One aspect of lean production that helps to save costs of stock is the just-in-time (JIT) principle.
Just-in-time means producing and supplying goods at the time they are needed.
This reduces costs and so helps to improve the return on investment for shareholders.
JIT also carries risks if the business has no stock it could be less able to cope if suppliers fail to deliver.
Monden has described two types of kaizen costing: Kaizen costing is applied to products that are already in production phase.
Prior to kaizen costing, when the products are under development phase, target costing is applied.
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This focuses on making small continuous improvements across all functions, systems and processes within a business. Continuous improvement contributes towards lean production. Lean production uses fewer resources more efficiently.
This increases productivity and can improve profitability.