Kaizen and TQM

ACCA P5 Advance Performance Management


Kaizen costing means

Incremental (small steps at a time)

Improvement (in performance and quality)

Every-time (continuous improving),

Everywhere (every single process) and

Everyone (active participation by everyone)

Under Kaizen costing cost reduction targets are set on a regular basis and variance analysis is carried out at end of each period to compare target cost reduction with actual cost.

In increasing cost efficiency it focus on waste minimization and elimination of:

Ø  Overproduction: produce goods just to keep in stock

Ø  Inventory holding: purchase of unnecessary inventory

Ø  Waiting time: production delay and idle time

Ø  Defective units: products or parts which require rework

Ø  Motion:

Ø  Transportation:

Ø  Over-processing: non-value adding activities

Kaizen concept can be used as a basis for TQM.

Total Quality Management (TQM)

TQM is a philosophy which aims to get things right first time, removal of waste and continuous improvement. This contrasts with the traditional approach that less than 100% quality is acceptable. It involves both prevention of errors before they occur, and ‘total quality’ in the design of products, services and systems. TQM will result in Type 1 (cost of conformance) cost but Type 2 (cost of non-conformance) cost will fall to a greater extent.

TQM means that everyone in the value chain is involved in the process including employees, suppliers and customers. TQM gives everyone in the organisation responsibility for quality at every stage of production (real and active participation by all), from the initial design stages to after sales service. If a problem is detected during any stage of production process, it is solved by that person, before it affects subsequent production stages. Therefore, problems are eliminated before they impact on the final customer.

TQM is not a one off process, but is a continuous improvement process. TQM improves quality, save costs by reduction of waste, increase productivity and results competitive advantage.

Performance measures for Kaizen and TQM

Ø  Target – analyze cost gap – operating in demand pull market

Ø  Standard costing - Variance analysis

Ø  Life cycle costing - Variable Cost reduction – acknowledges costs are incurred before product is made and sold and is conceived until last unit is sold.

Ø  Waste reduction

Ø  Benchmark

CIMA Article: Quality Control 

CIMA Article: Kaizen Costing