Principles of Lean Production (Edexcel IGCSE Business)

Introduction to 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

  • High quality output is likely as a result of supplier reliability and carefully managed production processes

  • The result should be increased profit margins

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

Just-in-time (JIT) Stock Management

• 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 
    
    

• Just-in-time is particularly useful for businesses that operate in dynamic markets

  • Products may need frequent design changes that require different components 

    • Holding large amounts of stock risks wastage through obsolescence
      
      

  • Where significant competition exists lean production can ensure a high level of quality to achieve a competitive advantage
    
    

The Advantages & Disadvantages of Just in Time Stock Management

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 and always focused on meeting customers' needs
    
    

• Kaizen requires a long-term cultural and management commitment to change

  • All workers must be actively involved in making improvements, not just management

  • Ongoing training and development is vital

Diagram: The Impact of Kaizen on Productivity over time

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
    

    • Employees are likely to work in teams and be empowered to work creatively
      
      

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

The Importance of Using Resources Effectively

• Lean production is focused on the effective use of resources and, in particular, the elimination of waste throughout the business

  • Waste refers to anything that prevents a business from being efficient

  • Seven key types of waste are minimised in lean production 
    

Diagram: The Seven Wastes

Lean production involves the reduction of all types of waste

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
   

• Eliminating waste has several benefits

Benefits of Reducing Waste