Production Processes: Lean Production (Cambridge (CIE) IGCSE Business): Revision Note

Lean production techniques

• 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 inventory 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

1. Just-in-time inventory control

• Just-in-time (JIT) is a lean production technique where raw materials are not stored on-site but ordered as required and delivered by suppliers at the moment they are required for production

  • Close relationships with suppliers need to be developed to ensure reliable delivery and communication

  • Locating the business close to suppliers can reduce transport time and costs

2. 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) 

• 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

Evaluating the use of lean production

• Lean production has several advantages for businesses aiming to reduce waste and improve efficiency

• However, the initial implementation and ongoing monitoring of lean production has some significant drawbacks

Advantages of lean production

• Lean production helps to lower stockholding and storage costs

  • Just-in-Time (JIT) systems reduce the need to keep large amounts of inventory

  • Storage space can be used for more productive activities, such as extra work areas or machinery

• It encourages continuous improvement

  • Employees regularly suggest small changes that help reduce waste and improve quality

  • This process allows problems to be identified and solved early

• Employee motivation is likely to improve under lean production

  • Workers are encouraged to work in teams and take responsibility for improvements

  • Being involved in decision-making can make staff feel valued and more committed

• Lean production improves cash flow

  • Because less money is tied up in stock, more cash is available for other business needs

  • This can help the business invest in areas like marketing, training, or technology

• It can lead to fewer defects and higher product quality

  • Lean methods focus on doing things correctly the first time to avoid waste

  • This results in more efficient production and greater customer satisfaction

Disadvantages of lean production

• Lean production makes it harder to gain bulk buying discounts

  • Since businesses place smaller orders more often, they may pay more for components and raw materials, increasing unit costs

• It reduces the ability to respond quickly to unexpected increases in demand

  • With little or no stock kept in reserve, businesses may miss sales opportunities

  • This can lead to dissatisfied customers or a damaged reputation

• The system depends heavily on reliable suppliers

  • If a delivery is late or poor in quality, production may come to a complete stop

  • Businesses must develop strong and dependable supplier relationships

• Introducing lean production can be costly and disruptive

  • It often requires big changes to the organisational structure and workflow

  • Employees may need extra training, which takes time and money

• There are increased administrative costs due to frequent ordering

  • Managing more orders creates extra paperwork and workload for staff

  • This can raise overall office and back-office expenses