Chapter 42 · Lean Production
Discover how just-in-time and kaizen reduce waste, how workers help improve processes, and why effective resource use matters to businesses and customers.
Learning objectives
- Understand the principles of lean production, including just-in-time and kaizen.
- Understand the importance of using resources effectively.
What Is Lean Production?
The aim of lean production is to use less of everything needed to produce goods or services: factory space, materials, stock, suppliers, labour, capital and time. Lean production does not simply mean cutting costs regardless of the consequences. It aims to remove activities that do not add value for customers.
- Raises productivity by making more effective use of available resources.
- Reduces production costs and lead times (the time between ordering and delivery).
- Reduces defective products through more reliable working methods.
- Can improve quality and speed up product design or delivery.
Getting Started: Goldstone Holdings
Goldstone Holdings, a manufacturer of gym equipment, used lean-production improvements at two plants employing 94 workers. Changes included standardised procedures, a better factory layout, employee training, worker involvement and reduced clutter and unnecessary stock.
| Measure | Reported change |
|---|---|
| Space gained after layout changes | 17% more production space |
| Turnover | 50% increase |
| Production set-up time | 74% decrease |
| Machine downtime | 73% decrease |
| Delivery targets met | 21% improvement |
| Product rejection | 50% reduction |
These outcomes suggest that efficient layouts and worker participation can help a business use both people and equipment more effectively. The available data do not provide enough starting figures to calculate Goldstone’s exact monetary profit increase.
Staff participation mattered because workers knew the processes, could spot waste and needed to accept new methods. Training and decision-making responsibilities also helped improve motivation, not just factory productivity.
Just-in-Time Production
Large inventories tie up money and create storage costs. For example, holding US$1 million of unused stock means that cash cannot be invested elsewhere until the stock is sold. Just-in-time production reduces unnecessary raw-material and finished-goods stocks.
- Raw materials and components: reliable suppliers deliver items to the production line when required, sometimes several times per day.
- Finished products: the business aims to make goods when ordered rather than producing large amounts for storage.
- Coordination: orders, suppliers, deliveries, production schedules and customer requests must be communicated accurately and quickly.
Table 42.1: Advantages and Disadvantages of JIT
| Advantages | Disadvantages |
|---|---|
| Cash flow can improve because less cash is tied up in stock. | Frequent orders can raise administration and ordering costs. |
| Less out-of-date, damaged or wasted stock. | Production relies heavily on reliable suppliers. |
| Warehouse and factory space is released. | The business may lose bulk-buying discounts. |
| Stock-holding costs fall. | Sudden changes in customer demand are harder to meet. |
| Closer supplier relationships may reduce the number of suppliers needed. | A delay or breakdown in supply can stop production. |
Activity 1: Dell
A Dell example shows how build-to-order computers reduce the need for large inventories of finished products. Customers specify their requirements online, after which the business assembles and dispatches the computer. This depends on responsive and reliable parts suppliers.
Dell’s model could lower warehousing costs and allow customers to choose individual specifications. However, a delayed component delivery might postpone the whole order and damage customer satisfaction.
Halfway questions
Try each question before selecting Show suggested answer. Use the chapter examples and show working for calculations.
Define lean production and identify two resources it aims to use more effectively.
Show suggested answer
Lean production reduces waste and uses fewer resources without sacrificing customer value. Resources include space, inventory, materials, labour, capital, suppliers and time.
Give two numerical improvements reported by Goldstone Holdings.
Show suggested answer
Examples include production set-up time falling 74%, machine downtime falling 73%, turnover rising 50%, deliveries improving 21%, rejection falling 50% or 17% more production space.
Explain why keeping US$1 million in inventory could be a disadvantage.
Show suggested answer
Cash is tied up in stock and cannot be used to pay expenses or invest in another part of the business. Storage, damage and obsolescence may create additional costs.
State two advantages and two disadvantages of JIT.
Show suggested answer
Advantages: lower stock holding costs, improved cash flow, reduced waste or more space. Disadvantages: reliance on suppliers, ordering costs, lost bulk discounts, inability to respond to unexpected demand or supply interruptions.
Explain how Dell used just-in-time production.
Show suggested answer
It accepted customer specifications through direct online orders, assembled computers to order, kept finished-goods stock low and relied on suppliers to deliver components at short notice.
Why might a business with unreliable transport find JIT difficult?
Show suggested answer
Production may stop when urgently needed parts arrive late. With very little safety stock, even a short disruption can delay customer orders.
Kaizen
Kaizen is based on continuous improvement. Employees look for small, practical ways to improve efficiency, reduce waste and meet customer needs rather than relying only on occasional major reorganisations. Training and staff participation are essential.
Identifying and Reducing Waste
Waste does not just mean unused materials. It also includes lost time, unnecessary movement and equipment that is underused.
- Waiting before a task can begin, for example while materials are delivered.
- Walking across a factory repeatedly to collect tools that could be kept close to the workstation.
- Using a machine very rarely when its capacity is largely idle.
5S: Good Housekeeping
Good housekeeping is a key element of kaizen. The five steps help create an organised, efficient and safe workplace:
| The five S steps | Practical meaning |
|---|---|
| Sort | Remove clutter and unnecessary materials; retain what is needed. |
| Set in order | Arrange tools and resources so workers can find them quickly. |
| Shine | Keep the workspace and equipment clean. |
| Standardise | Use the most effective identified methods consistently. |
| Sustain | Make the first four practices permanent habits. |
A factory loses four minutes each time staff search for a shared tool. Storing and labelling the tool at the workstation could reduce unnecessary movement; regular checks help sustain the improvement.
