Section b group8 (1)

KAIZEN COSTING: BOEING

Group No:8(Sec B)Deepinder Singh

Advait Bhobe

Vineet kumar

Richanshu Verma

Kanumuri Rajashekhar

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.

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.

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

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.

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.

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.

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

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

KAIZEN COSTING

Target finalized

Ways to achieve target

YESPrevious cost product use as baseline

Cost should be reduced in

successive periods

NO Investigate

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.

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.

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

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.

THANK YOU !