5.3. Lean Production and Quality Management (HL only)

  • Lean production
    • Process of streamlining operations and processes to reduce waste
    • Leads to improved quality and reduced costs
    • Forms of waste: materials/resources, time, energy, human effort
    • Principles to be followed:
      • Waste minimisation – remove processes that don’t add value
      • ‘Right first time’ – zero defects
      • Flexibility
      • Continuous improvement
      • Supply chain management – develop good working relationships
  • Methods of lean production
    • Kaizen/continuous improvement
      • Productivity/efficiency gains from small/continuous improvements
      • Involves forming small groups/Kaizen groups
        • Identifies changes and improvements to establish steady flow of small improvements
      • Easier to manage change if it is small; less resistance
      • Continual improvements in quality and eliminate waste
      • Different from quality circles since suggestions can come from anyone
    • Just-in-time (JIT)
      • Inventory management system based on stocks being delivered as and when they are needed for the production process
      • Buffer stocks are not required/no storage
      • Finished goods are delivered as soon as they are produced
      • Advantages
        • Reduces costs of holding stock
        • Working capital may be used elsewhere
        • Businesses become more responsive to the needs of customers
        • Improves motivation by promoting employee participation
        • Reduces wastage
        • Improves relationship with suppliers
      • Disadvantages
        • Reliance on external suppliers
        • No room for error
        • Less economies of scale
        • Inflexible and cannot cope with fluctuations in demand
        • Admin and transaction costs will increase due to frequent ordering
        • Quality control can be an issue
        • Relies on sophisticated technologies
        • Requires commitment of workers
    • Kanban
      • Variation of JIT
      • Scheduling system that aligns inventory levels with consumption
      • Rate of demand controls rate of production
      • Utilizes kanban cards which signals the need to restock products or inventory when used
      • Advantages
        • Reduce wastage
        • Flexibility in production
        • Problems in production are evident by checking the kanban
        • Improves flow
      • Disadvantages
        • No room for error
          • No buffer stock means quality problems/defects will be harder to address
        • Large variations in demand can cause problems
        • Ineffective when there is no variation in products
    • Andon
      • Refers to any visual system that shows the status of production
      • e.g. worker will change a signboard to red to indicate a problem
      • Used when personnel are far away from each other or attend to many different machines
      • Advantages
        • Allows for quick communication in production floor
        • Problems can be resolved faster
        • Employees are more involved
        • Production status can be observed easily
      • Disadvantages
        • May require training for operators to use andon system
        • Relies on operators to be responsible
  • Cradle to cradle manufacturing and design
    • Design and manufacturing approach that seeks to eliminate waste
    • Takes the entire product life cycle into account
    • Inputs and outputs are seen as nutrients
      • Technical nutrients – recyclable with no loss of quality
      • Biological nutrients – consumable or compostable
    • 5 key features:
      • Material health (e.g. source, toxicity)
      • Material reutilization
      • Use of renewable energy
      • Water usage and discharge
      • Social responsibility
  • Quality control and assurance
    • Quality
      • Features of a product that fulfils its purpose and meets user expectations
      • Perceived value for money
      • Importance:
        • Essential in satisfying customers
        • Provides competitive advantage
        • Reduces likelihood of bad reputation due to poor products
        • Competition makes this even more relevant
      • Four driving forces:
        • Higher disposable income
        • Higher customer awareness
        • Gov’t legislation
        • Competition
      • Costs of poor quality:
        • Reputation of the business
        • Costs to repair/fix
        • Physical harm to customers
        • Compensation claims
      • Methods to measure quality
        • Reject rates
        • Level of product returns
        • Customer complaints
        • Level of customer satisfaction
        • Degree of customer loyalty
        • Market share
    • Quality control
      • Inspecting, testing and sampling of the quality of work
      • Advantages
        • Defects do not reach customers
        • Saves reputation
        • Cheaper specialized QC inspectors can find several issues
      • Disadvantages
        • Does not prevent mistakes made
        • Individuals are not accountable for quality of work
        • Lack of quality culture
    • Quality assurance
      • Process of guaranteeing a product’s quality at the first time
      • Informs/convinces customers that there is a specific standard
      • Serve as a competitive advantage vs. other businesses
      • Advantages
        • Involves employee participation (more ownership and recognition)
        • Improves staff morale
        • Generation of new ideas
        • Break down certain cultures (them vs. us)
        • Less wastage and production costs
      • Disadvantages
        • Time-consuming
        • Requires training
  • Managing quality
    • Total Quality Management (TQM)
      • Process that requires dedication of all employees in the organization to commit to achieving quality standards and minimizing waste and defects
      • Embeds quality in every business operation and process
      • Management by example
      • Empowers employees to improve quality to have zero defects
      • Advantages
        • Motivation/empowered employees
        • Reduces wastage and costs
        • Improves image
        • Possible competitive edge through quality assurance
      • Limitations
        • Added costs (such as market research)
        • Costs to improve quality
        • Requires all members to be committed
        • Somewhat bureaucratic
        • Time lag before benefits are seen
    • Quality circles
      • Small groups of people that examine issues relating to quality
      • Consists of volunteers from various departments
      • Often uses circle or all channel network
      • Directly involved in executing solutions
      • Advantages
        • Increased efficiency
        • Productivity
        • Profitability
      • Limitations
        • Demotivation by teamworking and extra workload
    • Benchmarking
      • Comparing products, operations, and processes to similar businesses
      • Stages:
        • Identify area
        • Measure internal performance using set criteria
        • Identify most appropriate competitors to benchmark with
        • Measure external performance of rivals
        • Use comparative data to find main weakness of firmr
        • Set standards for quality improvements
        • Implement change
        • Evaluate outcome and check for improvements
      • Can be either historical or interfirm benchmarking
      • Advantages
        • Close performance gap
        • Eliminates guesswork
        • Allows perception of customers to be heard
        • Help lower costs and improve competitiveness
      • Disadvantages
        • Costs and time implications
        • Can discourage innovation
        • Time and finance must be used to implement change
  • National and international quality standards
    • National and international quality awards are given to businesses that show their products meet certain quality standards.
    • Purpose:
      • Promote quality awareness within organization
      • Recognize quality achievements
      • Attract high calibre employees
      • Strengthen firm’s competitiveness
    • International Standards Organization (ISO)
      • One of the most powerful NGOs in the world by providing a single set of quality standards
      • ISO Standard for Quality Management: ISO 9000
      • Endorses businesses that have done quality management.

 

Kim De Leon5.3. Lean Production and Quality Management (HL only)

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