Kaizen Costing and Target Costing – Essay Example

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Daimler Chrysler had been operating under five cross functional teams. These were focused on large cars, small cars, mini-vans, trucks and jeeps. The team involved was cross functional and included people from various genres such as design engineering, manufacturing engineering, purchasing, finance, marketing, production and procurement. The applied target cost method system had to determine had to determine cost objectives of each time. Daimler Chrysler used a tool box which focused on management initiatives to improve productivity and reduce costs. The tool box incorporated value engineering, manufacturing design, paper kaizen and lean manufacturing.

The initiative was implemented through a number of workshops that consisted of various multi-functional times. The workshops were brain storming sessions where aspiring participants participated, brainstormed, trouble shooted and generally tried to solve problems. The Value Engineering Analysis component aimed at increasing the value of the product offered by Daimler Chrysler by working on designs. The main focus was to ensure that the new design benefits outweighed the costs of implementing it. In the Design for Manufacturing Assembly, the design effectiveness against assembly operations was evaluated.

One aim could be reduce the number of vehicle components to as little as possible and to simply assembly processes. As a result less assembly errors would follow and simpler vehicles. Lean manufacturing takes place after the product has been launched as practiced at Daimler Chrysler. It extends beyond the scope of the company and aims to reduce set up times and un-necessary inventory movement. Customer inputs are frequently taken in before they implement any new design innovation. It is first figured out if they will even pay for the new design.

An approach which is somewhat on the same lines is also followed at Caterpillar. They first put in place their tools associated with target costing and then develop a standardized approach for achieving their target costing objectives. Let’s explore how they do it. For instance, the target cost of a particular vehicle is set to be at 94.6%. This gives them an initial gap of 5.4%. The cost of the comparable model is specified on the basis of the current manufacturing capabilities of the company. Thus it’s obvious that to reduce target costs, they must be decreased by 5.4%.

(Cost of the model is 94.6% and cost of the product is 5.4%) This is followed by the establishment of a cost improvement team that works on to improve product design, manufacturing engineering, marketing products and devises various ways to narrow down the gap.

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