Definition: Continuous improvement is the managerial accounting concept of requiring people at every level in the organization to constantly be looking for ways to increase efficiency, effectiveness, and profitability. In other words, it’s the idea that both managers and employees should continually focus on ways that the company can improve every facet of its business.
What Does Continuous Improvement Mean?
The concept of continuous improvement disregards the idea that products and operations can be “good enough.” There is no such thing as good enough in an organization that is constantly getting better and looking for ways that it can improve.
Example
Cost and managerial accountants consider the concept of continual improvement to be a lean practice because it encourages managers and employees to find ways to cut excess costs and operations. Most businesses that adopt and support the philosophy of constant progress eventually end up using a total quality management system and a just-in-time manufacturing or inventory system because these systems reduce idle time and costs at almost all stages of manufacturing and selling.
Total quality management focuses on improving the quality of all aspects of the business. This concept includes both products and business processes. For example, a might strive to make a higher quality product, so customers will be more pleased. They might also strive to have a higher quality assembly line and production process, so they can minimize defects and reduce waste.
Just-in-time manufacturing and inventory systems are used to eliminate wasteful storage, purchasing, and reduce theft. These systems are designed to cut costs by only manufacturing or purchasing inventory based on customer orders. Thus no extras are ordered and need to be stored.
As you can see, both of these processes are firmly rooted in the idea of continual improvement where management and employees are encouraged to experiment with new ideas that could improve the company’s processes.
