Cindi James, the manager in charge of a general store at a favourite summer holiday location, has launched a kaizen costing program to reduce operating costs by applying JIT concepts. She expects the program to reduce costs by at least 15% throughout the summer season. Information for the first two months of the program and estimated cost savings for the next two months follows.

Required

A. Calculate the percent change in costs, and determine whether the kaizen cost goal is likely to be met.

B. Identify two possible quality problems that could arise from the planned changes to operations.

C. To meet the labour savings estimate, sales staff will be scheduled on split-shifts (i.e., some sales people will work the busy morning rush, go home for a few hours, and then return to work the evening rush). Discuss the qualitative issues that should be considered for this cost savings measure. (Note: Split-shifts are legal.)

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Actual Cost Last 2 Months Estimated Cost Next 2 Months Ordering costs-place more orders on-line; work with suppliers to have an integrated ordering system Supplies costs-reassess approved vendor list; work with suppliers to have supplies delivered as needed Labour costs-more efficient scheduling of sales staff $ 2,000 $ 1,500 $ 5,000 $4,250 $32,000 $27,500