1. Kaizen Costing is a cost reduction system.

2. Yashihuro Moden defines Kaizen Costing as “the maintenance of present

cost levels for products currently being manufactured via systematic efforts
to achieve the desired cost level.
3. Kaizen Costing also maybe simply as continuous improvement at the same
time in focus on cost reduction.
4. Every firm aims to achieve customer satisfaction whereby there are
significant importance to provide customer need and their expectation.
5. Therefore, the company need to ensure the product that supply to customer
have higher quality.
6. Other than that, every company want to reduce their production cost while
still maintaining their quality of product.
7. This can be done by eliminating non value added activities or costs.
8. When there are lower cost of production, the company may supply their
product at lower selling price.
9. Therefore, it will attract existing and potential customer to buy their product
that meet their satisfaction.
10. Hence, there are higher demand for the product then resulted higher
competitiveness and sustainability in the market.
11. As conclusion, Kaizen which can be simply low cost and people focused on
to continuously enhance the firm capabilities, productivity and quality that
can be considered as major competitive resources.
Advantages of LCC
Firstly the advantages of LCC is improved awareness.

 LCC can be improved awareness of total costs, this application provides

management with an improved awareness of the factors that drive costs
and the resources required by the purchase.
 It is important to identify the cost driver because most management effort
is applied to the most effective areas of the purchase.
 Furthermore, awareness of the cost drives will also highlight in existing
items which would benefit from the involvement of management.
Secondly, improved forecasting

 Application of LCC techniques allows the full cost associated with a

procurement to be estimated more accurately
 Therefore, it can enhance decision making at all levels, for example
investment decision or the establishment of cost effective support
policies.
 Additionally, LCC analysis allows more accurate forecasting of future
expenditure to be applied to long term costing assessment.
 For example, it takes into account the initial capital costs, repairs,
running and replacements costs and expresses these in comparable
terms.
Thirdly, performance trade-off against cost.

 In purchasing decision cost there are not the only factor to be considered
when assessing the options.
 There are other factors such as overall fit against the requirement and the
quality of the goods and the levels of service to be provided.
 LCC analysis allows for a cost trade-off to be made against the varying
attributes of the purchasing options.
ENVIRONMENTAL COSTS

1. PREVENTION COSTS
 The costs that incurred to reduce or minimize the number of defects
at first place.
 It much better to prevent defect rather than finding/ removing them
from products.
 These costs associated with the design, implementation and
maintenance of the quality of management system.
 For example, there are need workers training for car services that
provide development skill, preparation and maintenance program.
2. APPRAISAL COSTS
 Also known as inspection costs that associated with the measuring
and monitoring activities related to quality.
 These costs are associated with the suppliers and customer
evaluation of services to ensure they are conform to specifications.
 For example, quality audit the confirmation that the quality of car
service is functionally well.
 Supervision of testing and inspecting activities
3. INTERNAL FAILURE COSTS
 Costs incurred to remedy defects discovered before the service is
delivered to customers.
 These costs occur when the result of work fail to reach specific quality
standard and are detected before transferred to the customer.
 For example, waste performance of unnecessary work as a result of
errors, poor organization or communication.
4. External failure costs
 Costs incurred to remedy defects that discovered by customer.
 These costs occur when the services provided fail to reach specific
quality standard are not detected until transfer to the customer.
 For example, complaints. All work and costs associated with handling
and servicing customer’s complaints.