5.3 Lean production and quality management (HL only)
When the term Lean production is used, at its most basic it simply means efficiency and the elimination of waste. Production methods and the history of seeking less costly manufacturing have a long history. Henry Ford revolutionized the assembly method in the production of early automobiles with the insight of Rensis Likert among other industrialists. However, before we get ahead of ourselves, lets take a practical look lean production or lean thinking may apply in our daily lives.
When the average family goes shopping for food, how much food do they buy? Essentially, relative to income levels, families will tend to buy what is needed for the day or week or perhaps several weeks and not overstock on food. Why is this the case? Other than shopping being a social experience for some, the primary drivers are also because certain food can spoil faster if not consumed, storage space is limited, and costs may be prohibitive. These reasons are not very different for a business. While the average family is also interested in saving on costs, the business is driven by the need to increase profits, which can be done through increasing sales revenue, costs cutting or both!
Lean production is an approach to production that was introduced by Arthur Deming to Japan and perfected in Japan. Manufacturers who apply lean production methods use less of everything that is involved in production, from labor, machines, space, time, suppliers and especially inventory.
The following features of lean production:
Less waste
The concept of having less waste when carefully thought-out implies that when applied to material; less of the materials used in production are discarded. Overall waste does not add value but instead raises costs and if possible should always be reduced or eliminated. Waste can come in many forms such as:
  • Labor that is idle and not productive
  • Capital that is idle and not productive
  • Material that is discarded
  • Activities that cause Labor and capital to be less productive

Jamie Oliver has an interesting point on how the meat industry, and fast food chains like McDonalds have taken material waste in this approach and harmed consumers.

Greater efficiency
Efficiency means less costs are incurred. Consider the following analogy. If you want to fill a bucket with water and the bucket has many small holes, (some larger, some smaller) the holes represent the inefficiency of your efforts to collect water. Lets also assume that the water you are pouring in represents sales revenue, the holes are costs and the collected difference between what is in the bucket and what flows out is your lost profit. Since your aim is to fill the bucket but water flows out of the holes you can either continue the process of pouring more water in (Sales revenue) or plug up some of the holes. If you manage to do both the water (Profit) collected in the bucket will rise dramatically!
Efficiency simply stated involves controlling your costs, which is just as important as increasing your sales revenue. To achieve greater efficiency, costs must be understood and their sources controlled. Take a moment to think about the types of costs you have and if you are fully aware of them.
The following methods of lean production:
Continuous improvement (kaizen)
There are various methods associated with lean production and the first one we will examine is called Kaizen, a Japanese concept in management. Kaizen, which means continuous improvement is a concept that applies to all areas of management and even goes beyond the business environment to include activities that are outside of the business that may have an indirect impact of the business itself. Therefore, Kaizen includes ideas such as work-life balance. Kaizen is an umbrella concept that implies continuously seeking to improve upon all the elements that affect a business and not a one-time fix. This approach to continuously addressing and improving upon any imbalances, results in more worker productivity.

PDCA (Plan, Do, Check, Act) is a cycle also referred to as the Deming Cycle. This series of activities is how continuous improvement is implemented in the process of applying Kaizen.
Plan: This is the stage where the problem is identified and information is gathered to address the needed change
Do: After the problem has been identified this stage involves the action that is to be taken to resolve the issue. It is the implementation stage.
Check: As a follow up to the action taken, an inspection to determine the success of the action is the goal of this stage.
Act: If the inspection reveals a successful outcome then the action is applied to all levels where the problem arises or where it can be implemented
Once the cycle is complete however, the planning begins again as does the entire cycle, thereby the continuous improvement.


Just-in-time (JIT)
An important part of kaizen is the Just-in-time (JIT) concept. Essentially it is exactly what it means, the delivery of raw materials just when it is needed. The thinking behind JIT is the elimination of inventory build-up. In other words, if a business has to stock-up on raw material, only when the raw material is sold does it add any value. Therefore, raw material used in production is an idle resource, which as we mentioned previously implies a “sitting” cost. Getting rid of this cost entirely is impossible, because costs for raw materials must be incurred in the manufacturing process, however, accumulated costs can be reduced to when they are needed, which is the thinking behind JIT.
Take a moment to consider that a business may order very large volumes of inventory that ties up cash. The sitting inventory will also require storage space, workers, and could also be subject to deterioration. Lets take a closer look at the advantages and disadvantages of JIT.
  • Costs associated with storages and storage space are eliminated
  • The business has a significant increase in cash reserves that would have otherwise been sitting in stock
  • Deterioration and waste of raw material is reduced or eliminated
  • Dependency of suppliers is critical
  • The economics of scale realized by purchasing in bulk or whole sale is lost
  • Sudden changes in increased demand will not be met
  • The need for continuous orders will raise administrative costs

