REPORT KAIZEN COSTING

SEMINAR IN MANAGEMENT ACCOUNTING

(MAF 651)

PREPARED FOR:
MADAM NUR ADURA BINTI AHMAD NORUDDIN @
NORDIN

GROUP: AC220 8K

MEMBERS’ NAME UITM ID

1 MUHAMMAD AHZA BIN MAHMAD 2017192565

2 MUHAMMAD AYYASH BIN ABDUL HAKAM 2017950095

3 MUHAMMAD FARHAN BIN NATILAN 2017714009

 MAF651 – SEMINAR IN MANAGEMENT ACCOUNTING
RUBRIC FOR REPORT - SEMINAR 1 (10%)

MEMBERS’ NAME (ALPHABETICAL ORDER) UITM ID GROUP

P MUHAMMAD AHZA BIN MAHMAD 2017192565
1
P MUHAMMAD AYYASH BIN ABDUL HAKAM 2017950095
2 8K
P MUHAMMAD FARHAN BIN NATILAN 2017714009
3

CRITERIA/ FULL EXCELLENT GOOD SATISFACTORY POOR

MARKS MARKS
FORMAT Report is properly Report is properly Report is properly Report is not binding,
binding, with title page, binding. Missing one binding. Missing two no title page/table of
table of contents, of the format criteria. or more of the format contents/paginating/
paginating, criteria. appendix
introduction, contents,
conclusion and
appendix
10 10-9 8-7 6-5 5<
INTRODUCTION Provide clear overview Provide moderate Provide overview but Provide vague
of the topic using own overview of the topic, no definition of key introduction, irrelevant
sentence (original),clear define some key concept, relevant and not using own
definition of key concepts and terminology sentences, no
concept, relevant terminology definition of key
terminology concept/relevant
terminology
15 15-14 13-10 9-7 7<
CONTENT - Provide proper Provide logic Unclear structure, no Provide an
structure, readable, structure, readable; continuity among unstructured, not
SMA TECHNIQUES &
comprehensive yet less comprehensive paragraphs. Omit comprehensive,
OTHER ISSUES relevant discussion of (omit few relevant many important irrelevant discussion.
the content. Smooth issues of the topic). issues. Poor topics
flow of thought, good arrangement & lack
topics arrangement & originality
original work.
30 30-25 24-20 19-16 15 <
APPLICATION TO Provide comprehensive Provide ample Provide some No discussion on the
discussion on effective discussion on discussion on the application of the SMA
INDUSTRY
application of one (1) or application of one (1) application of SMA techniques in the
more SMA techniques SMA technique only technique but very company
in the company chosen in the company. brief discussion given
25 25-23 24-20 19-13 13 <
CONCLUSION & Provide critical Provide general Provide conclusion by No conclusion given
conclusion of the topic conclusion of the repeating the same
RECOMMENDATION
by giving own topic by giving sentences from the
comment general comment content with no
comment given
10 10-9 8-7 6-5 5<
REFERENCES Use sufficient Use reference Use insufficient Reference given from
references which are insufficient references reference which the textbook only
relevant to the topics, which comes from comes from unreliable
reliable (from journals) mixed sources sources and without
with proper referencing (reliable and proper referencing
style unreliable) with style
proper referencing
style
10 10-9 8-7 6-5 5<
TOTAL 100
 ACKNOWLEDGEMENT
This report required a lot of guidance and assistance from many people to give us in
depth of knowledge regarding the topic that we chose. We are very thankful to those willingly
to help us to get this report, assignment and presentation that has been given to us.

We also like to give a big thank to our beloved lecturer who teaches us Seminar in
Management Accounting (MAF651), Madam Nur Adura Binti Ahmad Noruddin for her
guidance and effort to give us the explanation regarding the topic that we chose for our
continuous assessment purpose.

To our family members and family, thank you for providing us a lot of information,
lessons, encouragement and their support such as money and moral support in order to
make this project complete successfully.

