Lean Production

Topics: Economics, Economics of production, Term Pages: 8 (2877 words) Published: September 6, 2010
Lean production is widely understood to be production based upon a range of waste saving measures inspired by Japanese manufacturing companies, particularly the Kaizen and Just in time techniques. Metov’s plastics have taken the decision upon themselves to incorporate some of the characteristics of lean production namely time management and critical path analysis into their manufacturing process and I will examine these.

One method used by Metov’s is critical path analysis (CPA). CPA is the process of planning the sequence of activities in a project in order to discover the most efficient and quickest way of completing it. Metov’s have recently been able to incorporate this technique due to recent advancement in the companies ICT system so that more advanced software which could run CPA could be utilised. There are many advantages to this technique. Metov’s constructed a CPA for setting up a new factory in Dover, in doing this they were able to work out the latest finish time was 19 weeks. This meant they were sure that two majors customers with orders worth £1million and £2million respectively would get there orders in time and this increased customer satisfaction. In addition CPA has helped with particular concentration on speed of delivery. This enabled less factory space to be wasted on storage of raw materials and more production to take place, which was of real benefit as the factory was already crowded. With increased speed of production comes an increased level of production which means they were able to sell more products and satisfy more orders/customers. CPA also assists in helping to control and review. Metov’s will be able to analyse CPA to monitor the progress against the original plan thus highlighting any delays and steps which could be taken to rectify a problem.

Time management is an approach than recognises the importance of time and seeks to reduce the level of unproductive time within an organisation. Metov’s recently adopted a 24 hour round the clock shift system so that it could meet customer orders within a matter of hours. The obvious consequence of this is increased customer satisfaction, and they made themselves a far more attractive proposition to prospective customers. As a company that supplies other secondary sector companies they have to be able to meet demands quickly to keep up with the Just in time policy of customers, using time management allows them to do this and gives them a USP. In addition time management also leads to reductions in waste, cumulating in overall increased efficiency and nearing capacity utilisation, this is an advantage to any business.

Discuss whether the economies of scale enjoyed by Metov’s Plastics in its Liverpool factory outweighed the diseconomies of scale it experienced.
An economy of scale is an advantage that an organisation gains due to an increase in size, these cause an increase in productive efficiency (a decrease in the average cost per unit of production.) The opposite to economies of scale are diseconomies of scale. This occurs when an organisation experiences an increase in size which led to a decrease in productive efficiency and an overall increase in the average cost per unit of production. Metov’s plastics have recently experienced a surge in demand that has led to them having to increase supply and they have consequently been experiencing from both economies of scale and diseconomies of scale.

On one hand the diseconomies of scale has had major negative impact upon the production process at Metov’s. They had been suffering from technical diseconomies in particular whereby production in their factory on such a large scale became difficult to organise which led to many problems. This has led to the factory becoming a very confined space so a greater number of inefficiencies and accidents, as stocks of particular products were difficult to access because of the congestion within the factory. Having such a congested factory has many...
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