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NotesBusiness Management HLTopic 5.3Lean production
Back to Business Management HL Topics
5.3.111 min read

Lean production (Business Management HL)

IB Business Management · Unit 5

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Contents

  1. 1Less waste: what lean production cuts
  2. 2Greater efficiency: more from the same
  3. 3What lean production does for a business
  4. 4What lean production costs, and when it works
  5. 5Exam-style question
One night at Mill Lane: Two in the morning at the Mill Lane bakehouse. Priti and her six bakers have until five, when the vans leave for the three shops.

One night Priti counts everything.

What happenedLoaves
Made by the bakers1,370
Burnt or misshapen, into the bin40
Taken by the vans1,330
Sold in the shops1,200
Sent to Second Helpings in the evening130
So 170 loaves were baked that no customer paid for.

A business that sets out to find and cut this kind of loss at every stage of making its product is using lean production: making what customers want with as few resources as possible.

The word that matters is waste. In lean production, waste is anything that uses flour, time, space or effort but adds nothing a customer pays for. A burnt loaf is waste. So is a baker walking across the building for a sack of flour.

Six kinds of waste at Mill Lane

1

Making too much (overproduction)

The shops sell 1,200 loaves, but 1,330 leave in the vans. The extra 130 were made with paid-for flour, oven time and hands, and nobody bought them.

2

Faulty products (defects)

Forty loaves a night come out burnt or misshapen. Every one used the same ingredients and oven time as a good loaf, and it goes in the bin.

3

Waiting

The oven bakes 600 loaves an hour, but between batches it stands empty while the next dough is still rising. A costly machine is switched on and producing nothing.

4

Needless movement

The flour and the baking tins are kept in the store room at the far end of the building. Each baker walks there and back many times a night.

5

Too much stock

Three weeks of flour from Valley Grain is stacked in that store room. It fills a room the bakers could use, and it was bought long before it is needed.

6

Extra work nobody pays for

Every loaf is put in a paper bag at Mill Lane, then taken out again at the shop for the display basket. Customers pay for the bread, not for the bag going on and off.

Waste is not only what goes in the bin: The burnt loaves are easy to see. The waiting, the walking and the stacked flour never show up in a bin, but they cost wages, oven time and space every night.

Lean production looks for all six, not just the ones that are thrown away.
What one night's waste costsLoavesIngredients at $0.90 a loaf
Burnt or misshapen40$36
Unsold, to Second Helpings130$117
One night170$153
A thirty-night month5,100$4,590

And that counts only the flour, butter and yeast. The bakers' time and the oven's electricity for those 170 loaves come on top.

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Priti asks her bakers one question: where does the night go? The answers come from the people doing the work. Ade, the newest baker, points out that he walks to the store room about forty times a shift.

Bake to the orders

  • Each shop sends its sales figures at eight every evening
  • Priti bakes to those numbers and a few more, not to a guess
  • Unsold loaves fall from 130 a night to 30

Right first time

  • A timer on the oven and a quick check of each tray before it goes in
  • Burnt or misshapen loaves fall from 40 a night to 10
  • Fewer loaves need to be baked to fill the vans

Everything within reach

  • Flour and tins now sit next to the mixers: Ade's idea
  • Dough is started in turns, so a tray is ready as the oven empties
  • One week of flour is kept, not three, and the store room is free
A night at Mill LaneBeforeThree months later
Loaves baked1,3701,240
Burnt or misshapen4010
Unsold, to Second Helpings13030
Loaves sold in the shops1,2001,200
Oven time at 600 loaves an hour2 hours 17 minutes2 hours 4 minutes
Ingredients in loaves nobody bought$153$36
The same 1,200 loaves, from less: The shops sell exactly what they sold before. What has changed is what it takes to sell them.
Loaves' worth of flour, oven time and handsIngredients for every loaf sold
Before1,370 for 1,200 salesabout $1.03
Now1,240 for 1,200 salesabout $0.93
Efficiency: Getting the same output from fewer inputs, or more output from the same inputs, is efficiency.

That is lean production's second feature. Less waste is the first, and greater efficiency follows from it: every loaf that is not burnt, and every trip to the store room that is not made, leaves the same bakers and the same oven free for loaves that sell.

Notice where the ideas came from. Lean production asks everyone who does the work to spot waste, because the baker at the mixer sees it first. Lean businesses use named methods to do this, such as making small improvements again and again (kaizen, continuous improvement) and having materials arrive only when they are needed (just-in-time, JIT).

The two features: Less waste: of materials, time, space and effort, at every stage.

Greater efficiency: the same output from fewer resources. Everything else a lean business does serves those two.

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Marco reads the numbers: Three months on, Marco compares the before and after nights. The bakery sells the same 1,200 loaves, but it spends $117 a night less on ingredients for bread nobody buys.