The Japanese word Kanban means signboard. In production, the signaling for more material when it is required at the various stages of production is done through the use of colored pin-pong balls. This approach serves to control how much material is needed and when it is needed, by ensuring no excessive build up of inventory. As you can imagine, it works well with the JIT system.
The different types of Kanban include not only 1) production Kanban as mentioned above, but also 2) Vendor Kanbans to inform suppliers and also 3) conveyance Kanban, to communicate between workers at different production levels about required material raw material.
Another important part of the lean production method, and an intricate part of quality control is the Andon system. This is simply a method used to allow workers to raise the alarm when a problem in the manufacturing process has been detected. Andon is therefore a signboard with lighting signals that enables any worker on the manufacturing floor to alert the operations and management team when there is a production related problem. This invariably means that production can be halted to fix the problem if it is serious enough. If a defect, malfunction or safety issue is detected, this can be reason enough to call for maintenance or management involvement. Once the problem has been noted, it is easy to see how this fits into the concept of Continuous Improvement and the previously discussed Deming Circle whereby the Check and the Act portion of PDCA is enacted.
Features of cradle to cradle design and manufacturing
As you can imagine part of the criticism that has been leveled against the manufacturing industry is the waste and impact certain industries have had on the environment. These devastating effects all in the relentless pursuit for profit have given rise to numerous interest groups whose sole mission is to counteract this negative impact on the planet.

Public Domain Photo

The phrase "cradle to cradle" itself was first used by Walter R. Stahel a Swiss architect, whose work on sustainability included the philosophy of reusing, repairing and remanufacturing in industrial economies. The Cradle to Cradle design is therefore a means of protecting the ecosystem and nature through a system that is in principle waste free. This is a mimic of nature whereby the metabolism of the planet is self-sustaining and holistic. Another term used to refer to the Cradle to Cradle design is regenerative design.
Features of quality control and quality assurance
What determines your choice to purchase a bicycle, skateboard, magazine, or even a snack? Imagine if the appearance of a sandwich or the reputation of a company that you bought your skateboard bearings from was sketchy? Would you go ahead, buy and eat the sandwich or buy and use the skateboard regardless of the physical appearance or reliability of the bearings? I would not either!
Quality control is at the heart of an consumers willingness to purchase a product or service. If a business has a good image and reputation for quality, the likelihood that consumers will be loyal and repeat their purchases is very high. Take you favorite fast food restaurant, if you have one. At some point you will expect the same level of quality to be matched at every outlet. Businesses take the concept of quality control and Total Quality Management very seriously. So will we!
Methods of Managing Quality
Quality circle
Businesses seeking to maintain and improve on the quality of their products implement Quality circles as an approach to controlling and resolving production related issues. The quality circle is comprised of a group of workers who come together in teams and make decision on how to address the issues and problems they have identified. Management if supportive of the Quality circle will not only motivate the staff involved but also reap the benefits of the model. Quality control can be costly however the benefits far outweigh the costs.

TQC system.jpg

Who is the best player on your sports team? Who is the fastest runner? Which student in you class is the best performer? If you aspire to match the level of any one of those we have mentioned, then they have become your benchmark.
Businesses also have the same strategy. By determining what the industry standard is, who the industry leader is and using this information to target performance, business is able to attract consumers who expect this as a minimum level of quality.
Benchmarking is part of the competitive nature of the market and is very specific.
1) The first stage is in determining what the business want to benchmark. This could be within any function of the business, for exampling in Human Resources Management: salaries, wages, benefits, or dress codes among others. In Operations and Management: Quality, timeliness, equipment and inventory among others.
2) The second stage is determining who your benchmark should be and collecting as much information that is available. By identifying the industry leaders this information becomes easy for any business to access.
3) The third stage is to apply the information gathered and try to not only match the industry leader but to in turn become the benchmark standard itself.
Total quality management (TQM)
Ultimately a business would seek a level of quality control that not only ensures consumer satisfaction at all levels, but consumer loyalty and an image and reputation that independently secures the business. Total Quality Management or TQM is a process that looks at quality management from the pre-purchase stage to the post-purchase stage. The management of quality at the pre-purchase stage involves image, reputation and the consumer’s perception of the product prior to purchase. The brand name and reputation play a very important role in TQM. The post-purchase stage of TQM is in the effort to determine if the quality of the product will draw loyalty from the consumer and thereby generate repeat consumption.
Every function of the business, all activities and all individuals are taken into account when TQM is applied. TQM is a holistic approach and organizes on a business-wide scale the efforts of all individuals, departments and activities to put in place and make permanent a system in which the business continuously improves on the deliver of high-quality products and services to consumers.
TQM is costumer focused from start to end with customer relations conducting post sale surveys and service; employee involved through empowerment and process centered.
The impact of lean production and TQM on an organization
With competition in business being increasingly global, businesses that fail to implement lean production and TQM policies are at a distinct disadvantage. The competitive costs of not implementing these processes exceed those of implementation. However, occupational injuries, job strain and stress, are increasingly linked to lean production work pace and demand. In a well balanced business environment the benefits of applying of lean and TQM policies are clear.
The importance of national and international quality standards
Quality standards in national and international settings serve to guide consumers and producers alike. Organizations such the International Organization for Standardization, the European Foundation for Quality Management, the Alliance for Performance Excellence and the Canadain ; National Quality Institute all serve to ensure compliance with set standards through certification that recognizes guidance in quality management. Consumers can determine if business is in compliance and in turn businesses can market their products and services as being in compliance.