Lean production is an approach to management which focuses on cutting out waste while ensuring quality levels are still met. It can be applied to all aspects of a business.
In A Nutshell
- Doing simple things well
- Doing things better
- Involving employees in the continuous process of improvement
- Avoiding waste so therefore reducing costs - greater efficiency
- Waste = costs
Examples Of Waste In A Business
- Over production - Making more than needed leading to excess inventories which could become unsaleable.
- Waiting time - Equipment and people standing idle waiting for a production process to be completed or resources to arrive.
- Transport - Moving resources around unnecessarily.
- Stocks - Usually held as an acceptable buffer but should not be excessive.
- Motion - Worker who appears busy but is not actually adding any value.
- Defects - Output that doesn't reach the required quality standard which can be a significant cost to an uncompetitive business.
Effective Lean Production Requires
- Good relations with suppliers
- Committed, skilled and motivated employees
- A culture of quality assurance, continuous improvement and willingness to embrace change
- Trust between management and employees
Recognises the importance of time and seeks to reduce the level of wasted time in the production process of a business.
Benefits of Time-Based Management
- Faster response times to meet changing market and customer needs
- Faster new product development
- Reduction in waste which enables greater efficiency
Requirements for Time-Based Management
- Flexible production methods:
- Ability to change products quickly
- Ability to change production volumes / runs
- Trained employees:
- Mulit-skilled staff
- Trust between workers and managers
Helps firms develop and launch new products more quickly. All parts of the project are planned together with everything considered simultaneously.
Benefits of Simultaneous Engineering
- New products are brought to the market much more quickly
- Businesses could charge a premium price leading to a higher profit margin and help recoup research and development costs
- A better sense of involvement across business functions improves staff commitment to the project
- Competitive advantage if it can bring a reliable new product onto the market with brand loyalty before its competitors
Form of team working where production processes are split into cells with each cell responsible for a complete unit of work.
Benefits of Cell Production
- Closeness of cell members should improve communication
- Workers will become more multi-skilled and adapted to business needs
- Greater motivation from responsiblity
- Quality improvements as each cell has "ownership" for quality in its particular area
Drawbacks of Cell Production
- Culture needs to embrace trust and participation or workers may feel they are being pushed for more output with no respite
- May need to invest in new materials handling and ordering systems suitable for cell production
- May not allow a firm to use machinery as intensively as in traditional flow production
- Small scale production lines may not yield enough savings to make a switch to cell production worthwhile
- Allocation of work needs to be efficient so they have enough work but not so much to make them unable to cope
Aims to ensure inputs in the production process only arrive when needed.
How JIT Works
- Uses a "pull" system of production - customer orders determine what is produced and so what supplies are ordered.
- Uses complex production scheduling using specialist software to connect the production department with suppliers.
- Supplies delivered to production line only when needed.
- Needs close cooperation with high quality and reliable suppliers.
Benefits of JIT
- Lower stock holding means reduction in storage spaces which means less rent and insurance costs
- Stock only obtained when needed so less wasted capital tied up in unused stock
- Less likihood of stock perishing, becoming obsolete or out of date
- Less time spent checking and re-working production as emphasis spent getting it right first time
Drawbacks of JIT
- Little room for mistakes as little stock kept for re-working faulty products
- Highly reliant on suppliers and whole production schedule can be delayed due to late deliveries
- No spare finished product available to meet unexpected orders as all products are made to meet actual orders
- Requires complex, specialist stock systems
- Continuous improvement - Involved employees at all levels working together to efficiently improve areas of the company.
- Often used in healthcare and banking sectors.
- Worker-led method.
- Workers know best about the production process so know what is best for the company.
- Diminished returns likely - As time progresses, may run out of things to improve.
- Marginal gains - Tiny improvements over time create a big improvement overall.