concept of lean production and how to achieve it: just-in-time (JIT) inventory control and Kaizen

4.1.1 Production Processes – Lean Production

1. Production, Productivity and the Need for Lean

Production – the conversion of inputs (materials, labour, capital) into goods or services.
Productivity – a measure of efficiency, usually expressed as output per unit of input (e.g., units per labour‑hour).
Why lean? In a competitive market businesses must raise productivity while keeping costs low and quality high. Lean production does this by removing all forms of waste (muda) and ensuring that the right product reaches the right customer at the right time.

2. What Is Lean Production?

Lean production is a company‑wide philosophy that:

• Eliminates waste (over‑production, waiting, transport, excess inventory, motion, over‑processing, defects).
• Creates a smooth, continuous flow of value‑adding activities.
• Involves every employee in the search for efficiency.

2.1 The Seven Wastes (Muda) with Simple Examples

Waste	Typical Example
Over‑production	Making 1 000 shirts when the order is for 600.
Waiting	Workers idle while a machine is being set‑up.
Transport	Moving components between distant workstations.
Excess inventory	Holding large stocks of raw material that sit unused.
Motion	Operator repeatedly reaches for tools placed far away.
Over‑processing	Polishing a part that will later be painted.
Defects	Scrap produced because a machine is not calibrated.

3. Lean Techniques

3.1 Just‑In‑Time (JIT) Inventory Control

JIT is a pull‑based system that synchronises production with actual customer demand, keeping inventory as low as possible.

Key Elements of JIT

• Demand‑driven scheduling – production starts only when a real order is received.
• Pull system (Kanban) – visual cards or electronic signals tell the previous process when more parts are needed.
• Small‑batch production – reduces set‑up time and limits stock.
• Reliable supplier relationships – short, dependable lead‑times, often with “supplier‑managed inventory”.
• Continuous material flow – workstations are arranged to minimise movement and waiting.
• Rapid response to quality issues – production stops at the first sign of a defect.

Typical JIT Implementation Steps

1. Analyse past demand patterns and improve forecasting accuracy.
2. Introduce a pull system (Kanban cards or electronic signals).
3. Negotiate short, reliable lead‑times with key suppliers.
4. Re‑design the production line for flexibility and quick change‑overs.
5. Install real‑time inventory monitoring and adjust schedules instantly.

Numeric Example (AO2 – Application)

Company A produces 10 000 units each month.

• Before JIT: average inventory = 2 000 units → inventory turnover = 10 000 ÷ 2 000 = 5 times per year.
• After JIT: average inventory = 500 units → inventory turnover = 10 000 ÷ 500 = 20 times per year.

The four‑fold increase shows lower holding costs and better asset utilisation.

Data‑Interpretation Task (AO3 – Analysis)

Month	Average inventory (units) – Before JIT	Average inventory (units) – After JIT
Jan	2 000	500
Feb	2 200	550
Mar	1 900	480
Apr	2 100	520

Calculate the inventory turnover for each period and comment on the change in holding costs and cash flow.

Performance Metrics for JIT

Metric	Before JIT	After JIT
Inventory turnover (times/yr)	5	20
Average lead‑time (days)	12	4
Stock‑out frequency (per month)	0	1–2 (initially)

Suggested Diagram

3.2 Kaizen – Continuous Improvement

Kaizen means “change for the better”. It is a culture of ongoing, incremental improvement involving every employee.

Core Principles

• Standardised work – documented procedures provide a baseline for improvement.
• Elimination of waste (muda) – each suggestion targets one of the seven wastes.
• Employee empowerment – staff at all levels are encouraged to propose ideas.
• PDCA cycle (Plan‑Do‑Check‑Act) – structured problem‑solving for each improvement.
• Continuous measurement and feedback – results are recorded, displayed and shared.

Typical Kaizen Process (PDCA)

1. Plan: Identify a problem, set a measurable target, design a change.
2. Do: Implement the change on a small scale (pilot).
3. Check: Measure the outcome against the target.
4. Act: If successful, standardise the new method; if not, revise the plan.

Simple Kaizen Example (AO2)

Problem: Workers spend 3 minutes per unit reaching for a tool placed at the end of the line.
Plan: Relocate the tool to the workstation.
Do: Move the tool and run the line for one week.
Check: Average handling time falls to 1 minute per unit (a 33 % reduction).
Act: Make the new layout permanent and record the new standard time.

Benefits (AO3 – Analysis)

Benefit	How it supports the business
Reduced costs	Less waste, lower inventory holding and fewer re‑works.
Improved quality	Early detection of defects, lower scrap rate.
Higher productivity	Shorter cycle times, smoother flow.
Enhanced employee morale	Staff feel valued, leading to higher motivation and lower turnover.

Other Lean Tools (brief overview)

• 5S – Sort, Set in order, Shine, Standardise, Sustain; creates an organised workplace.
• Value‑stream mapping – visualises the flow of materials and information to identify bottlenecks.
• Cellular manufacturing – groups machines into cells to reduce transport and waiting.

4. Relationship to Quality, Cost and Inventory Control

• Quality: Early defect detection (JIT) and continuous improvement (Kaizen) cut scrap and re‑work.
• Cost: Waste reduction lowers material, labour and overhead costs; JIT cuts carrying costs; Kaizen removes inefficiencies.
• Inventory control: JIT keeps stock to the minimum required; Kaizen improves reliability of the flow, reducing safety stock.

5. Limitations of Lean Production

• Heavy reliance on reliable suppliers – any disruption can cause stock‑outs.
• Risk of production stoppages when demand spikes unexpectedly.
• Initial investment in training, layout redesign, and information systems.
• Less suitable for high‑variability or highly customised products where set‑ups are frequent.

6. Wider Implications

6.1 Location Decisions (Syllabus 4.4.1)

Lean considerations influence where a firm chooses to locate its operations:

• Proximity to key suppliers – reduces inbound lead‑times for JIT deliveries.
• Proximity to major customers/markets – shortens outbound transport and enables rapid response.
• Transport costs and infrastructure – good road/rail links support quick material flow.
• Legal and regulatory environment – stable regulations reduce the risk of supply interruptions.
• Availability of skilled labour – essential for Kaizen participation and continuous improvement.

6.2 Stakeholder Impact (Syllabus 5.5.1‑5.5.4)

Stakeholder	Effect of JIT	Effect of Kaizen
Customers	Lower prices, faster delivery, higher product reliability.	Improved quality and consistency.
Employees	More predictable workflow, less overtime caused by over‑production.	Greater involvement, skill development and morale.
Owners/Shareholders	Reduced inventory carrying costs → higher profitability.	Continuous cost savings and competitive advantage.
Suppliers	Need to provide frequent, small deliveries – stronger partnership.	Opportunities to adopt lean practices themselves.
Community	Less waste and lower emissions from reduced transport.	Potential for safer, more organised workplaces.

7. Comparison of JIT and Kaizen

Aspect	Just‑In‑Time (JIT)	Kaizen
Primary focus	Inventory reduction and flow optimisation	Continuous improvement of all processes
Implementation method	Pull system, Kanban, short supplier lead‑times	PDCA cycle, employee suggestion schemes
Key outcome	Lower inventory costs, faster response to demand	Higher quality, lower waste, improved morale
Typical measurement	Inventory turnover, lead time, stock‑out frequency	Cycle time, defect rate, number of improvement ideas implemented

8. Evaluation Prompt (AO4 – Evaluation)

Discuss whether JIT would be appropriate for a high‑customisation, low‑volume boutique furniture business. In your answer consider the benefits, the risks and any alternative lean tools that might be more suitable.