Production Efficiency
Business: Edexcel IGCSE, topic 5.2.3
Lean Production
Lean production techniques are geared towards reducing waste during production. Two examples are (just in time, another method, will be covered later):
Cell production
- Workers are grouped into multi-skilled teams within cells.
- Different teams are assigned to different aspects of the production process.
- A cells passes on completed products to the next cell in the production process.
- Efficiency may be improved because:
- Workers are more motivated (because they work within a team with extra responsibilities).
- Workers share expertise and skills.
Kaizen
- The Japanese term kaizen means continuous improvement.
- The process focuses on workers continuously making small improvements for overall progress and productivity gains in a firm.
Managing Stock - Just in Time
Just in time (JIT) is a method for managing stock that aims to keep stock levels very low at all times.
Benefits of JIT
- JIT can reduce costs because a business does not have to pay for storage space for the stock and the business is likely to have less unsold stock.
- Storage also adds other costs, for example damage to stock, stock insurance and security to protect the stock.
Disadvantages of JIT
- JIT usually needs more frequent deliveries. More deliveries usually means higher transport and logistic costs. There may also be environmental costs and an impact on the local community. – Because a firm using JIT is buying in lower quantities, rather than in bulk, they will get smaller or no discounts on the materials that they are buying.
- With JIT, there is a higher chance that the business will not be able to meet demand if there is an unexpected spike in demand. This is because they do not keep stock in reserve (buffer stock).
Test yourself on Production Efficiency
What does the Japanese term kaizen mean?
Features of Cell Production
For a lemonade business using JIT, what may happen in a heatwave?
Which of the following is an advantage of JIT?