Target and Kaizen Costing

from the Perspective of Competitive Advantage

by
Edwin B. Dean

Tanaka (1993) notes that "A manager in Europe or the United States generally expects to use cost information to make decisions about pricing or investments, while a Japanese manager expects to use cost information to control costs." Tanaka provides a rather insightful look into the cost planning at Toyota which is "an effort to reduce cost at the design stage."

Target costing, as used at Toyota, is a rigorous engineering process, which uses value engineering, to reduce the cost of their products.

Kaizen costing is a contining reduction of cost during production through the implementation of kaizen.

Design-to-cost, as used by the U.S. military community, is an attempt at target costing. However, lacking the rigor of Japanese cost planning, it falls far short of the mark.

Cost deployment, as used within quality function deployment, appears to be a means of allocating the cost targets to specific system components.

Target costing and kaizen costing are true forms of design for cost.

Sakurai (1989) provides an excellent introduction to target costing. Monden and Hamada (1991) provides a concise and definitive description of both target costing and kaizen costing. Monden, Y. (1995) provides a detailed view of target costing from a Japanese perspective. Ansari, Bell, and the Target Cost Core Group (1997) presents the recent research by the CAM-I Target Cost Core Group into target costing. Cooper and Slagmulder (1997) provides recent U.S. research into target costing, including value engineering.

References

• Ansari, S. L., J. Bell, and the Target Cost Core Group (1997). Target Costing: The Next Frontier in Strategic Cost Management, Irwin Professional Publishing, Chicago, IL, USA.
• Cooper, R. and R. Slagmulder (1997). Target Costing and Value Engineering, Productivity Press, Portland, OR, USA.
• Monden, Y. and K. Hamada (1991). "Target Costing and Kaizen Costing in Japanese Automobile Companies," Journal of Management Accounting Research, Vol. 3, Fall, pp. 16-34.
• Monden, Y. (1995). Cost Reduction Systems: Target Costing and Kaizen Costing, Productivity Press, Portland OR.
• Sakurai, M. (1989). "Target Costing and How to Use It," Cost Management, Summer, pp. 39-50.
• Tanaka, T. (1993). "Target Costing at Toyota," Cost Management, Spring, pp. 4-11.

Bibliographies

Target and Kaizen Costing Bibliography

Table of Contents | Cost Technologies | Use