Last but not least, thanks to all members for your commitment and be able to
complete this Seminar 1 together even though we had faced this online based learning when
this pandemic covid-19 hit us. Just like what we always wish, hopefully that all hard work that
we faced together will be able to give us a good result. Thank you for your full cooperation,
your time, and your commitment in order to complete this business plan.
CONTENTS PAGE

RUBRICS FOR REPORT – SEMINAR 1 i

AKNOWLEDGEMENT ii

BACKGROUND HISTORY 1

DEFINITION 2

EXAMPLE COST IN KAIZEN COSTING 3

5S IN KAIZEN COSTING 4

TYPE OF KAIZEN COSTING 5

TYPE IMPROVEMENT MODEL 6–8

ADVANTAGES & DISADVANTAGES 9 – 10

PROCESS OF KAIZEN COSTING IMPLEMENT 11

EXAMPLE COMPANY USE KAIZEN COSTING 12

CONCLUSION 13

RECOMMENDATION 14

ARTICLE 15 – 24

REFERENCES 25

TABLE OF CONTENT
 CONTENT
Background History

The historical backdrop of Kaizen starts after World War II when Toyota the first
company implement quality circles in their production process. American business and
quality administration educators who visited the nation in those days are partly affected such
execution.

A quality circle is a process gathering of laborers playing out the equivalent or

comparable work, who meet routinely to recognize, dissect and tackle business related
issues. This progressive idea turned out to be extremely well known in Japan during the
1950s. Presently it still exists as Kaizen groups just as similar worker participation. The term
Kaizen really got popular around the globe through crafted by Masaaki Imai.

Masaaki Imai is a Japanese hierarchical scholar and the executive’s advisor. His
work on quality administration, explicitly on Kaizen is notable. In 1985, he established the
Kaizen Institute Consulting Group (KICG) to enable western organizations to present the
concepts, systems and tools of Kaizen. At present time, the Kaizen Institute group has
applied the lean approach and kaizen instructional classes to for all intents and purposes all
business areas all through the globe.

Masaaki Imai distributed two essential books on business measure the executives.
"Kaizen: Japanese soul of progress" (1985), which advocated the Kaizen idea in the West,
and Gemba Kaizen: A Commonsense, Low-Cost Approach to Management (1997).
Definition

The word "kaizen" is deriving from two syllabus which are "kai" which mean change
and "zen" which is great. In other words, it essentially signifies "change for better". In English
kaizen commonly implies measures for actualizing nonstop improvement.

Kaizen is a way to deal with movement association dependent on presence of mind,

self-restraint, request and economy. Kaizen strategy is a solid patron and essential piece of
a lean creation measure model in lean assembling. It is pertinent to lean programming
improvement just as to individual undertakings.

Kaizen refers to any exercises that persistently improve all business capacities or
measures and includes each employee from the CEO to the production laborers. Kaizen is a
typical practice in Japan and additionally this technique applies to process. For example,
purchasing and logistics, that cross hierarchical limits into the supply chain.

With Kaizen use in the management practices, the primary focus is given to the
manufacturing process, since the way toward accomplishing results is not exactly same as
the final outcome. The explanation behind this center is that blemished process might not
lead in accomplishing the objective. A main function of kaizen is to turn into a piece of the
market by improving process inside the company instead to promoting products into the
market. One of the main errands in Kaizen includes improving the nature of work in an
association by accomplishing TQC (total quality control).

The kaizen strategy is presently a base model for other quality improvement
techniques including suggestion systems, automation, small gathering activities, Kanban
system, just in time, zero deformities, total productive maintenance and total quality control
Example cost in Kaizen Costing

There are several types of cost that can use kaizen costing. For example, the
production cost. As a manufacturing company, they do not want to overproduce their
products when the demand of the products is low. They need to analyze the level of
production of each type of their products so there will be no overload of production.

