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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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The term “Kaizen” is derived from the Japanese language, and refers to making small continuous improvements instead of major ones. Kaizen costing (or ‘continuous improvement costing') is a mechanism that consists of constantly introducing small incremental changes in an organization or business so that quality and efficiency can be improved over time.

This mechanism identifies employees as the best people to make room for improvement, since processes in action are observed all the time. Any firm that uses the Kaizen approach thus has to have an embodiment of a culture that incentivizes and encourages employees and workers for their contributions to the production process.

The primary objective of Kaizen costing is to lessen the actual costs of manufacturing a product to a point below the standard cost. Standard cost systems usually aim to achieve the cost standards set by the management whereas Kaizen costing systems are more concerned with reductions in the actual costs below the standard costs. Also, potential cost reductions are lower with Kaizen costing since the products are already in the manufacturing stage of their life cycles. By then, a major proportion of costs will have already become locked-in and become unredeemable.

Kaizen can operate at an individual level, or via Quality Circles and Kaizen Groups, which are groups of different sizes that are brought together specifically to identify potential improvements in the manufacturing stage. This mechanism is also compatible with working in teams or Cell Production, because improvements could be an important part of the team's main aims.


The important features of Kaizen costing include:

¥ Various, small changes are the basis for improvements rather than the massive radical changes that are bound to arise from the Research and Development sector.

¥ As the ideas are sourced from the workers themselves, there is a less likeliness for them to be extremely different, and thus become easier to implement as well

¥ Small improvements and changes are less likely to require huge amounts of capital and investment than more significant process changes

¥ The ideas are sourced from the talents and abilities of the existing workforce, drastically contrasting the usage of R&D, equipment or consultants – all of which are usually very expensive

¥ All employees involved should continually be looking for ways to improve their own performance or aid that of others

¥ It aids in encouraging workers to take responsibility for their contribution, and can help bolster team working, thereby also enhancing worker motivation


¥ Focus on customers: The Japanese Kaizen philosophy has only one primary objective of complete customer satisfaction. Kaizen permits no middle ground: it states that either you provide the best products which satisfy customers or not provide any at all. All the activities are aimed at providing customers with whatever they want and which help the firm in its long term objective of customer satisfaction, building up good relationship at the same time. It is an assumed responsibility of every person working for a Kaizen company to ensure that the product is up to the required norm and it satisfies customers' needs.

¥ Continuous improvements are made: There is no such term as a best way to do a thing, and there is always a better way. In a Kaizen company, similarly, the search for excellence is never ending. Work is done on the improvement implemented and ways are constantly found out for making it more effective

¥ Open acknowledgment of problems: There are certain problems which every company has that are related to competition, finance, change in demand, marketing, etc. Kaizen companies are no exception to these issues, but by fostering an appropriately constructive and supportive culture, it becomes easier for any team or group to get their problems in the open. The whole organization unifies as a team in order to solve the problem. These problems are openly shared with the employees and workers by the management which avoids spread of rumors

¥ Promotion of openness: In Kaizen companies, there is less functional ring fencing i.e. the senior managers and very senior executives have private cabins and workplaces. Otherwise, the workspace is generally open and in various companies the dress code and canteen for everyone is the same as well. This promotes an atmosphere of mutual respect and equality.

¥ Creation of work teams: Each individual belonging to Kaizen company is part of a work team supervised by a leader. Working in different overlapping teams draws employees towards corporate life culture and reinforces mutual understanding.

¥ Cross-functional teams: Kaizen assumes that no team or individual has all the required knowledge and skill to complete a task in the best way possible. Cross-functional teams thus assist in getting all the necessary valuable information from the point of view of all the differently related people. It calls for a smooth flow of ideas so that further improvements can be made.


As Kaizen consists of several minor improvements over time, it contrasts with the massive leaps seen in industrial standards when revolutionary new technologies or methods of production have been established. Over the years, the absolute volume of Kaizen improvements and developments can lead to significantly beneficial advances for a firm, however the management cannot afford to undermine the need for major changes from time to time. For instance, several UK service companies and manufacturers have found it essential to outsource processes to economically cheaper centres such as China and India – these changes would be highly unlikely to arise from Kaizen.

Whilst suggestions by the staff can aid in enriching the work for most employees, Kaizen can be seen as an unstoppable process. In some firms, teams and individuals are given a set period of time to come up with a certain number of ideas. Sadly, employees can sometimes find this to be an uninvited burden, as it can become increasingly difficult to identify further scope for improvement. Japanese-owned firms usually engage in conducting quality improvement sessions in the workers' own efficiency and time, which may lead to resentment among them unless there is a fitting recognition and reward for suggestions.

For Kaizen to make an impact there has to be an existing culture of harmony and trust between the staff and management, supported by a democratic framework and an optimistic, positive view of employees. Well established two-way communications and a non-hierarchical organisation would also support this approach (though it is practically impossible to not have a hierarchy in an organisation). Nevertheless, some workers may comprehend the demands as an unwanted burden rather than an inviting opportunity and hence, it can take a while to successfully embed Kaizen into the culture of an organisation.

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