5.3 - Lean Production and Quality Management

Features of Lean Production

• An approach to operations aiming to reduce wastage and make a business more efficient

• Needed in an age of growing competition where there’s a need to provide excellent value for money

• By being more efficient, a business can reduce its prices and keep its profit margins, but also increase sales or keep the price constant + benefit from higher profit margins

• Managers are constantly looking for ways of reducing the cost per unit

• Lean production involves focusing on problem areas and finding the most efficient ways of doing these

• When the right method is found, staff need to be trained and shown how to do this, and then follow this approach

Less Waste

• Lean production aims to reduce all forms of waste in the production process and was developed in Japan

• This includes waste of materials, time, energy, and human effort

• Lean production streamlines operations so costs are reduced and efficiency increased

• Seven types of waste include:

  • Defects

    • Wasteful bc they need to be put right later or thrown away

  • Overproduction of goods not demanded by customers

  • Stocks waiting further processing or consumption

  • Unnecessary processing

  • Unnecessary motion of employees

  • Unnecessary transport and handling of goods

  • Waiting for an earlier stage of the process to deliver

• Lean production aims for:

  • Zero delays, inventories, mistakes, waitings or accidents

Greater Efficiency

• Lean production increases the efficiency of the business by reducing waste bc fewer resources are used to produce the output so unit cost will be lower

• Efficiency of a process is measured by output produced relative to the inputs used

• If lean production means the same output can be produced w/ fewer inputs it’s more efficient

Methods of Lean Production

• Lean production methods include:

  • Continuous improvement (kaizen)

  • Just-in-time (JIT) manufacturing

Continuous Improvement (Kaizen)

• Kaizen is the belief that firms can always do better

• Tries to get employees to improve what they do in some small way, every day of every week of every year

• If workers improve the quality of their work by one percent every day the effect over a year would be huge

• This approach focuses on the idea that improvement comes through a series of small changes

  • Gradual rather than radical

• Profit margins of many business are relatively small bc they rely on selling large volumes of products

  • What seems like a tiny reduction in costs for one unit can lead to significant increases in profit overall bc of the scale of the sales involeved

• Kaizen approach says change must be monitored and evaluated to determine the extent of the improvements made

• At each stage there should be assessment of what actions have been taken and how effective they’ve been

Just-In-Time (JIT)

• Stocks are goods that’ve been produced or are in the process of being produced, but which haven’t been sold

• JIT happens when firms produce products to order

• Instead of producing as much as they can + building up stocks, they only produce items when they know they can sell them

• Components + supplies are also only bought by a firm when they’re needed

• The aim of JIT production is to reduce inventory levels by as much as possible

• JIT is complex and places many demands on the business, including:

  • Good supplier relationship

    • Cannot afford delays on materials

  • Reliable employees

  • A flexible workforce

• Introducing JIT production will involve:

  • Investing in machinery that’s flexible and can be changed from producing one type of item w/o much delay

  • Training employees so they have many skills and can do many jobs

  • Negotiation w/ employees so their contracts are flexible + allow them to move from one job to another

  • Building relationships w/ suppliers who can produce JIT as well

Limitations of Lean Production

Lean production has many needs, including:

• A workforce willing to take on extra responsibilities like implementing kaizen

  • Employees must feel trusted + respected

• Investment in training staff

• The right suppliers

• Tech investments

Problems w/ lean production:

• If there’s a delay or disruption to supplies it’ll stop production at the business bc it has no buffer stock

  • Super reliant on suppliers

• If staff go on strike, business has no supplies to keep producing

Features of Cradle-to-Cardle Design & Manufacturing

• The phrase cradle-to-cradle design and manufacturing describes an approach to developing and producing products so that they can be recycled at the end of their lives

• Products usually have been produced to be used and then thrown away which is known as a planned obsolescence approach

• Increasing customer concern ab the waste involved in the traditional approach to manufacturing causes a greater focus on resources being used more efficiently

