Lean Production and Quality Management PDF

5.3 Lean production and quality management Mtro. Ian M. Guillen Ortega Efficiency and waste These two terms are interconnected. Efficiency looks at how well a company can turn its inputs into useful goods and services. Waste is any input that is not transformed into goods and serv...

5.3 Lean production and quality management Mtro. Ian M. Guillen Ortega Efficiency and waste These two terms are interconnected. Efficiency looks at how well a company can turn its inputs into useful goods and services. Waste is any input that is not transformed into goods and services. If waste can be reduced, then efficiency should improve. Efficiency At the heart of operational decision making are considerations of efficiency – how much gets produced (output) compared with the inputs. If a firm can produce more goods or services (increasing output) using the same or even fewer resources (inputs), then the company is more efficient. In very simple terms, better efficiency reduces costs. If more output is produced with the same inputs, or if the same output is achieved with fewer inputs, then average cost per unit will fall. Labour For many firms, labour costs are the most productivity. expensive resource input. Therefore labour efficiency can have a significant effect on unit costs. The more efficiently staff work, the fewer of them will be needed or the more units they will produce in a given period, thus reducing average labour costs. As discussed in a later unit, the efficiency of a firm’s workforce can be measured using labour productivity. Example Imagine that you run a large hotel chain. One of the biggest variable costs of letting a room for the night is the cost of cleaning it after the guests have left. If you pay your cleaning staff $12 an hour and it takes one person 30 minutes to clean a room, then the average variable cost will be $6. However, if you train your staff and give them the necessary tools to do their job, cleaning time could be reduced to 20 minutes. This increased efficiency will see the average variable cost fall to just $4 per room. Productivity versus quality Our analysis tells us that higher labour productivity should reduce average costs and improve potential profit. It is important, however, that firms do not sacrifice quality to achieve higher output. If work is rushed, or workers are put under too much pressure, then mistakes will be made. This can lead to increasing amounts of waste or, worse still, faulty products. Effective quality control is essential to ensure mistakes are minimized and good analysis is essential to identifying and understanding these issues. Waste Waste can be defined as any part of the production process that does not add value to the final consumer. If waste can be reduced, costs are also reduced, leading to higher total profit. types of waste: TIM WOOD. Transportation – moving components between work stations or from suppliers. Inventory – building up excessive stocks, resulting in storage costs. Motion – staff risking injury while making the product. Waiting – delays in the production process. Over-processing – adding features to a product that are not required by the customer and therefore do not add value. Over-production – producing an inventory of finished goods before they are needed. This can lead to wastage in fast-moving markets. Defects – finished goods that do not meet quality control standards. Exercise Individually tell me how company/industry can have the 7 different types of waste.