Another example of cost is inventory cost. An efficient and effective company is when
they able to manage their inventory. The company need to identify the level of inventory that
the company should hold. If there are a lot inventory hold by the company, they will be
incurred holding cost and there will be waste of their storage.

Next, kaizen costing can help inhuman resource cost. For example, in hiring new
employee, training to develop new skills and expertise and retention of unskilled or bad
employee. This important because without employees, a company cannot be functioned
normally and effectively. Employee is one of the main factors of success of the company.

Finally, in term of raw material where the company need to decide how to manage
and reduce the wastage in the production and the time used in producing a product. This is
important because if the company can reduce the amount of wastage of product and time
needed in producing a product, they will save a lot of cost that are needed in production thus
will increase their profit.

Thus, we can say that almost all cost of the company can be monitored through
kaizen costing.
5S in Kaizen costing

5S is being introduced and developed by Hiroyuki Hirano in production system where

the company use it for Just in Time manufacturing system which they need to reduce as
much waste. This system used first time in industries of manufacturing automobile where
they were really worried regarding waste happened in manufacture industry where that time
Japan in post war. So, they need to maximum their output bust minimizes the cost in
accordance of Japanese economy revolution.

If the company want to implement kaizen costing approach, they need to applied 5S
application to improve their workplace environment especially production and manufacturing
department. 5S have five steps which are: -

 Seiri
Seiri is the first step of 5S which mean sort. Manufacturing development need to
identify and grouping the item according to their needs. The unnecessary items can
be sold. This will make the working environment is neater and leave with only
important things. This will enhance the efficiency in the working environment and
working experience.
 Seiton
Next is straighten which mean after left with item that is needed, the item is labelled
and arrange in order according to their function. This will give a better working
experience to the worker when they know where the items is located and also where
items should be put back.
 Seiso
Seiso is shine. This mean maintaining the cleanliness in work station or workplace is
very important. The tools are used is needed to put it back to own place. This not
only can prevent any accident at workplace, it also can improve the productivity of
the employees. So, this will be one of continuous improvement for the company.
 Seiketsu
Seiketsu that mean standardize, is the organization need to keep it as standard and it
has to follow by all employees regarding the cleanliness, usability and maintaining
the placement of the items by creating banner, label, sign or board.
 Shitsuke

The last step will be shiketsu which mean sustain. This is where employees need to
be educated regarding any changes made by establishing communication. By having
this, it can develop a sense of self-control and also discipline among employees and
this can maintain the standards.
Type of Kaizen costing

Kaizen costing can be done either at every level of organization, business unit or the
whole of organization itself. It also can be based on product that the organization want to
produce or the process of production or manufacturing itself.

1. Asset oriented
Kaizen costing on asset oriented is focusing on the planning and directed as per the
requirement of organization. It also can be called as organization oriented. It focuses
the need for particular of business unit.

2. Product oriented
Product oriented focusing more into activities or project oriented where value
analysis is use with a great focus.
Type of improvement model
Kaizen which means continuous improvement where known is a culture for quality in
management. It need participation from everybody in every level of organisation. Here
actually four type of Kaizen costing methodologies which are: -

1. Kaizen Teian
Kaizen teian is bottom-up improvement where employees participate in improving
their own processes. This type of kaizen develops a culture of change because it
involving everybody in the organisation to think of improvement needed. Kaizen teian
is recommended if organisation want to start to implement Kaizen costing in the
organisation.
There will be eight form of waste need to identify and eliminate to ensure kaizen is
successful in the organization.

