The Concept of Lean Production (Cambridge International IGCSE Business)

Lean Production

Spec point — • The concept of lean production: how to achieve it, e.g. just-in-time inventory control and Kaizen; benefits of lean production

• Lean production involves the minimisation of the resources used in production

  • Less time is required as the production process is organised in the most efficient way
  • Fewer materials are used as there is a focus on waste reduction
  • Less labour is used as lean production is typically capital intensive
  • The space required for production is reduced as a result of just in time stock management
  • A small number of trusted suppliers work closely with the business

• The use of lean production is likely to lead to a competitive advantage

  • Lower unit costs are achieved due to minimal wastage so prices may be lower than those offered by competitors
  • Better quality of output is likely as a result of supplier reliability and carefully managed production processes

• Lean production uses strategies such as Just in Time stock control and Kaizen

Just in time stock control

• Just in Time (JIT) stock management is a process in which raw materials are not stored onsite but ordered as required and delivered by suppliers 'just in time' for production

• Careful coordination is required to ensure that raw materials and components are delivered by suppliers at the moment that they are to be used

  • Close relationships with suppliers need to be developed
  • Suppliers may need to be in close proximity

Evaluating the use of just in time stock management

Continuous improvement (Kaizen)

• Kaizen involves taking continuous steps to improve productivity through the elimination of all types of waste in the production process

  • Changes are small and ongoing rather than significant one-off’s
  • They are constantly reviewed to ensure that they achieve the desired positive impact on productivity
  • Kaizen requires a long-term management commitment to change

Kaizen (continuous improvement)

Kaizen Versus One-off Improvements

• Elements of Kaizen commonly include

  • Zero defects in manufacturing
  • High levels of automation
  • High levels of cooperation between workers and management

• Staff training and computer inventory management systems may also reduce wastage as fewer errors are likely to be made

The Benefits of Lean Production

• Lean production leads to the following benefits for a business:

  1. Right first time approach
  • Aims for zero defects in output
  • Identifies and solves problems as they arise
  • Prevent rather than corrects errors
  1. Flexibility
  • Multiskilled staff and team working
  • Flexible management styles
  1. Waste Minimisation
  • Removes processes that do not contribute to added value
  • Consumes as little as is necessary
  1. Effective supply chain management
  • Develop excellent relationships with suppliers
  • Minimal number of suppliers
  1. Continuous improvement
  • Ongoing, small steps
  • All staff involved in improvement

The seven wastes eliminated in lean production

• Waste refers to anything that prevents a business from being efficient
• Seven key types of waste are minimised in lean production:

1. Transportation: Unnecessary movement of materials or products
2. Inventory: Excess raw materials, work-in-progress, or finished goods
3. Motion: Unnecessary movement of people or equipment
4. Waiting: Delays or idle time in the production process
5. Overproduction: Producing more than what is required by the customer
6. Overprocessing: Using more resources than necessary to produce a product
7. Defects: Products or services that do not meet customer requirements