION
A Japanese term for making
improvements to a process through
small, incremental amounts
rather than through large innovations.
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4. BENEFITS
Change in attitude
Reduction in Production Time
Reduction in Rejection
Energy Saving
Improved Quality
Motivation
Team Building
Sense of belongingness
Environment conservation
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5. •Proactive approach to cTSost management.
•Orients organizations towards customers.
•Breaks down barriers between departments.
•Foster partnerships with suppliers.
•Minimize non value-added activities.
•Encourages selection of lowest cost value
added activities.
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6. LIMITATION
Effective implementation and use requires the
development of detailed cost data.
its implementation requires willingness to cooperate
Requires many meetings for coordination
May reduce the quality of products due to the use of
cheep components which may be of inferior quality.
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7. Jay Raval

8. CUSTOMER VALUE
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9. STANDARD COSTING V/S KAIZEN
COSTING
1. Cost reduction targets
are set and applied
monthly.
2. Variance analysis
involves target Kaizen
costs versus actual
cost reduction amounts.
3. Investigation occurs
when target reductions
are not attained.
1. Standards are set
annually or semi-
annually.
2. Variance analysis
involves comparing
actual to standard
costs.
3. Investigation occurs
when standards are
not met.
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10. CONCERNS
Often viewed as reactionary not value adding.
The system places enormous pressure on employees
to reduce every conceivable cost.
The product is already in the manufacturing process,
thus it is difficult and costly to make large changes to
reduce costs.
The cost of disruptions to production may be greater
than the savings.
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11. RULES FOR IMPLEMENTATION OF
KAIZEN COSTING
􀂃List your own Problems
􀂃Grade problems as to minor, difficult and major
􀂃Start with the smallest minor problem
􀂃Move on to next graded problem and so on
􀂃Remember improvement is part of daily routine
􀂃Never accept status quo
􀂃Never reject any idea before trying
􀂃Eliminate tried but failed experiments
􀂃Highlight problems rather than hiding
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12. Just-In-Time Systems
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13. History and Philosophy of Just-In-Time
• A philosophy that seeks to eliminate all types of
waste, including carrying excessive levels of inventory
and long lead times.
• Takes its name from the idea of replenishing material
buffers just when they are needed and not before or
after.
• Developed by Toyota Motor Company in mid-1970s
• Best applied to a production system, such as
automobile assembly, that would be considered
repetitive, such as a flow shop.
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14. Characteristics of Lean Systems:
Just-in-Time
 Pull method of materials flow
 Consistently high quality
 Small lot sizes
 Uniform workstation loads
 Close supplier ties
 Flexible workforce
 Line flows
 Automated production
 Preventive maintenance
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15. JIT Means …
• Keeping work flows moving
• Eliminating inventories
• Reducing travel distances
• Eliminating defects and scrap
• Maximizing usage of space
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16. JIT Demand-Pull Logic
Customers
Sub
Sub
Fab
Fab
Fab
Fab
Vendor
Vendor
Vendor
Vendor
Final
Assembly
Here the customer starts
the process, pulling an
inventory item from
Final Assembly…
Then sub-
assembly work is
pulled forward by
that demand…
The process continues
throughout the entire
production process and
supply chain
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17. Just-In-Time Production
• Management philosophy
• “Pull” system though the plant
WHAT IT IS
• Employee participation
• Industrial engineering/basics
• Continuing improvement
• Total quality control
• Small lot sizes
WHAT IT REQUIRES
• Attacks waste
• Exposes problems and bottlenecks
• Achieves streamlined production
WHAT IT DOES
• Stable environment
WHAT IT ASSUMES
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18. Traditional Systems Compared to
JIT
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19. Priorities
• Traditionally
– Accept all customer orders
– Provide a large number of options from which
customers may order
• JIT
– low cost/high quality within limited market
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20. Engineering
• Traditional
– design custom outputs
• JIT
– design standard outputs
– incremental
improvements
– design for
manufacturability (DFM)
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21. Capacity
• Traditional
– excess capacity designed into system just-in-case
problem arises
– highly utilized
– inflexible
• JIT
– minimize waste of having extra capacity
– flexible capacity
– moderately utilized
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22. Transformation System
• Traditional
– job shop
– materials handling equipment
– lots of space to store inventory
• JIT
– mostly used in repetitive production situations
– job shops often converted to cellular
manufacturing
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23. Transformation System continued
• Traditional-long lead times are often thought to allow
more time to make decisions and get work performed.
• JIT
– short lead times mean easier, more accurate forecasting and planning.
– If lead times are reduced, there is less time for things go awry, to get
lost, or to be changed
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24. Transformation System continued
• JIT
– Employing Kanban (Toyota’s materials management
system)
– Pull system: System for moving work where a workstation
pulls output from the preceding station as needed
(control-based systems that signals the requirement for
parts as they are needed in reality).
– Push system: System for moving work where output is
pushed to the next station as it is completed (planning-
based systems that determine when workstations will
probably need parts if everything goes according to plan)
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25. Sequential Production System with
Two Machines
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26. Layout
• Traditional
– job shop approach of using widely spread-out equipment with space
for stockrooms, tool cribs, and work-in-process inventories between
the equipment
– To handle and move all this inventory, automated or semi automated
materials handling equipment (conveyors, forklifts) is required, which
takes even more space.
• JIT
– Equipment is moved as close together as possible so that parts can be
actually handed from one worker or machine to the next.
– Use of cells, and flow lines dictates small lots of parts with minimal
work-in-process and material-moving equipment.
– manual transfer
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27. Workforce
• Traditional
– competitive attitude between workers and managers
– status symbols and privileges
– much of the employees’ time is nonworking time: looking for parts,
moving materials, setting up machines, getting instructions, and so on.
When actually working, they tend to work fast.
• JIT
– broadly skilled flexible workers who can uncover and solve problems
– workteams
– cooperative attitudes
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28. Inventories
• Traditional
– used to buffer
operations
– large WIP buffers
• JIT
– inventory is seen as an
evil
– small WIP buffers
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29. Scrap Unreliable
suppliers
Capacity
imbalance
Inventory Hides Problems
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30. Lowering Inventory Investment to
Expose Problems
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31. Suppliers
• Traditional
– suppliers treated as
adversaries
– multiple sourcing
• JIT
– supplier considered part
of team
– single-sourcing
agreements
– supplier certification
programs
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32. Planning and Control
• Traditional
– focus is on planning
– planning complex and computerized
• JIT
– focus is on control
– procedures kept simple and visual
– rather than planning and forecasting for an
uncertain future, the firm attempts to respond to
what actually happens in real time with flexible,
quick operations.
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33. Quality
• Traditional
– inspect goods at critical points
– scrap rates tracked
• JIT
– goal is zero defects
– workers themselves inspect parts
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34. Maintenance
• Traditional
– corrective maintenance, repairing a machine when it
breaks down
– done by experts who do nothing but repair broken
equipment
– equipment run fast
• JIT
– preventive maintenance, conducting maintenance before
the machine is expected to fail, or at regular intervals.
– done by equipment operators
– equipment run slow (minimizes their chance of breakdown
while maximizing their output)
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35. Typical Benefits of JIT
• Cost savings: inventory reductions, reduced scrap, fewer
defects, fewer changes due to both customers and
engineering, less space, decreased labor hours, les rework.
• Revenue increases: better service and quality to the customer.
• Investment savings: less space, reduced inventory, increased
the volume of work produced in the same facility.
• Workforce improvements: more satisfied, better trained
employees.
• Uncovering problems: greater visibility to problems that JIT
allows, if management is willing to capitalize on the
opportunity to fix these problems.
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36. Potential Problems Implementing JIT
• Applicable primarily to repetitive operations
• Requires discipline
• Based on cooperation and trust
• Requires change of philosophy
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37. Jay Raval