 Defects
Scrap product which hinders it usability is waste of space and need to eliminate.
 Excess processing
Product that needs to be repaired to satisfy customer needs and wants.
 Overproduction
When there are too many products produces than what customer buy, this will be
a big waste of organisation either from raw material, storage, time or other
resources.
 Waiting
Idle worker or machine are also type of waste since organisation need to utilise
to gain optimum production and achieve economic of scale.
 Inventory
A valuable product or material that will be sold or processed into finished goods.
 Transportation
Moving products or material require costs and need to have proper schedule to
eliminate any unnecessary cost.
 Moving
Excessive movement will be waste of energy, effort and time.
 Unutilized talent
If the potential is not satisfied and not fully utilised, there will be waste of talent.
This happened if there is no proper management of team, group of employee or
department.
2. Kaizen events
Kaizen events is for specific process of improvement in over brief of time. This type
kaizen will use to solve specific problem by using Value Stream Map (VSM) analyse
by employees and management.
This will take a brief of time either several days, weeks or targeted timeframe with a
sort of challenges need to solve. If the problem solved, it will be a step of change in
efficiency, quality of management and good performance.

3. Kaikaku
Kaikaku is a big and a bit of tough to implement since it is a radical change.
Sometimes, small changes are not satisfied the organisation to achieve their goals.
By this, a big and radical change need to be implemented.
Rather than improving process, kaikaku urge all employee and management switch
into new process or new environment. For an example usually organisation operates
their productions in traditional process, but they shifting into modern and automated
production process which is completely new environment. It is a continuous
improvement since the external factors which in technological is more modernize but
this change is in a big scale.

Hiroyuki Hirano introduced 10 commandments of Kaikaku which are: -

 Throw out the traditional concept of manufacturing methods

 Think of how the new method will work rather than how it will not work.
 Don’t accept any excuses
 Deny status quo and ready to start new
 Do not seek perfection. A 50% implementation rate is a reasonable as long it can
be done on the spot.
 Do not spend too much
 Use your brain as much as possible to solve the proble,
 Ask “why” 5 times to be clear.
 Ideas from many people is better than one person
 Kaikaku knows no limit
4. Kakushin
Kakushin happened after Kaikaku which is after you shift entirely new way of
process. It is a break-through of a big thing that change everything.

Kaikaku is changing what is already done for example after an organisation change
into automated process, they will choose using 3D printing method of their material
which will demand new skill to manage the machine.

This will require management to think why they need to change into particular
process. This will also require culture of change to commit in new way of process.
Brainstorming and any other tools of Kaizen costing needed to ensure continuous
improvement is happened in the organisation. Management also need to lead their
employees by giving directions.
Advantages of Kaizen

Firstly, Kaizen implementation can improve the teamwork among the employee in an
organization. The reason is because Kaizen concept need an involvement from all parties in
the organization as a whole. This concept is emphasizing cooperation between the team.
Any problem that are arise will be solve together between the team and management. As a
result, it can create a team’s spirit and strong bonding relationship between the team. Other
than that, by working in a group, it also can build cross functional collaborations between the
workers in other departments. It means that a worker that has skill and expertise in certain
area can share the knowledge with the others. It will enable the employee to learn skill and
expertise from one another. To get an impressive result, input from all parties is a must.

Secondly, implementation of Kaizen can reduce the waste. As the overall purpose of
Kaizen itself is to improve the efficiency, thus it will save cost and time consuming on certain
area if their objective is met. What management need to do is they need to determine the
cause of wastage and fix the problems immediately. They should recognize the area that
needs an improvement and make a necessary change towards it. The lesser time changes
are made, the more waste can be reduced.

Lastly, it can improve the satisfaction of workers in the organizations. As it is

including people as a whole, the employee can make a suggestion and input throughout the
teams meeting. When they are being involve in the decision making, they will feel worthy in
the organisations. Thus, it will lead for an employee eagerness to implement the concept as
they feel motivated. Usually, the organizations will recognize and give reward to whoever
that can find inefficiency of their operation. This action taken could boost the employee
participation to get involved and voice out an opinion.
Disadvantages of Kaizen

Despite of many benefits from Kaizen implementation, there is also a side implication
that organisation need to bear. Firstly, it is difficult to implement the Kaizen concept for an
organization that has an existing system. The reason is because the implementation will
alter the current system, so the management need to aware whether the replacement
system is actually bringing the benefit to the organization. One fact that the management
need to take note is that once system has been implemented, it is hard for the organization
to return back into the old method. Therefore, the company need to make a detailed analyse
on advantage and implications to the company before decided on it. Other than that, the
company should give employee an opportunity to voice out their opinion

