Lean Production - introduction

Lean production is a Japanese approach to management that focuses on cutting out waste, whilst ensuring quality. This approach can be applied to all aspects of a business – from design, through production to distribution.

Lean production aims to cut costs by making the business more efficient and responsive to market needs.

This approach sets out to cut out all activities that do not add value to the production process, such as holding of stock, repairing faulty product and unnecessary movement of people and product around the plant.

The most important aspects of lean production for current UK A-level specifications are as follows:

  • Just in time production (JIT)
  • Cell production
  • Kaizen (Continuous improvement)
  • Quality Circles
  • Total Quality Management (TQM) and zero defect production - see notes on quality management
  • Time based management
  • Simultaneous engineering

Just in time production (JIT)

Just in time is a ‘pull’ system of production, so actual orders provide a signal for when a product should be manufactured. Demand-pull enables a firm to produce only what is required, in the correct quantity and at the correct time.

This means that stock levels of raw materials, components, work in progress and finished goods can be kept to a minimum. This requires a carefully planned scheduling and flow of resources through the production process. Modern manufacturing firms use sophisticated production scheduling software to plan production for each period of time, which includes ordering the correct stock. Information is exchanged with suppliers and customers throughEDI(Electronic Data Interchange) to help ensure that every detail is correct.

Supplies are delivered right to the production line only when they are needed. For example, a car manufacturing plant might receive exactly the right number and type of tyres for one day’s production, and the supplier would be expected to deliver them to the correct loading bay on the production line within a very narrow time slot.

Advantages of JIT

  • Lower stock holding means a reduction in storage space which saves rent and insurance costs
  • As stock is only obtained when it is needed, less working capital is tied up in stock
  • There is less likelihood of stock perishing, becoming obsolete or out of date
  • Avoids the build-up of unsold finished product that can occur with sudden changes in demand
  • Less time is spent on checking and re-working the product of others as the emphasis is on getting the workright first time

Disadvantages of JIT

  • There is little room for mistakes as minimal stock is kept for re-working faulty product
  • Production is very reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed
  • There is no spare finished product available to meet unexpected orders, because all product is made to meet actual orders – however, JIT is a very responsive method of production

Time-based Management

Time-based Management is an aspect of Lean Production. It is a general approach that recognises the importance of time and seeks to reduce the level of unproductive time in an organisation. Benefits include:

  • Quicker response times (reduced lead times) to meet changing market and customer needs
  • Faster new product development
  • Reduction in waste, therefore greater efficiency

For a firm to operate time-based management effectively, it needs to have flexible production facilities that enable it to make changes easily. For example, it may need to be able to switch production quickly between different products and to alter the length of production runs as needed.

As with other aspects of Lean Production, Time-based management also calls for flexible, multi-skilled staff, and a culture of mutual trust between workers and managers.

Simultaneous Engineering

Simultaneous Engineering is part of the Time-based Management approach. It is a project management approach that helps firms develop and launch new products more quickly.

All of the areas involved in a project are planned together. Everything is consideredsimultaneously(together, in parallel) rather than separately (in series).

  • Product teams are set up to include people in all areas that are relevant to the new product – design, development, production, marketing etc.
  • Suppliers are involved in the new product development so that potential delays in resourcing of raw materials, components and services can be anticipated and avoided
  • A teamwork approach is used, with all areas involved in the project working on the project at the same time.

The end result is that:

  • The new product is brought to the market much more quickly
  • The firm may be able to charge a premium price that will give a better profit margin and help recoup R&D costs
  • There is less likelihood of a need to modify the product later due to unforeseen problems
  • A greater sense of involvement across business functions improves staff commitment to the project.

This can therefore be a source of competitive advantage(‘first mover advantage’)for the firm if it can get a reliable new product into the market and build brand loyalty before its competitors.

