2.3.4 Impact on costs and sales revenue

Question 1

Time based management

Answer 1

Aims to save time wherever possible → no one is delayed by waiting for other employees

Question 2

Product development lead time

Answer 2

Starts from the first idea about the product, through design and development period, to selling the final product

Question 3

minimising waste of resources

how does lean production achieve this

Answer 3

Lean prod increases efficiency and productivity and cuts costs by devising practical ways to reduce waste during the production process
- Reducing the need to correct defects
- Cutting the cost of storing inputs and finished products
- Keeping production levels in line with current demand
- Seeking process innovation - technical improvements in the production process
- Avoiding over processing → adding more value than customers require
- Time based management: reduces time spent on moving inputs/moving employees around the workplace

Question 4

competitive advantage of short product development lead times

Answer 4

Successful businesses are nimble → adapt to dynamic markets and changing circumstances, need to respond faster than competing businesses

1. Speed of development: takes time to create a new product or to adapt to an old one; the business responds quickly when market demand changes, its market is likely to grow → shorter the product development lead time, the faster the new product can get to the market
2. Speed of delivery: businesses that can expand output in response to unexpected new orders, quickly and efficiently, will get more customers
3. Flexibility: capital and labour → capital equipment can make a range of differentiated products, the business will be able to adapt easily to market change; labour when multi skilled and jobs can be switched = greater adaptability

Question 5

benefits of short production development lead times

Answer 5

• Few products will fail to sell because the business can cease production as soon as downturn in demand is observed
• Time based management + flexibility: make it possible to switch production as soon as necessary, to something that sells better

Gives the business COMPETITIVE ADVANTAGE
- Reduces development time in product life cycle
- Reduces costs
- Improves cash flow
- Can respond rapidly to changes in consumer tastes and demands
- Can enter the market before competitors do

Question 6

drawback of short production development lead times

Answer 6

• Requires that capital equipment, labour and management are flexible enough to do this → Only then can business produce or redesign a product quickly in response to market forces