1. KAIZEN COSTING: BOEING
Group No:8(Sec B)
Deepinder Singh
Advait Bhobe
Vineet kumar
Richanshu Verma
Kanumuri Rajashekhar
2. BOEING
The Boeing company is an American multinational
aerospace and defence corporation.
Founded in 1916 by William E. Boeing in Seattle,
Washington, the company has expanded over the
years, and merged with McDonnell Douglasin 1997.
A top U.S. exporter, the company supports airlines
and U.S. and allied government customers in 150
countries.
Its corporate office is in Chicago, Boeing employs
more than 170,000 people across the United States
and in 70 countries.
3. INTRODUCTION
In the past decade due to increasing global
competition US firms have radically changed
their manufacturing practices to improve their
competitiveness
Many firms are discovering that standard cost
systems are inadequate to identify costs
associated with modern manufacturing process
objectives.
4. KAIZEN COSTING
Kaizen costing is a method for ensuring that a
product meets or exceeds customer requirements
for quality, functionality, and prices to sustain
product competitiveness.
Standard costing systems focus on meeting cost
standards and avoiding unfavourable variances.
Kaizen costing, in contrast, stresses continuous
cost reductions
5. TARGET COSTING
Increased pressures within supply
chains, coupled with new pressures from capital
markets are forcing firms to adopt Japanese cost
management systems.
In Japanese firms, cost management is proactive
in planning, managing, and reducing costs.
Japanese firms believe the consumer will only
buy the product if the price is less than the
perceived value of the product.
6. Only two ways to make this happen—
increase the perceived value of the product
lower the price of the product by lowering the costs
required to produce it
The key to target costing is the principle in which
a product price is developed based on what the
market is willing to pay for it, not on what it
actually costs to produce the product.
7. The target cost with a customer price of 80 cents
and a profit margin of 20% becomes 64 cents
(0.80*0.20=0.16) and (0.80-0.16=0.64).
The target cost is then used to control design and
manufacturing costs.
Kaizen costing and value added analyses are
methods used to lower prices in the target costing
approach.
8.
9.
10. KAIZEN COSTING
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.
kaizen costing at the work cell group level is
subsequently established based on negotiation and
agreement between management and the work cell
11. KAIZEN COSTING
Once reduction targets are finalised, the work cell
has complete freedom in coming up with ways to
achieve these targets.
Interim results are measured after three months to
evaluate.
If the work cell fails to meet progressive targets, the
reasons are investigated.
Costs must be subsequently reduced in each
successive period in order to meet the target profit
12. KAIZEN COSTING
Target
finalized
Cost should be
Previous cost
reduced in
YES product use as
successive
baseline
periods
Ways to
achieve target
NO Investigate
13. KAIZEN COSTING
Key factors in successful implementation of
kaizen costing:
After the cost-reduction target is established, then
the work cell should be held accountable to these.
The kaizen process needs to be consistent and
repeatable.
14. VALUE ADDED SERVICES OF BOEING
Value-added analysis quantifies the level of waste
existing in a given production process.
Value added time is the time in the process
transforming materials into the product which adds
more value to the product.
Boeing has launched many products in the world in
the defense market.
Value Added Services is defined as the cost of
implementing product and process innovations,
technological flexibility provided Boeing with a
number of long term benefits.
Specifically, it made the design process more
efficient, reducing both the time it takes to create the
"blue print" for the aircraft and the number of errors
in its production.
15. This information is usually expressed in percentages
of a work cell’s time
Ideal situation is when non value added time is equal
to the lead time of product.
(e.g. 20% value added v. 80% non-value added time
for a given period). To begin the analysis, each
production activity must be studied & a
determination made as to whether or not it adds
value to the product.
Re-sampling is then performed at predetermined
intervals to track the change in proportion of value
added time.
As this process continues, the work cells becomes
more attuned to what non- value- added time is &
find it easier to come up with ways to eliminate waste
16. IRC(INTERIORS RESPONSIBILITY CENTRE)
Design and production responsibility of aircraft
interiors for the Boeing Commercial Airplane
Company.
Products include overhead stowage bins, ceiling
panels ,sidewall panels, class divider partitions
etc.
The production area was organised into product
groups broken out by stow bins, closets and
partitions, ceilings and sidewalls.
Two metrics are used to measure the work cells
in terms of financial performance.
hours per part (HPP)
budget v. actuals.
