Chapter 28 - Operations Strategy
Learning Objective: To understand Lean Production techniques
Lean Production is all about producing goods and services with the minimum of wasted resources while maintaining high quality:
There are 8 main sources of waste in most industries:
Excessive transportation of components, products, and raw materials;
Excessive inventory;
Excessive workforce movement reaching for supplies and components;
Waiting times caused by delays;
Overproduction due to inaccurate forecast;
Over-processing: making simple items into complex to manufacture products;
Defects and products not meeting quality standards (rejected and corrected);
Unused workforce: not properly engaging employees or properly coordinating activities and information.
Considering the sources of waste mentioned lean production focuses on producing high quality output using fewer resources resulting in less waste, less duplication, and eliminating non-adding value activities for the sake of bringing companies various advantages:
Waste reduction of time and resources;
Higher profit margins due to the reduction on unit costs;
Efficiency due to easier operations and less crowded working areas;
Less damaged equipment and inventories;
Opportunity to launch new products quicker.
It all sounds good and well in theory. But what are the practical ways companies can implement lean production and therefore reduce waste?
A well-known approach to Lean Production is 1) Kaizen:
The Japanese philosophy of small but continuous improvements to rip large long-term benefits is applied by businesses in various industries. It also states that 'workers know better' in a reference to the importance of overall contribution.
Conditions for Kaizen to be Successful:
Management culture, team-work, empowerment, and involvement are key requirements for the Kaizen approach to be successfully implemented.
Although a winning management approach, Kaizen's limitations cannot be ignored:
Some changes need to be drastic and not gradual;
Senior managers may not be keen to empowerment of low level workers (culture);
Kaizen requires organization and regular meetings which decreases output (costs);
Most important results from Kaizen happen early on its implementation and many believe it is not cost-effective in the long-term.
Exam Analysis Tips:
- Kaizen can be linked to the McGregor's Theory Y and Theory X of Motivation;
- Kaizen can be connected to Herzberg's Two Factor Theory (job enrichment as motivator);
- All steps of production need to be involved in Kaizen or a bottleneck will be formed.
Another technique of lean production: 2) Quality Circles:
"QC divides small groups of workers for discussions of possible improvements for products and processes. Discussions can lead to official suggestions to senior managers or even put into practice by empowered workers."
The main benefits of such approach are:
A simple discussion yields great improvements on products and processes;
Increased participation boosts motivation;
Workers experience and knowledge are fully used.
Basic requirements for QC to be successful:
Commitment of all members involved;
Trainings on effective meetings and problem-solving techniques;
Senior management should be supportive;
Lower level workers should be empowered for the implementation of the solutions.
3) Simultaneous Engineering is nowadays a widely used Lean Production method:
Taking on different stages of the product development simultaneously to save time, launch products quicker, and lead the market.
- Prevents companies from losing new products to obsolescence and from having competitors introducing products first.
4) Cell Production (a form of flow production) is another Lean Production method:
- The production method in which a complete unit of work starts and finishes within the same cell (relates to TQM).
- Multi-skilled workers and team-leader are in the same hierarchical level within the cell improving motivation due to team-work, job rotation, and the sense of importance.
It improves productivity as it removes the boredom from traditional flow production.
For cell production to be possible, multiskilled and flexible workforce are a must.
Finally, Lean Production is also about Just-in-Time inventory management system - the process of reducing inventories thereby eliminating waste. It requires a good relationship with suppliers (quantity, time, quality of supplies) as well as flexibility of labor and capital to be successful.
There are some situations in which Lean Production methods may not be suitable to businesses:
Businesses with inaccurate forecasts and struggling to meet demand;
Businesses where the production process is difficult to start-off (e.g. iron plant);
Businesses looking at lean-production as a way to reduce labor costs - although efficiency may lead to redundancies it should not be the main goal or there will be no support from workforce;
When the cost of technology and retraining are too high for the business and making improvements on existing systems may be better.
The main point of Lean Production is to reduce and properly implement waste management for resources (defective products, inventory, labor). Many advantages can be ripped from its implementation:
Waste is reduced and therefore operations sustainability is improved;
Efficiency is increased;
Average costs are decreased (higher profits);
Operations becomes simplified and risks reduced;
New products can be launched quickly;
Quality is improved;
Job enrichment takes place and motivation is boosted;
Capacity management becomes more efficient due to flexible working.
Chapter 28 - Operations Strategy
To-Do-List: Activity 28.3
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