38. Introduction
• At the start of any project it is important to understand
the costs involved.
• Traditional methods simply look at start-up costs, cash
flow and profit (or loss).
• With more complicated projects, it is necessary to
understand costs throughout the life of the project.
• This allows the financial managers to;
• Understand when the project will break-even
• What are the costs and returns during the life of the project
• Estimate life of the project.
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39. Definition
• A life cycle costing estimates a product’s
revenues and expenses over it’s entire life cycle.
• Life Cycle Cost =
Initial Cost + (Annual Costs * Project Life *Discount Factor)
• Life cycle concept is associated with target
costing & target pricing.
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40. Advantages
• important inputs in the decision making process in
the product design, development and use.
• evaluation of alternatives
• Evaluation of competing options in purchase
• Improved awareness of total costs
• More accurate forecasting of cost profiles
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41. Why use LCC
Project manager
Maintenance
Engineering
Production
Accounting
Shareholders
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minimize capital costs
minimize
repair hours
maximize operation hours
maximize project
net present value
Increase wealth of company

42. Disadvantages
• The accuracy of LCC analysis reduce as it predicts further into the future
• LCC is time consuming
• LCC is an expensive concept, not appropriate for all applications
• The assumption is that the product, as known, has a finite life-cycle
• The accuracy of data is often doubtful
• It has a high sensitivity to changing requirements
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43. Cost element
• For an equipment, there are TWO cost
elements:
1) Initial Cost, and
2) Operation & Maintenance Cost

44. Company X is considering whether to follow Project A or Project B.
Project B has an initial cost of £2,000, while Project A has an initial cost of £3,000.
However, applying the life cycle cost formula will help Company X determine what will
select among two projects?
PROJECT A PROJECT B
Initial Cost £3,000 £2,000
Annual Costs
Electricity
Maintenance
£150
£50
£250
£150
Project Life
(Years)
15 15
Discount Factor
(Based on an interest
rate of 3%)
0.64 0.64
Calculations
£3,000 + (£200 x 15 x
0.64)
£2,000 + (£400 x 15 x
0.64)
LIFE CYCLE COST £4,920 £5,840
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45. Jay Raval