That is about $3,510 over a thirty-night month. It is the first impact of lean production, and the easiest to measure. It is not the only one.

What lean production did for the bakery

1

Lower costs

Less flour goes into loaves that are burnt or unsold, so the cost of each loaf sold falls from about $1.03 to $0.93 of ingredients. At the same $3 price, more of every sale is profit, or Lena can hold her price when flour costs rise.

2

Better quality

The tray check and the timer mean faulty loaves are caught before they are baked, not after. What reaches the shops is more even, night after night.

3

Faster and more reliable

With no oven standing idle and no walking to the store room, the last tray is out before five. The vans leave on time and the shelves are full when the shops open.

4

Space and cash freed

One week of flour instead of three frees the store room for a second shaping bench, and less money sits in sacks waiting to be used.

5

Less food thrown away

A hundred fewer loaves a night are made for nobody. That cuts the flour, water and energy the bakery uses, and customers who care about waste notice.

6

Staff who are listened to

Ade's idea changed how the whole bakehouse works. Bakers whose ideas are used often care more about the next improvement.

These impacts reach beyond the owners. Customers get more even bread and full shelves at opening time. The bakers work in a tidier bakehouse with less walking. Lena and Marco get a lower cost per loaf and a store room back.

An impact needs its because: 'Lean production lowers costs' is a claim. 'Fewer loaves are burnt or left unsold, so less is spent on flour for bread nobody buys' is an explanation.

Say which waste falls, then what that does for the business.

Not everyone at Mill Lane is happy. Lean production changes how people work, and it takes away the slack that used to hide problems. Some of its costs fall on the bakery, and some fall on other people.

For the staff

  • Two nights of training and new habits after years of baking one way
  • Every minute and every tray is now counted, and some bakers feel watched
  • In a large factory, time saved can become jobs cut

For the business

  • The lean course for Priti and the six bakers cost $2,800, and savings took weeks to show
  • With one week of flour, a late delivery from Valley Grain could stop the night's baking
  • With 30 spare loaves, not 130, a shop can sell out by four o'clock

For others

  • Second Helpings now receives 30 loaves an evening, not 130
  • Valley Grain must deliver every week, in smaller loads
  • Regulars who come in late may find the shelves empty
StakeholderWhat lean production givesWhat it takes away
Lena and Marco (owners)About $3,510 a month less spent on wasted ingredients$2,800 of training; less room for error
Priti and the bakersTheir ideas are used; less walking and waitingPressure, new habits, a feeling of being timed
CustomersMore even bread, full shelves at openingFewer loaves left late in the day
Valley GrainA steady weekly orderMore frequent, smaller deliveries
Second HelpingsNothingA hundred fewer loaves each evening

When lean production works best

  • Steady demand. Baking to yesterday's sales works on an ordinary Tuesday. It works less well before a festival or in a heatwave, when sales jump or fall without warning.
  • Reliable suppliers. Small stocks are safe only if deliveries arrive when promised.
  • Staff who are asked. The ideas come from the people doing the work. A manager who only gives orders gets neither the ideas nor the trust, and lean production stalls.

So for Lena's Bakery the impact is mostly good: the $2,800 course is paid back within the first month, the vans leave on time, and quality has improved. But the bakery now has less room for error, and part of the saving came from Second Helpings.

Lena may decide to bake a few extra loaves for Second Helpings on purpose. That would be a choice she has made, not a waste she has failed to notice.

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How this comes up: Lean production comes up as short questions for two or four marks, and as a longer case question for ten.

The question types

  • Define or state (2 marks each). Define lean production, or state two of its features.
  • Explain (4 marks). Explain one advantage and one disadvantage for a named business of introducing lean production.
  • Evaluate (10 marks). The case gives a table of figures and asks you to evaluate the impact of lean production, often alongside other changes. That needs both sides, the figures, and a judgement.

The four-mark pattern

  • Name the advantage. Less waste lowers costs: fewer faulty or unsold products are made.
  • Show it in the case. Mill Lane now bakes 1,240 loaves, not 1,370, to sell the same 1,200, saving $117 of ingredients a night.
  • Name the disadvantage. Small stocks and fewer spare products leave less room for error.
  • Show it in the case. With one week of flour, a late delivery from Valley Grain could stop the night's bake; with 30 spare loaves, shops can sell out.
The trap: a feature is not an advantage: 'Lean production reduces waste' describes what lean production is. It is a feature, and on its own it does not answer a question about advantages.

The advantage is what less waste does for this business: lower costs, better quality, space freed. Name that, then prove it with a figure from the case.
IB-style questionExplain[4 marks]

Explain one advantage and one disadvantage for Lena's Bakery Ltd of introducing lean production.

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Quarrow Tiles, a ceramic tile maker, is introducing lean production in its factory.

two features of lean production.
[2 marks]

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