2.3.3 Efficiency and competitiveness using lean production

Question 1

Efficiency

Answer 1

Means organising production so that waste is minimised and costs are the lowest possible

Question 2

Lean production

Answer 2

Systems of production that aim to minimise waste and cut costs at every stage of production and distribution

Question 3

Quality control

Answer 3

Traditional method of checking that products are of an adequate standard

Question 4

Quality assurance

Answer 4

Ensuring that quality standards are agreed and met throughout the organisation

Question 5

Total quality management

Answer 5

Employees are all involved in quality control and take responsibility for the quality of their and their teams work → reduce costly wastage but also reinforces employee motivation

Question 6

Kaizen

Answer 6

Continuous movement, everyone involved in search for improvements to product and process of production

Question 7

what is lean production

Answer 7

• Aims to reduce the quantity of resources used in production (factory space, materials, stocks)
• Becoming more efficient and responsive to market needs
• Flexible: eliminates waste and working on continuous improvement
• Needs excellent communication, constant looking for product improvements
• Focus on quality → defective products reduced, lead times are cut and reliability improves
• Cut out or minimise activities that do not add value (holding stock, repairing faulty products and unnecessary moving of people and products)
• Helps firms gain competitive advantage through lower costs, as waste is reduced

Question 8

quality control

Answer 8

• In a competitive market quality can be an important source of competitive advantage
• Consumers may prefer better quality products over those of rivals
• Business may be able to charge a higher price and gain increased profits
• Improved quality means less wastage and therefore reduced costs → improves profitability
• Reliable quality is an important element in branding

Question 9

drawbacks of quality control

Answer 9

• It does not identify the cause of the defect or find every faulty product
• It is expensive in terms of implementation and wastage of stock
• It does not add value

Question 10

quality assurance

Answer 10

• More thorough, improves quality throughout the production process -> implies a commitment to collaboration between everyone responsible for design production and marketing
• Involves working together towards improving quality and reliability at each stage of production
• Putting in place systems that require high standards at each stage of production
• Organising employees in teams that can collaborate and take responsibility for quality issues
• Changing the corporate culture of a business, so that all employees can see quality as a high priority that influences all aspects of their work and feel involves and committed
• Focus on prevention of defects rather than just checking for those that happened —> zero defects policies, so that wastage was minimised, reducing costs
• Developing kaizen and total quality management

Question 11

total quality management

Answer 11

• Includes all sectors in a firm
• Each department is aware of others needs and striuves to improve the quality of their production stage
• Drive towards quality and reliability is in whole production process
• Committed leadership
• Employee empowerment
• Increased training
• Kaizen and quality circles
• Close relationships with customers, determination to meet their needs
• Closer relationships with suppliers, raising the quality of inputs

Question 12

benefits of TQM

Answer 12

• Improved products and services
• Reduced costs
• Increased customer satisfaction
• Repeat purchases and brand loyalty
• Improved profitability
• competitive advantage
• Motivated workforce

Question 13

drawbacks of TQM

Answer 13

• Implementation costs
• Takes time to set up
• Retraining of employees
• Increased pressure on management
• May be difficult to involve staff
  Does not suit all businesses

Question 14

just in time manufacturing

what is essential for it to work and what are the benefits

Answer 14

• Reduces theneed for high levels of stock and freed up resources → improving efficiency as less expenses used on storage
• Average costs reduced, become more competitive
• Materials arrive just before they will be needed and only the exact quantity required is ordered
• No buffer stocks are held, so supplies must arrive promptly and there must be no problems with the order
• Requires accurate, open and continuous and honest communication with suppliers, high levels of organisation and reliable suppliers
• Involves having close relationships with suppliers and the producers
• Stock control especially important for supermarkets and large retailers who carry a large range of stock, turning over at different speeds

Question 15

advantages of JIT

Answer 15

• Improves cash flow as money is not tied up in stocks
• Reduces waste, obsolete and damages stock
• More factory space is available for productive use
• Stockholding reduces costs significantly
• Supplier base is reduced
• More integration with computerised systems
• Motivation of the workers improves as often linked with team working and more responsibility

Question 16

Disadvantages of JIT

Answer 16

• Relies on reliable and flexible suppliers, often out of your control
• Increased ordering and admin costs
• Advantages gained through bulk buying is lost
• Vulnerable to breaks in supply or machinery breakdowns
• Difficulty in reacting to sharp increases in demand
• Loss of reputation if customers are let down by late deliveries

Question 17

Kanban

Answer 17

• Japanese
• Controls the transfer of materials between different stages of production
• Only make the quantity needed for the next stage of production
• Firm can be more market orientated, allowing production to be driven by the pattern of consumer demand → more responsive a firm is to changes means the more profit can be made
• Instead of production pushing output towards the market, the market pulls output through production

Question 18

kaizen

Answer 18

• Approach of constantly introducing small incremental changes in a business in order to improve quality/efficiency instead of radical changes brought about by R+D
• Assumes that employees are the best people to identify room for improvement, since they see the processes in action all the time
• Firm that uses this approach therefore has to have a culture that encourages and rewards employees for their contribution to the process

Key features:
- Ideas come from workers themselves, so are less likely to be radically different and therefore easier to implement
- Small changes do not usually need major capital investment
- Ideas come from workforce talents, not consultants and equipment of R+D, avoiding costs
- All employees are continuingly finding ways to improve their own performance
- Helps encourage workers to take ownership of their work and can help reinforce team working, improving worker motivation

Question 19

drawbacks of kaizen

Answer 19

• Radical change is still needed from time to time
• Unrelenting → pressure for new ideas, focus on quality improvement can be exhausting and time consuming
• Communication is key first

Question 20

competitive advantage from lean production

Answer 20

• Improved quality means more satisfied consumers
• Reduced costs of production lead to possibility of reduced prices or increased profit margins
• JIT, reduces costs of storing unsold goods
• Cuts costs and waste to ensure the business is not left with unwanted stock

Question 21

advantages of lean production

Answer 21

• Reduces wastage and related costs
• Reduces costs of storage and handling
• Improves quality
• Fewer reject costs
• Customers more satisfied with quality
• Greater flexibility
• Shorter lead times
• More motivate staff, less turnover
• No waste caused by unsold output

Question 22

disadvantages of lean production

Answer 22

• Does not suit all production processes
• Failure by one small supplier may halt entire production process
• Some employees may not want more responsibility
• Managers may not be flexible enough
• May not be able to meet unexpected orders