Stock Management Just in Time and Lean Production

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Discuss the critical elements of an effective and efficient stock control system for a continuous flow production line and how these elements can contribute to the profitability of McDonald’s business By Chan Tsunglin

Introduction
Business activities involves purchasing raw materials, semi-finished goods and components, changing them into finished goods or combined with services, and selling them to the customers. Before customers purchasing these finished goods and services, they are all hold by companies and are regarded as stocks. Companies are always trying to control their stock according to the market demand and the holding opportunity costs in order to generate highest profit for them.

McDonald’s is one of the most popular chain restaurant businesses. By continuously serving customers, it can almost be regarded as a flow production factory. It builds its customer royalty by offering fast, fresh, quality food. Moreover, because it starts offering more food selections, its stock level has raised to a higher level. Therefore, to maintain their service efficiency, stock management has become one of the major challenges for McDonald’s. This essay provides analyses and evaluations of stock management concepts McDonald’s applied and discusses how they benefits to McDonald’s.

Stock management
Which level of stock should be maintained is always a big issue. Too little stock level may cause business activities stop. Business might not be able to cope with unexpected demand from market because there are not enough finished goods can be sold. Producing process may be delayed because there are no raw materials to be assembled, resulting revenue lost and numerous resources wasting such as human resources and time. By owning a low stock level, companies always need to re-order small quantity from supplier and therefore the relationship and ability of supplier is essential. (Womack, James P. and Jones, Daniel T., 2003)

On the contrary, holding a high volume of stock might also causes problems. Before company sells stocks to costumers, its capital is tied with stocks and therefore will lower the liquidity of company. Stock storage required space, which can be altered for other more productive purposes. Holding large amount of stock might also need to put more attention on deterioration and product life circle because customers will no longer purchase those goods which are damaged or out of date. Materials such as frozen food needs special storage facilities in order to keep them fresh, therefore companies need to invest more capital on its equipment.

Stock management is regarded as an important knowledge because it can diminish companies’ wastage, improving space functionality and company’s liquidation. Moreover, by implementing stock management, companies can identify many other defects within the company producing process such as flow production path and the efficiency of using human resources. Therefore it can also improve the overall productivity.

Lean Production, Just In Time and Kanban
Lean production was designed to improve flow production system created by Henry Ford, who first built the car flow production line. Because after The World War two, customers started requiring different products and this changed flow production focusing on variety of smaller quantity products. However, in adapting phrase it brings out many problems such as overproduction and the difficulty of changing production process. Therefore lean production was designed to re-exam companies and diminishes these defects. Lean Production is a management concept that not only controlling the stock, but also focuses on changing whole company’s environment and culture. Its main objective is to reduce all wastage and error, establish good teamwork and efficient information flow within whole company system to improve the overall productivity and product quality.

Just in time (JIT) can be regarded as a part of lean production. It is a...
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