Quality

• Goods and services produced should be of sustainable quality

• A quality product meets the customers’ needs and expectations

• A product isn’t quality bc it’s hard to make and is expensive, bc customers only pay for what is of use to them and gives them value

  • Nothing else constitutes ‘quality’

• Expensive doesn’t necessarily equal good quality

• Managers must make sure what they are producing consistently meets customers’ requirements to remain effective

• So, to provide good quality, firms must learn exactly what customers are looking for

• To achieve quality, managers must set targets based on customer needs and expectations, then make sure those targets are being achieved

Quality Targets

• Diff types of businesses will have diff quality targets

• Hotels might set quality targets for

  • Customer satisfaction levels

  • Accurate billing

  • Speed of response

• Manufacturing businesses may set targets for

  • Proportion of products w/ defects

  • Amount of waste produced in process

  • Proportion of returned goods

Why Quality Matters

• Poor quality = mistakes that have to be put right or fixed

• Goods may have to be thrown out, items may have to be replaced, or a business could be sued

• Effects of poor quality are expensive

Features of Quality Control and Assurance

Quality Control

• Traditional approach to improving the quality of a firm’s products is to put resources into inspecting the finished products to find any faults

  • If all goods and services w/ defects can be found, the customer will only get the perfect products, so quality will be improved

• This is quality control process or system, and relies on the inspection of products

• One problem is that quality control assumes defects are inevitable, since the task is to make sure they’re discovered before the customer gets them

• This is saying to some elements of the production team that it’s acceptable to make mistakes, bc the quality control department will find them later

• This could mean employees don’t take sufficient care in their work

Quality Assurance

• Focuses on preventing mistakes happening rather than finding them later

• If the process can be designed so it ensures defects don’t happen, inspection at the end is less important

• This focuses on prevention, not just inspection, and stresses the need for employees to get it right the first time

• An important part is taht employees check their own work instead of relying on someone else to do it for them, known as self-checking

• Employees also have the right to reject any work no matter who produced it

• Employees previously passed along faulty models since they didn’t feel responsible for the mistake

• Quality assurance needs training so individuals can carry out their tasks effectively, and also involves choosing the right suppliers so they deliver defect-less products

Methods of Managing Quality

Quality Circles

• A group of employees who meet regularly to discuss potential improvements to product quality

• Managers invite employees to be involved in improving the transformation process

• Benefit of this is that those directly involved in the task are helping develop it, so they have direct experience to make improvements

• Usually meet w/o a senior staff present

• Employees usually come from diff backgrounds for diff perspectives

Benchmarking

• Aims to develop better processes and systems by learning from others, leading to better quality

• A business compares itself w/ the industry leaders to see what it can learn from others’ techniques

• Looking for ways to improve corporate performance internally assumes a business’s staff knows the best way of doing smth or how to improve it

• The benchmarking process includes:

  • Identifying which companies have the best processes or results in a certain area

  • Finding out how those companies do things and learning from those processes

Total Quality Management (TQM)

• Every employee is jointly responsible for maintaining the overall quality of the final product

• TQM recognizes that all employees are important in terms of improving quality

• Employees must think ab who their customers are

• Under TQM, everyone has to think ab their internal and external customers’ needs

Impact of Lean Production and TQM on an Organization

• Lean production can lead to greater efficiency, less waste, and lower costs, which can improve the profits of a business

• TQM can lead to fewer errors, and therefore greater customer satisfaction

• Both approaches needs employees to be fully involved in the process since they must understand the need for these processes and have the skills and commitment to implement them

• Both also rely on very strong supplier relationships so they deliver the right quantities at the right time w/ no faults

Vocabulary

• Lean production → Aims to reduce all forms of wastage in the transformation process and make a business more efficient

• Just-In-Time production → Occurs when firms produce products to order

• Cradle-to-Cradle design & manufacturing → An approach to developing and producing products in a way where they can be recycled at the end of their life

• Quality product → One that meets customer expectations

• Quality control process → Aims to identify mistakes that occurred through inspection and checking