Standardisation
Employees perform tasks according to agreed, well-tested methods. Procedures may be displayed at workstations and reviewed when problems occur. Consistent standards support quality control and help customers receive reliable products.
Teamworking
Production staff work in small teams focused on a common part of operations. Sharing duties, covering absent colleagues, discussing ideas and solving problems can improve motivation, flexibility, communication and working relationships.
Empowerment
Empowerment gives workers greater responsibility and authority over decisions in their jobs. It can encourage initiative, faster problem-solving and motivation because employees feel trusted, but workers also need training and clear limits to their authority.
Suggestion Schemes
Workers are invited to suggest small improvements. A written idea may be placed in a suggestion box, discussed by managers and rewarded if adopted. Suggestion schemes work best when staff receive feedback and believe their ideas will be taken seriously.
Quality Circles
These are small groups of employees from the same area of production who meet regularly to solve work problems and improve methods. They need time and cooperation from both managers and employees.
Multi-skilling
Multi-skilled workers are trained to do several different jobs. They can cover an absent colleague, switch between tasks and support flexible production. A wider range of duties may also make work more interesting.
Standardisation establishes consistent methods; teamworking coordinates people; empowerment increases workers’ decision-making authority; quality circles discuss problems; and multi-skilling increases the range of tasks workers can perform.
The Importance of Using Resources Effectively
Lean production aims to use less factory space, inventory, materials, labour, capital, suppliers and time without reducing the value provided to customers. Effective resource use benefits businesses in several connected ways.
Financial Benefits
Lower inventories can reduce storage, insurance, damage and handling costs. Less waste and better productivity may reduce unit costs and improve profit margins. Businesses might reinvest savings in training, equipment or product development.
Improved Competitiveness
Lower costs may allow firms to offer competitive prices without sacrificing profit. Better quality, reliability and shorter lead times also make a business more appealing to customers; firms such as Dell and Toyota illustrate different lean-production approaches.
Positive Environmental Effects
Using fewer materials, reusing resources and reducing energy consumption can cut waste and environmental harm. Responsible production may also strengthen a company’s reputation, provided the improvements are genuine and measurable.
Improved Customer Service
Shorter lead times mean customers can receive goods sooner. Fewer defects mean fewer complaints and returns, while kaizen encourages staff to pay attention to what customers need. In the Dell example, tailored products could be supplied relatively quickly.
The success of lean production depends on balancing costs and efficiency with quality, supply security and customer service. A smaller inventory may save money yet increase risk if deliveries are frequently disrupted.
Large vs Small Businesses
Both theory and practice suggest that both large and small businesses may benefit from lean production. However, the methods they choose can differ.
- Larger businesses: high output means that small savings in materials or time can have a large cumulative effect. They can invest more heavily in training, processes, supplier coordination and quality circles.
- Smaller businesses: a tidy workspace, shorter work steps, lower inventory and suggestions from staff may be practical and inexpensive. A business with one or two employees may not need formal quality circles.
- Important qualification: JIT may be more difficult for businesses with unpredictable demand, little negotiating power over suppliers or unreliable deliveries, whatever their size.
End-of-chapter questions
Try each question before selecting Show suggested answer. Use the chapter examples and show working for calculations.
Define kaizen and explain why the improvements can be described as continuous.
Show suggested answer
Kaizen means continuous improvement: workers regularly identify and make many small changes to processes rather than make only one large reorganisation.
List the historical figures’ five S practices in the correct order.
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Sort, Set in order, Shine, Standardise and Sustain.
Give two examples of wasted time or resources that kaizen aims to remove.
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Examples include workers waiting for materials, walking long distances to fetch tools and equipment used too rarely to make effective use of its capacity.
Explain how standardisation can raise product quality.
Show suggested answer
Using agreed, tested procedures makes tasks more consistent, reduces avoidable mistakes and helps the business satisfy customers’ expectations.
How do teamworking and multi-skilling improve flexibility?
Show suggested answer
Teams can share tasks, make quick decisions and cover absences. Multi-skilled employees can work across different roles when production needs change.
What is the difference between empowerment and a quality circle?
Show suggested answer
Empowerment gives individual workers authority to decide and solve problems. A quality circle is a small group meeting regularly to discuss and improve working methods.
Explain two ways that lean production can improve financial performance.
Show suggested answer
It can cut waste, stock-holding costs and inefficient labour time, improving profit margins or releasing cash. Higher quality may also reduce the expense of defects and returns.
How might lean production benefit the environment and customers?
Show suggested answer
Using less energy and material can reduce waste and emissions. Customers may benefit from lower prices, fewer defects, faster delivery and more reliable products.
A factory reduces the time between completed chairs from 82 seconds to 17 seconds. Calculate the percentage reduction.
Show suggested answer
Percentage reduction = (82 − 17) ÷ 82 × 100 ≈ 79.3%.
Explain one benefit of giving production workers greater responsibility for suggesting improvements.
Show suggested answer
Workers can identify practical ways to reduce waste and improve safety or efficiency because they understand the tasks they perform every day. Empowerment can also increase motivation.
Assess whether a small furniture manufacturer should use kaizen and other lean-production techniques.
Show suggested answer
Kaizen may reduce defects, wasted movement and inventory costs while engaging employees. However, training, supplier reliability and staff time are needed. Start with manageable changes and measure results.
Chapter 42 recap
Lean production aims to remove waste and make effective use of materials, people, space and time. Just-in-time reduces inventory but depends on dependable deliveries. Kaizen builds continuous improvement through 5S, standardisation, teamwork, empowerment, suggestion schemes, quality circles and multi-skilling. Efficient resource use may lower costs, improve competitiveness, help the environment and raise customer service.