Operational Strategies: Lean Production

Lean production: the adoption of techniques that help to reduce waste

There are a range of techniques available and businesses will need to assess the technique or range of techniques available and businesses will need to assess the technique or range of techniques which will allow them to act at optimum efficiency.

These techniques include just- in – time, kaizen and time based management. 

Just in time (JIT): a lean production technique which aims to minimise stock holdings

Materials are delivered as required

The time stock spends as work in progress in minimised as is the holding of finished product.

Result is a reduction in costs due to less physical need to hold and handle stock, such as insurance.

It does take time and money to introduce- systems have to be reviewed, new systems introduced, possible staff trained and often investment in better IT systems.

JIT also carries with it risk, particularly if the supply chain is long, complex or susceptible to interruptions, for example if importing from abroad. 

Kaizen: a lean production technique which aims to improve efficiency by making small but frequent improvements, also known as continual improvement.

Requires the commitment and involvement of all staff as the improvement can come from any stage or level

All employees must be empowered with the ability to spot opportunities and make recommendations for improvement

It recognises that employees are often best placed to make suggestions for small scale improvements

Provides motivation for the employee who is consulted more and given the opportunity to improve the efficiency of not only their own working practises but potentially the organisation as a whole

Small but regular improvements generated through a culture of enterprise and initiatives are easier to implement than large irregular changes.

Greater efficiency and competitiveness.

 

Time based management: managing resources effectively to ensure products are fit for market in the shortest time possible.

Aims to reduce waste

Focus is on reducing time wasted or unproductive time to improve efficiency.

Staff must be trained and able to perform a number of tasks, as flexibility is key

Benefits- quicker time to market new products, shorter lead times and an improved ability to respond to changes in market conditions and consumer tastes. 

Critical path analysis (CPA): a technique for planning complex projects to allow them to be completed in the shortest time possible by identifying activities that can be carried out simultaneously.  

Uses network diagrams-

Critical path network: a visual representation of the sequencing and timing of all the activities involved in completing a complex project.

Has a wide range of possible applications within a business, including:

·         A marketing campaign

·         Launch of a new product

·         Opening a new store

·         Relocating a business

·         Automating the production process

The key to CPA is for managers o be able to identify which activities are dependent upon the completion of earlier activity.

This allows for the planning of activities to be carried out simultaneously

Nodes are drawn to show the earliest each activity can be started and the latest it must be completed by in order not to delay the completion of whole project.

Each node shows three numbers

·         The number of the node- represents the order in which it was drawn

·         The earliest start time- the earliest the next activity can start

·         The latest finish time- the time by which the previous activity must be completed.

The critical path is identified as those activities that must be finished at an exact time to allow for the next activity to be started on time

Activities along the critical path, known as critical activities are said to have no float time,

Float time is calculated as:

Float time= latest finish time-duration-earliest start time. 

Forces management to think through and plan for complex project before undertaking it

Identify the shortest time period in which a project can be completed, shortening the time from conception to implementation

Can be used as a planning and monitoring tool as well as to aid decision making.

May be beneficial to see which store/ or product can be launched quicker in order to start generating cash inflows.

Helps with the implementation of JIT as the EST of an activity would indicate when materials would be needed.

Also allows managers to allocate resources more effectively. Staff can be allocated to set tasks or redeployed to focus on critical activities to ensure a project is not delayed.

Motivational as provides clear targets

Also a tool from which to monitor and review progress

Help in financial planning as will indicate when more money will be needed to fund certain parts of a project- more accurate budgeting and cash flow forecasting. 

Based on estimates so its reliability is dependent on the accuracy of the estimates

However, still useful is closely monitored and appropriate corrective action taken

May need to be altered and updated on an ongoing basis as a project develops.