Lean Management
AS Economics and Business
Unit 2b
By Mrs Hilton for revisionstation
Lesson Objectives
• To be able to discuss Just in Time (JIT) management of
stock
• To be able to identify how short product development
lead-times can give a business competitive advantage
• To be able to discuss how minimising waste of
resources can give a business competitive advantage
• To be able to answer a past paper question based on
the topic
Starter
• You have two cats.
• Each cat eats 2 pouches of wet food a day (one at 6 am one at
2pm)
• Each cat also eats 25g of go-Kat dry food a day
• You shop once a week and only have limited money
• How much cat food a week do you buy?
• Is there an efficient way to ensure that you never run out of cat
food other than buying loads and loads of cat food and stockpiling?
• What if you don’t have the storage space?
• What if you have a tight weekly budget?
• What is your re-order point?
Just-in-time
• A customer order pulls the parts through the system to
the finished product – built to order
• In a car manufacturer customers can select seats, trim,
options and colour. Parts are ordered as the car moves
through production. Seats arrive just as they are
needed.
Advantages of JIT
• As parts are ordered as they are
needed there is no wastage
which fits the TQM theory of
zero wastage
• Parts are not warehoused which
is a massive cost saving in terms
of premises and staff
• Less capital tied up in stock,
therefore reduced average costs
of production of each item
JIT and suppliers
• To make JIT work the large
manufacturer needs to haver
excellent working
relationships with their
smaller parts suppliers.
• JIT does not work when there
are delivery or quality issues
• No buffer stocks are held in a
JIT system so if delivery does
not arrive the product cannot
be made
JIT and employees
• Employees of the business
may need training to help
them work with a JIT /
Kanban system
• They may for part of a
quality circle or of a Kaizen
team and are encouraged
to sort problems on the
equipment that they work
with.
Short product development lead times
• The quicker a business can get
an idea to a fully working
product the sooner they will
gain:
• Competitive advantage
• First mover advantage
• Short lead-times that is from
design to final product mean
that a business can respond
quickly to new trends
Minimising waste of resources
Sample question 1
[4]
Answer question 1
Correct answer is D
• JIT stock management is a stock control method which relies on no buffer stock
and/or has regular deliveries from suppliers when required (1 mark).
• Nissan’s capital expenditure of stock will therefore be less than traditional stock
control methods as stock is not stored (1 mark)
• Less capital will be required to store/warehouse the stock (1 mark).
• Employee training may not necessarily change/decrease as there could be a need for
more employee training to cope with the JIT system (1 mark).
• There will be a decreased not an increase in product defects by using JIT as quality
improves using JIT/lean management techniques (1 mark)
• Average Costs are more likely to decrease rather than increase due to having less
stock holding costs (1 mark)
Any acceptable answer which shows selective knowledge/understanding/application
and/or development
NB up to 2 marks out of 3 may be gained for part (b) if part (a) is incorrect
• Maximum 2 marks for explaining why distracters are incorrect
Sample question 2
[4]
Answer question 2
Correct answer is C
• JIT involves the use of minimal stock levels, i.e. no buffer stocks. (1 mark)
• This will mean more frequent deliveries rather than a decrease in deliveries
order to maintain fully stocked shelves in the supermarket. (1 mark)
• JIT will lead to a fall in average costs rather than an increase as capital is not
tied up in stock. (1 mark)
• There will be a closer relationship with suppliers as deliveries are made
more frequently so Aldi will need to have more contact with suppliers. (1
mark)
• This will lead to a reduction in stock levels not an increase in stock levels as
stock is only ordered as it is required (1 mark)
Any acceptable answer which shows selective
knowledge/understanding/application and/or development
NB up to 2 marks out of 3 may be gained for part (b) if part (a) is incorrect
Maximum 2 marks for explaining why distracters are incorrect
Sample question 3
Answer question 3
Knowledge 1, Application 1, Analysis 2
Knowledge: up to 1 mark are available for explaining what is
meant by JIT (1 mark). E.g. no buffer stocks are kept
Application: up to 1 mark is available for explaining how JIT can
help TVS to reduce costs due to less storage (1 mark) and therefore
increasing profit margins (1 mark) or lead to a competitive
advantage in price for TVS (1 mark) or similar use of context.
Analysis: up to 2 marks are available for developing the above and
showing how JIT may reduce lead times (1 mark) and/or sales
pulling orders (1 mark). More able candidates may see the benefits
in terms of opportunity costs (1 mark).
Sample question 4
• [4]
Answer question 4
•
Correct answer is D less wastage
• Lean management is an approach by business to increase efficiency (1 mark) in
which may include just in time production/ short product development leads times /
minimising waste (1 mark).
• Lean management aims to remove waste whilst maintaining quality (1 mark).
• Stock levels using JIT will be minimised rather than increased by using Lean
management (1 mark).
• Labour Intensity will either remain the same or will have no impact on the use of
lean management (1 mark).
• Excess capacity should be reduced with lean management as the business is more
efficient (1 mark).
Any acceptable answer which shows selective knowledge/understanding/application
and/or development
NB up to 2 marks out of 3 may be gained for part (b) if part (a) is incorrect
Maximum 2 marks for explaining why distracters are incorrect
Revision Video