5.3- Lean Production and Quality Management (HL)

## **What is Lean Production?**

Lean Production is **cutting the fat**! The fat includes:

* Time
* Transportation
* Products
* Space
* Inventory
* Energy
* Talents

### **Benefits**

Lean Production effects all areas of an organization. It effects the *physical resources (ex.* storage space, rent, and utilities), *human resources* (ex. reduce unproductive travel times, use talents more efficiently, eliminate unnecessary roles), *financial resources* (ex. using capital in the most effective way possible).

## **Methods of Lean Production**

* *Kaizen* (Continuous Improvement)
* *Just-In-Time* (JIT)
* *Kanban*
* *Andon*

### **Kaizen- "Continual Improvement"**

* "Kai"= Change; "Zen"= Good
* must be inclusive of all levels of hierarchy
* There should be no blame attached to any problem or issues raised
* Systemic thinking is needed in order to consider the whole production process
* Focusses on the process, not the end product
* Must create an atmosphere of Respect

### **Just-In-Time (JIT)**

* **JIT**: avoid extra stock by being able to receive needed stock "just-in-time"
* Related terms/concepts:
	+ **Buffer Stock**: keeping stock on hand in order to be able to respond to unexpected demand
	+ **Stock Control**: controlling stock levels of a business

### ***Kanban*: a system of messages**

* system of messages (written or electronic) to help manage production flows and JIT delivery
* rate of demand determines rate of production
* is *not* a tool of stock control, but a tool to facilitate lean production

### ***Andon***

* a system of signals and alerts informing workers of a production problem that requires immediate attention

### **\*Cradle-to-Cradle Design Manufacturing**

* Very new concept
* Business Deal
* Refers to products should be 100% recyclable/reusable
* Launched 2012

## **Quality Control and Quality Assurance**

* **Quality Control-** a top-down, authortitative approach to quality management
* **Quality Assurance-** more inclusive of workers and more reflective of modern approaches to production
* *SHOULD NOT* be used interchangeably, as their meanings are different
* Focus on quality can increase sales and help the firm acquire retreat customers, reduce costs, and achieve premium pricing.

### **Quality Circles**

* Formal group of employees/volunteers
* People from different parts of an organization
* Discusses ways for a company to improve quality
* Intended that different perspectives lead to different ideas for improvement
* Good way to get people involved and improve the production process

### **Benchmarking**

* Comparing yourself to your competitors
* Businesses take the best players/market leader in their industry and follow that company's "best practices".
* Firms hope to make imrpovements and enhance their own organizational practices
* Has its limits, as not all firms have the culture established to look at weaknesses or readily accept change or criticism

## **Total Quality Management**

* Approach to quality enhancement that permeates the whole organization
* Always includes quality circles and benchmarking, as well as *kaizen, kanban,* and *andon*. These tools are mutually exclusive, and firms may use a variety of tools.

## **Implementing Lean Production and TQM**

#### ***Advantages***

* Can create closer working relationships with all stakeholders
* Can motivate the workers
* Can reduce costs (especially long-term)
* Can improve the design and production of quality products
* Can enhance the reputation of the company.

#### ***Disadvantages***

* Costly- especially during the short term
* Staff may need significant changes
* It may take time to change corporate culture
* Can create lots of stress on formal relationships in the business
* Difficult to maintain over long period of time.

### **National and International Quality Standards**

* Achieving certification in standardization can be a great boon to the business
* International standards are set up by organizations such as:
	+ International Organization for Standardization (IOS)
	+ European Union (EU)
	+ FDA (Food and Drug Administration
* Problems arise as not all countries have the same or simpatico standards. However, meeting recognized standards can:
	+ Enable Exports
	+ Give a competitive edge
	+ Save on the costs of withdrawing products