Synchronous Manufacturing: In an all-encompassing management philosophy which includes a set of principles, procedures and techniques where every action is evaluated in terms of common goals of the organization.
The seven principles are:
- Focus on synchronizing the production flow than on idle capacities.
- Value of time at a bottleneck resource is equal to the throughout rate of products processed by the bottleneck.
- Value of time at a non-bottleneck resource is negligible.
- Level of utilization of a non-bottleneck resource is controlled by other
constraints within the system.
- Resources must be utilized, not simply activated.
- Transfer batch should not be equal to process batch
- A process batch should be variable both along its route and overtime.
In Value Chain analysis, business activities are classified into primary activities and support activities.
Primary Activity/Support Activity
||Order processing and distribution
||Installation, repair and parts replacement
||Purchase of raw material and other consumable stores
||Transforming inputs into final products
||Selection, promotion, appraisal and employee relations
||Material handling and warehousing
||General management, planning, finance, accounting
||Communication, pricing and channel management
Students who are appearing for Advanced Management Accounting in CA, CS, CMA & MBA Finance may use these formulae for their preparations. Click on the links below to download:
In India Maruti-Suzuki is following kaizen costing.
Source: KAIZEN COSTING FOR CA FINAL STUDENTS
Kaizen costing is a cost reduction approach popular in Japan and now having global implication is explained below.
It is a cost reduction process which aims continuous improvement in manufacturing process. It sets monthly cost reduction target and try to get a target profit based on monthly basis and ultimately achieves annual cost reduction. It was first applied by a Japanese car manufacturer Daihatsu where six plans were involve:
Plan 1- Production, distribution, and Sales Plan(which includes projections of contribution margins from sales).
Plan 2- Projected parts and Materials Costs.
Plan 3– Plant Rationalization Plan(projected reductions in manufacturing variable costs).
Plan 4- Personnel Plan(for direct labor work force and service department personnel).
Plan 5- Facility Investment Plan (capital budget and depreciation).
Plan 6- Fixed Expense Plan(for prototype design costs, maintenance costs, advertising and sales promotion expenses, and general and administrative expenses).
Above six steps become the target profit basis. It aims to reduce both fixed cost and variable cost on the systematic basis on the monthly mode. Prior year data becomes the basis in both type of the cost. Reduction rate adjustment is done based on the target price. It allows management to decide the future cost reduction strategy.