The Concept of Lean Production (CIE IGCSE Business)

• 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 
    
    

The Advantages and Disadvantages of Just in Time Stock Management

Advantages	Disadvantages
Stockholding costs including storage costs are minimised Close working relationships are developed with a small number of trusted suppliers Cash flow is improved as money is not tied up in stocks Unused storage space is available for productive use Teamwork is encouraged so employee motivation is likely to be improved	Bulk buying economies of scale  are not generally possible The ability to respond to unexpected increases in demand is reduced Administrative costs related to frequent ordering are increased Unreliable suppliers (e.g. late or poor quality deliveries) can quickly halt production Significant changes to organisational structure  and production controls are required

Continuous Improvement (Kaizen)

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

• Lean production leads to the following benefits for a business
  • Right first time approach
    • Aims for zero defects in output
    • Identifies and solves problems as they arise
    • Prevent rather than corrects errors
  • Flexibility
    
    • Multiskilled staff and team working
    • Flexible management styles
  • Waste Minimisation
    • Removes processes that do not contribute to added value
    • Consumes as little as is necessary
  • Effective supply chain management
    • Develop excellent relationships with suppliers
    • Minimal number of suppliers
  • 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. 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