Principles of Lean Production (Edexcel IGCSE Business)

• 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 stock 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
  • High quality output is likely as a result of supplier reliability and carefully managed production processes
  • The result should be increased profit margins

• Lean production uses strategies such as Just in Time stock control and Kaizen 
  

• Just-in-time (JIT) stock management is a process in which raw materials are not stored onsite but ordered as required and delivered by suppliers 'just in time' for production
  
  
• Careful coordination is required to ensure that raw materials and components are delivered by suppliers at the moment that they are to be used
  • Close relationships with suppliers need to be developed
  • Suppliers may need to be in close proximity 
    
    
• Just-in-time is particularly useful for businesses that operate in dynamic markets
  • Products may need frequent design changes that require different components 
    • Holding large amounts of stock risks wastage through obsolescence
      
      
  • Where significant competition exists lean production can ensure a high level of quality to achieve a competitive advantage
    
    

The Advantages & Disadvantages of Just in Time Stock Management

• Staff training and computer inventory management systems may also reduce wastage as fewer errors are likely to be made

• Lean production is focused on the effective use of resources and, in particular, the elimination of waste throughout the business
  • Waste refers to anything that prevents a business from being efficient
  • Seven key types of waste are minimised in lean production 
    
    

Diagram: The Seven Wastes

Lean production involves the reduction of all types of waste

1. 1. Transportation: Unnecessary movement of materials or products
   2. Inventory: Excess raw materials, work-in-progress, or finished goods
   3. Motion: Unnecessary movement of people or equipment
   4. Waiting: Delays or idle time in the production process
   5. Overproduction: Producing more than what is required by the customer
   6. Overprocessing: Using more resources than necessary to produce a product
   7. Defects: Products or services that do not meet customer requirements
      
      

• Eliminating waste has several benefits

Benefits of Reducing Waste