Next, reluctant of employee towards changes thus make it difficult for the
organisations to perfectly implement the system. This is happened when the employee is not
ready to implement the unfamiliar and different system as they are already felt comfortable
with the existing system. When the company is not ready, it will lead to waste of time and
cost. To make a perfect implementation, the employee needs to get a training thus causes
them to divide the time for works and training.

Other than that, training requirements for kaizen implementation is also one of
disadvantages. To implement this concept, it needs a lot of time to understand regarding the
concept and objective of the system, thus the employee is required to have an enough
course and training. If the employee did not get an enough training to understand the
concept, then it became useless as the objective to improve effective did not meet. This
training will incur cost to the organisation and if it is become failure, they need to incurred
losses. In addition to that, it also quite troublesome for an employee since they need to
divide their time to undergo a training session.
Process of Kaizen Costing Implementation

Basically, the process to implement the Kaizen Costing is consist of five (5) simple
steps. Firstly, it is started by identifying the problem in the production line or any other
sectors that need an improvement. The management need to analyse the production of
works if there is any wastage happened between the process. To make the production
become efficiently, wastage such as defect product, overproduction, and waiting time (delay)
need to be eliminated.
Secondly, once the problem has been identified, we will proceed to the next step
which is to find the best solution to overcome the problems. The idea can be generated
through team brainstorming between the management and workers. In addition, the lower-
level opinion such as from workers in the production line is good since they are in real
situation to understand and identify any inefficiency. Thus, opinion from them is likely more
relevant and useful to be included in the discussion. The best solution will be picked to be
tested and implement in the process.
Thirdly, is the implementation process. Throughout this process, the management
will use 5’s as a guidance in the Kaizen activities. It consist of sorting which is grouping the
tools and materials into needed and unneeded item, then the any unneeded item will be
eliminate, straighten which is by placing item in its place, this process will make time more
efficient, shine is that production place should be clean and neat, this will avoid any
unneeded accident happened in the workplace, standardized which all the process activity
need to have a procedure that can be followed by operator activities and sustain which it
means the all 4 ‘s above need to constant followed in order to have a good result. During this
implementation process also, the communication is very important between the
management and employees. It is to ensure that the organisations objective can be met.
Fourthly, to check and monitor the progress of work done. This procedure is done by
checking whether the problem identified has been overcome and not recurred. Other than
that, the management also need to monitor and analyse the result between before and after
effect of the implementation. It is to examine if the changes done is effective or not. If did not
bring any benefits, the process needs to reanalyse by follow again the steps above.
Fifthly, to standardise the solution in the standard operating procedure of the
company. Since it has proved to have a good result, the solution should be implemented
during the process of production. All in all, there is a few basic things that management
should take note, which is the management should not too focused in finding a perfection. If
the possibility of efficiency to increase is only 50%, it is still a good sign as it brings benefit to
the company even though in a small unit. Besides, the company need to always question to
improvise their current practice. By doing so, we can always sustain the continuous
improvement from time to time.
Example of Companies That Used Kaizen in The Real World

TOYOTA motor
corporation

Toyota motors corporation is one of the famous car manufacturers that has been
implement this costing for many years ago. In fact, they are the one who introduced this
concept widely around the world and proved that the system is effective and measurable.
The owner itself is belief that there is always a room of improvement in the procedure and
practices of the organisations.

To implement this concept effectively, the company has applied positive vibes on
each of its employee. It is to ensure that employee is giving fully cooperation and
participation on generating ideas. In addition to their motivation, this compare also
compensate a reward to the employee that find inefficiency n the system and ways to correct
it. This indirectly has boost employee’s morale to work hard willingly for the best of the
company as they feel appreciated.

