Improving Production Efficiency: Lean Production, Just-in-Time and Kaizen
Lean production is the general approach a business takes to eliminate anything that does not add value for the customer, such as waiting time, overproduction and defects, through methods including just in time stock control and kaizen, continuous improvement through small changes suggested by workers.
Before you start
Make sure you're comfortable with these topics first:
Method
- Calculate before you evaluate. Productivity is output divided by workers or hours, and unit cost is total cost divided by output; almost every question on this topic opens with one of them.
- Identify the specific waste in the case: idle time, excess stock, rework, movement between stations, or overproduction. Naming it makes the analysis concrete.
- Choose the technique that addresses that waste. Excess stock points to just in time, defects to kaizen and quality at source, isolated repetitive work to cell production.
- Trace the chain to a financial outcome: less waste means lower unit cost, which means a higher margin at the same price or the ability to cut price and win share.
- State the human requirement honestly. Lean methods only work if employees are trained, consulted and motivated, so a business with poor industrial relations may fail to implement them.
- For the judgement, weigh the vulnerability lean creates, since removing all slack removes the buffer against disruption, against the cost it saves.
Worked example
Baildon Assembly employs 25 workers producing 5,000 units a month at a total cost of 90,000 pounds. Introducing cell production and kaizen would cost 15,000 pounds in training and is expected to raise output to 6,500 units a month with the same workforce and the same other costs. Evaluate the change.
- Find current productivity: 5,000 / 25 = 200 units per worker per month.
- Find new productivity: 6,500 / 25 = 260 units per worker per month, a 30 per cent increase with no extra staff.
- Find current unit cost: 90,000 / 5,000 = 18 pounds per unit.
- Find new unit cost. Other costs are unchanged, so the monthly cost stays at 90,000 pounds: 90,000 / 6,500 = 13.85 pounds per unit, a saving of 4.15 pounds a unit.
- Find the payback on the training: the monthly saving is 6,500 x 4.15 = 26,975 pounds of value, so the 15,000 pound training cost is recovered well inside the first month of full operation, though the gain will build up rather than appear at once.
- Add the conditions that earn the top marks. The extra 1,500 units a month must be sellable, or the improvement produces stock rather than profit. Cell production also depends on workers accepting broader responsibility, which may need a pay discussion, and productivity often dips during the changeover.
- Conclude: the change is strongly worthwhile on these figures because it raises output without capital investment or extra staff, provided Baildon has demand for the extra units and involves the workforce in designing the cells rather than imposing them.
Practice questions
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Q1Define lean production.Show answer
Answer: An approach to operations that aims to eliminate every activity that does not add value for the customer, including waiting, excess stock, unnecessary movement, overproduction, defects and rework.
Q2A business produces 3,600 units a week with 12 workers. After changes it produces 4,500 with the same 12. Calculate the percentage rise in productivity.Show answer
Answer: Before: 3,600 / 12 = 300 units per worker. After: 4,500 / 12 = 375. Increase = 75 / 300 = 0.25, so 25 per cent.
Q3Explain what kaizen means and why employee involvement is essential to it.Show answer
Answer: Continuous improvement through many small ongoing changes. It relies on employees because the people performing a task daily see the small wastes and awkward steps that managers never observe, so the improvements only surface if staff are asked and their ideas are acted on.
Q4State two benefits of cell production compared with a long assembly line.Show answer
Answer: Any two of: workers complete a whole section, which is more varied and motivating; the team takes ownership of quality in its own output; problems are identified and solved within the cell; less movement of part-finished goods between distant stations.
Q5Explain one risk of removing all buffer stock as part of lean production.Show answer
Answer: There is nothing to absorb a disruption, so a late delivery, a transport problem or a machine breakdown at a supplier halts production immediately, with no time to find an alternative.
Q6Why does higher productivity usually reduce unit cost?Show answer
Answer: Fixed costs and wages are spread over more units of output, so each unit carries a smaller share of the same total cost.
Q7Give one reason a business might prefer lean methods to buying automated machinery.Show answer
Answer: Lean methods require training and reorganisation rather than large capital spending, so they suit a business without the cash or borrowing capacity for automation, and they do not lock the business into one product or process.
Exam-style questions
Written in the style of a GCSE Business exam paper, with a full mark scheme.
Renshaw Engineering produces 2,400 components a week using 20 workers, with weekly costs of 26,400 pounds. It currently holds 4 weeks of raw material stock, worth 48,000 pounds. Adopting lean production and just in time would cut stock to 1 week, raise output to 3,000 components with the same workforce, and cost 20,000 pounds to implement. (a) Calculate the change in productivity and unit cost. (b) Calculate the cash released from stock. (c) Analyse one risk of the change.
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Evaluate whether lean production is suitable for all manufacturing businesses.
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