Making Operational Decisions Flashcards
(19 cards)
Lean production
Lean production is a way of manufacturing that dices to get rid of waste, while improvingquality.it was invented by Taiichi Ohno and is a part of the Toyota production system (TPS)
Firms have to choose the optimal mix of resources, for example high wages increases fixed or variable costs making the firm more compatible. The right balance will depend on the nature of the firm.
In order to be efficient a firm may employ lean production techniques.
This is any system that reduces waste from the manufacturing process. Examples include just in time (jit) manufacturing where goods are made to order and kaizen where continuous improvements are sought by the workforce.
Advantages
- Improved customer service through delivering exactly what is required when they want it.
- Improved productivity in terms of output per worker per time period.
- Quality improvements: through reduction in defects and reworking faultly goods (customer loyalty).
- Shorter lead times, which can become a competitive advantage for the business for example, customers are not always prepared to wait six months for a sofa to be made and delivered to them.
- Safer work environment, with a more organised, learner organisation comes higher levels of safety
Disadvantages
- It is better suited to larger organisations, where goods are being manufactured.
- weeds good relationships with suppliers, to co-ordinate productions and have a JIT system.
- some employees may resist change when a new way of working (lean production) is introduced, they view it as leading to job losses.
Just in time (jit)
- Just in time means that a business does not keep stocks of parts in a warehouse. Instead, they order the parts and get them delivered the same day from the supplier. This means the business needs to develop very close relationships with the suppliers, and may even be involved in the design of the components.
- ‘if it isn’t wanted, don’t order it; if it isn’t sold don’t make it’
JIT - advantages
- As parts are ordered as they are needed there is no wastage
- parts are not warehoused, which is a massive cost saving in terms of premises and staff.
- stock is less likely to go out of date
- The business will improve their cash flow, as their money is not tied up in stock.
JIT - disadvantages
- The business won’t be able to meet unpredicted surges in demand
- The business won’t be able to quickly replace damaged parts
- If the delivery does not turn up in time this can stop the whole production line, which is costly.
Kaizen
Kaizen (continuous improvement) is a policy of constantly introducing small incremental changes in a business, in order to improve quality and efficiency-In contrast, the western manufacturing policy is to make large one-off improvements e.g. To install a new machine or deep clean of a kitchen kaizen assumes that employees are the best people to identify improvements since they see the processes in action all the time.
What elements does kaizen need to work.
- A trained work force - the workers must have the ability to understand their roles and complete their tasks efficiently.
- effective communication systems - workers must be able to communicate suggestions to superiors, and other relevant employees this can be done through kaizen groups, but other methods of communication must also be available.
- security of jobs - kaizen does suggest that demand for labour will fail, but this should be achieved through natural wastage.
Kaizen - advantages
- Improved teamwork
- leadership skills
- improved efficiency
- Improved employee satisfaction
- reduces cost
Kaizen - disadvantages
- Can be difficult to implement
- change is difficult
- training required
Waste
Any activity or result that the customer doesn’t value, and is not willing to pay for. These activities that don’t add value for the customer, between the inputs and the outputs, must be removed or minimised.
Waste and lean production
- Waste minimisation can help improve efficiency and reduce the unit costs of production.
- waste minimisation can also improve the public image of the business, if they are seen to be more eco-friendly.
- waste minimisation can carry heavy legal fines for non-compliance
7 deadly wastes
- Over-production
- Waiting time
- Transportation time
- Excess processing
- Excess stock
- Excess motion
- Product qualify
Resource mix
The combination of capital and human resources utilised within a business, to achieve the required output.
Key features of labour intensive
- High proportion of human labour
- low capital investment
- Flexibility in operations
- Cost structure
- output volume
Examples of labour intensive
- Agriculture: farming, harvesting, any other agricultural activities require significant human effort
- construction: building infrastructure, residential housing
- textiles and garments: production of clothing
- Handicrafts: industries producing hand-made goods like pottery
- hospitality and tourism: hotels, restaurants
- retail: traditional retail stores customer service
- healthcare services: caregiving, nursing hands and human effort and interaction
Key features of capital intensive
- High investment in machinery and equipment
- low dependence on human labour
- economies of scale
- focus on productivity and efficiency
- capital cost dominate
- output volume
Capital intensive examples
- Automobile manufacturing: requires extensive test robotic assembly lines & advanced machinery
- oil/gas exploration & refining: requires high-tech equipment and infrastructure
- aerospace & aviation: requires significant investment in technology and facilities
- steel and heavy machinery production: depend on high-tech processes and machinery.
- power generation: costly installations and maintenance
- pharmaceutical manufacturing: specialised equipment, labs, and technology
- Telecommunications: large capital investments
- mining & mineral processing: depend heavily on large scale equipment and technology
Technology used to improve operational efficiency
- Design process (cad /cam)
- stock/inventory management (computerised reordering)
- capital for production or fulfilment (robotics/automation)
