Kaizen costing activities focus on continual small incremental product cost improvements
in the manufacturing phase, as opposed to improvements in the design and
development phase. In kaizen costing, management will set the cost reduction targets
for the product. In Boeing, for example, the overall cost reduction for the division
is set during a six-month time interval. Then, kaizen costing at the work cell group
level is subsequently established based on negotiation and agreement between management
and the work cell. Once reduction targets are finalised, the work cell has
complete freedom in coming up with ways to achieve these targets. Generally, the
only product costs considered are those directly controllable by the shop floor.
Interim results are measured after three months to evaluate if the work cell has
progressed toward achieving its target.