Lean production:

Question 1

What is lean production?

Answer 1

• Lean production is a management philosophy that aims to maximise output while minimising waste
• It focuses on maximising efficiency, improving quality and reducing costs

Question 2

How will lean production likely lead to a competitive advantage?

Answer 2

• 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

Question 3

What are the main principles of lean production?

Answer 3

• Right first time
• Flexibility
• Minimal waste
• Supply chains
• Continuous improvement

Question 4

What is a right-first-time approach?

Answer 4

• Aim for zero defects in output
• Identify and solve problems as they arise
• Prevent rather than correct errors

Question 5

What is flexibility?

Answer 5

• Adaptable capital equipment and physical resources
• Multiskilled staff and teamwork
• Flexible management styles

Question 6

What is waste minimisation?

Answer 6

• Remove processes that do not contribute to added value
• Consume as little as is necessary
• Rework rather than replace

Question 7

What is effective supply chain management?

Answer 7

• Develop excellent relationships with suppliers
• Minimal number of suppliers

Question 8

What is continuous improvement?

Answer 8

• Ongoing, small steps to improve processes
• All staff are involved in improvement, not just those employed in quality management

Question 9

What is a just-in-time approach?

Answer 9

• The just-in-time (JIT) approach is where raw materials and components are ordered as required and delivered “just in time” to be used in production
• Raw materials and components are ordered from a small number of trusted key suppliers just before they are to be used

Question 10

What qualities must businesses using a just-in-time approach have?

Answer 10

• Close, long-term relationships with these suppliers need to be developed
• Many businesses using JIT inventory management systems aim to source raw materials and components from local or regional suppliers
• They must be flexible and reliable
• They may be required to hold inventory on behalf of a JIT-operating customer
• They are often in close proximity to their key JIT-operating customer

Question 11

What are the advantages of a just-in-time approach?

Answer 11

• Stockholding costs, including storage rental and security, are minimised
• Inventory and finished goods are less likely to be damaged in storage
• Close working relationships are developed with a small number of trusted suppliers
• Cash flow is improved, as money that is not tied up in stocks can be put to other uses
• Unused storage space is available for productive use or can be disposed of

Question 12

What are the disadvantages of a just-in-time approach?

Answer 12

• Bulk buying economies of scale are not generally possible
• Unable to respond to unexpected increases in demand without precise forecasting of demand
• High administration costs due to frequent ordering of stock
• Unreliable suppliers (e.g. late or poor-quality deliveries) can quickly halt production
• External factors can delay delivery of stock, e.g. increased border checks on imported goods since Brexit

Question 13

What is a just-in-case approach?

Answer 13

• Just-in-case inventory management involves a business holding a quantity of raw materials, components or finished goods as buffer stock
• Stock is held in case of shortages so as to provide a competitive edge over rivals unable to meet demand

Question 14

What are the advantages of using the just-in-case approach?

Answer 14

• Buffer stocks ensure a stable supply of goods, allowing a business to respond to increases in demand
• Extreme price fluctuations due to shortages of inventory can be avoided
• Businesses that are dependent on particular raw materials avoid supply disruption
• Businesses with a regular supply gain a reputation for always being able to meet customers’ needs

Question 15

What are the disadvantages?

Answer 15

• Holding buffer stocks can be expensive, as it requires storage facilities and inventory management systems
• Buffer stocks can become obsolete if the demand for a particular product or input declines
• Holding buffer stocks ties up cash that could be invested in other areas of the business

Question 16

What changes need to be made to the processes of a business if it decides to use lean production?

Answer 16

• Work is reorganised into smooth, straight-line flows
• Just-in-time deliveries cut inventory rooms
• Right-first-time checks stop faults early
• Small, regular improvements (Kaizen) are built in

Question 17

What changes need to be made to the structure of a business if it decides to use lean production?

Answer 17

• Layers of management are reduced, so problems travel quickly from the shop floor to key decision-makers
• Cross‑functional teams replace separate departments
• Staff are empowered to implement decisions and take ownership over quality

Question 18

What changes need to be made to the culture of a business if it decides to use lean production?

Answer 18

• Everyone is taught to spot waste and suggest better ways daily
• Blame-free problem-solving and respect for each worker’s ideas become part of “how we do things”

Question 19

What are the advantages of lean production?

Answer 19

• Less waste: Just-in-time (JIT) deliveries and continuous improvement (Kaizen) reduce waste, storage space and the need to rework products, lowering unit costs
• Faster processes: streamlined production layouts shorten lead times, so customers receive orders sooner
• Better quality: Constant identification and fixing of faults by empowered employees reduces the number of defects and returns
• Higher flexibility: Quick changeovers and multiskilled teams make it easier to switch between product variants

Question 20

What are the disadvantages of lean production?

Answer 20

• Supply chain risk: With little buffer stock, any late delivery or production disruption can halt the whole production line
• Upfront investment: Staff training, layout changes and new IT systems can be costly before cost savings start to emerge
• Staff pressure: The relentless focus on speed and zero waste can raise stress and resistance if not matched by good support from managers
• Not a one-size-fits-all approach: Lean production works best where demand is steady and suppliers are reliable. In fast-changing markets, a business may need more buffer stock

Question 21

What is a real life example of a business where lean production worked?

Answer 21

• Lean production has been successfully embedded at Toyota
• By designing flow layouts, empowering team leaders and celebrating tiny daily improvements, Toyota cut defects, reduced inventory and shortened car assembly times
• The result is reliable cars, lower costs and a reputation for quality that lets it sell millions of vehicles worldwide, generating healthy profits
• Every part of the business — from purchasing to HR - lives the same lean values, so the system keeps reinforcing itself

Question 22

What is a real life example of a business where lean production failed?

Answer 22

• Boeing tried to run its 737 assembly line with almost no spare parts on the factory floor
• When a key fuselage supplier slipped behind schedule in 2019, Boeing had no buffer stock
• Unfinished aircraft stacked up outside the factory, costs soared and delivery dates were missed, angering customers
• The business realised that lean production needs solid suppliers, careful planning and full workforce support