Moreover, according to the principle of the business, they are focusing not only on
the production, but they are also taking consideration on after sales service effect as their
priority to be improved. If the system can be improved, they actually can produce something
that has high quality with a reasonable price thus cause customer to put trust on the brand
itself. By attract the customer loyalty towards the brand image, it eventually has assists
Toyota to sustain competitive in the market for a long run.
 CONCLUSIONS
In the conclusion, kaizen costing is very beneficial. It always makes sure that a
company started it operation on the right track in giving them the best profit. The conclusions
in applying the kaizen costing should not be doubted because success and effective rate of
this method is extremely high. This method has been applied all over the world and their
profit has increase drastically. Some of the big company that applied it successfully is like
Toyota, Honda and Nestle. All of these big names openly confess that one of the factors of
their success that they able to enjoy it today is because they applied the principles of kaizen
and they did not lose their faith on this method. Having faith in this method is important
because it require continuous improvement which is not everyone can endure with it and
sometime it might require to change the entire structure of the organization. Every method
has it drawbacks and limitation and the company that apply it need to tackle and overcome
these problems in order to get the benefit of the kaizen costing.
 RECOMMENDATIONS
Despite of the benefit from Kaizen costing implementation, it actually has several
drawbacks that organisations need to bear. However, these drawbacks arise can be
overcome through the right technique.
First and foremost, regarding on the issue of having difficulties to implement in the
existing systems. As what we know, the objective of the implementation is to replace the
current system that works more efficiently. But, if it does not in the right path, it can be a
waste to the company if it does not bring any benefit to the organisations. Thus, here is few
suggestions to overcome it which is by management role. Before decided to implement a
new system, management should make a detail analysis on the system. This analysis
includes list of benefit and drawbacks between the current and future practices, and also
suggestion of backup plan to support the implementation process. Other than that, the
management also need to monitor the progress of the implementation. Keeping the records
and monitor enables the management to analyse the progress of the implementation
whether it in the right path to achieve its objective.
Next is on the issue of employees that are reluctant towards changes. It is happened
when these employees are comfortable with the current system and is not prepared with a
new system that are unfamiliar. Thus, our recommendation on this issue is the role of team
leaders. A leader should have a skill to persuade the employee. They should give the
exposure on the benefits to them. In addition, the leader should play the role by giving fully
support and guidance to make them understands with the new concept. They also need to
be ready to receive a feedback regarding the implementation work. As the concept is
involving all parties, the employees have a right to voice out their opinion. All in all, it is an
actually win-win situation between the leaders and employees.
Last but not least, the issues of employee’s competency to implement this concept.
This concept needs an employee knowledge to add on the input of the process. The main
input is mostly from the employee itself as they are the person who in the real situation.
Thus, the management should prepare an enough training for the employees in developing
necessary knowledge and skills. The purpose for the training a to build up the quality of
thinking to develop an idea to solve a problem.
In conclusion, the drawback that arise from the Kaizen implementation can be settle
if all parties in the organisations play their role. The main recommendation is mainly
discussing on the role of leaders and management. There is also a quote from Richard
Branson, an English business magnate, investor, and author, it is said that “Two heads are
definitely better than one and by sourcing ideas from each other, you have better chance of
coming up with a strategy that will allow your business to overcome a setback or
challenges”. It means it is possible to settle the problem if we brainstorm the solution
together.

ARTICLE
 REFERENCES

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McGrawHill.

2. Prachi, M. (2019, May 10). Kaizen Costing. Retrieved from

https://theinvestorsbook.com/kaizen-costing.html

3. (“What is Kaizen”,2015). What is kaizen. Retrieved from

https://www.kanbanchi.com/what-is-kaizen

4. David, K. (2016, September 26). Toyota: an example of how to use Kaizen for
success. Retrieved from https://davidkigerinfo.wordpress.com/2016/09/26/toyota-an-
example-of-how-to-use-kaizen-for-success