Cell production

Cell production has the flow production line split into a number of self-contained units. Each team or ‘cell’ is responsible for a significant part of the finished article and, rather than each person only carrying out only one very specific task, team members are skilled at a number of roles, so it provides a means forjob rotation.

Cell production is a form ofteam workingand helps ensure worker commitment, as each cell is responsible for acomplete unit of work, which Herzberg sees as part ofjob enrichment. Cells would usually have responsibility for organising work rosters within the cell, for covering holiday and sickness absences and for identifying recruitment and training needs.

Cells deal with other cells as if they were customers, and take responsibility for quality in their area. Also see notes onKaizen, under ‘Improving Quality’.

Benefits of cell production

  • Closeness of cell members should improve communication, avoiding confusion arising from misunderstood or non-received messages
  • Workers become multi-skilled and more adaptable to the future needs of a business
  • Greater worker motivation, arising from variety of work, team working and more responsibility
  • Quality improvements as each cell has ‘ownership’ for quality on its area

Evaluation

Lean production and cell production can be very effective approaches to improving efficiency in a wide range of businesses. Some possible notes of caution:

  • The company culture has to encourage trust and participation, or workers can feel that they are being constantly pushed for more and more output with no respite
  • The company may have to invest in new materials handling and ordering systems suitable for cell production
  • Cell production may not allow a firm to use its machinery as intensively as in traditional flow production
  • Some small scale production lines may not yield enough savings to make a switch cell production economically worthwhile
  • The allocation of work to cells has to be efficient so that they have enough work, but not so much that they are unable to cope
  • Recruitment and training of staff must support this approach to production

Kaizen (Continuous Improvement) & Quality Circles

This forms part of the ‘Japanese’ approach to management, or ‘Lean Production’.

Kaizen, or ‘Continuous Improvement’is a policy of constantly introducing small incremental changes in a business in order to improve quality and/or efficiency. This approach assumes that employees are the best people to identify room for improvement, since they see the processes in action all the time. A firm that uses this approach therefore has to have a culture that encourages and rewards employees for their contribution to the process.

Kaizen can operate at the level of an individual, or throughKaizen GroupsorQuality Circleswhich are groups specifically brought together to identify potential improvements. This approach would also be compatible withTeam workingorCell Production, as improvements could form an important part of the team’s aims.

Key features of Kaizen:

  • Improvements are based on many, small changes rather than the radical changes that might arise from Research and Development
  • As the ideas come from the workers themselves, they are less likely to be radically different, and therefore easier to implement
  • Small improvements are less likely to require major capital investment than major process changes
  • The ideas come from the talents of the existing workforce, as opposed to using R&D, consultants or equipment – any of which could be very expensive
  • All employees should continually be seeking ways to improve their own performance
  • It helps encourage workers to take ownership for their work, and can help reinforce team working, thereby improving worker motivation

As Kaizen is characterised by many, small improvements over time, it contrasts with the major leaps seen in industry when radical new technology or production methods have been introduced. Over the years, the sheer volume of Kaizen improvements can lead to major advances for a firm, but managers cannot afford to overlook the need for radical change from time to time. For example, many UK manufacturers and service companies have found it necessary to outsource processes to cheaper centres such as India and China – these changes would be unlikely to arise from Kaizen.

Whilst staff suggestions can help to enrich the work for many employees, Kaizen can be seen as an unrelenting process. Some firms set targets for individuals or for teams to come up with a minimum number of ideas in a period of time. Employees can find this to be an unwelcome pressure, as it becomes increasingly difficult to find further scope for improvement. Some firms, especially Japanese-owned, conduct quality improvement sessions in the workers’ own time, which can lead to resentment unless there is appropriate recognition and reward for suggestions.

For Kaizen to be effective there has to be a culture of trust between staff and managers, supported by a democratic structure and a Theory Y view of employees. Good two-way communications and a de-layered organisation would also support this approach. Nevertheless, some workers might see the demands as an extra burden rather than an opportunity and it can take time to embed Kaizen successfully into an organisation’s culture.