Exam Questions Flashcards
1
Q
What are the limitations of the lean production approach? Explain, with examples, where lean approaches might be less effective.
A
lean approaches do have some potential disadvantages:
- Reputation and intangible effects may also make lean manufacturing less appealing. It is likely that any shop with a store on e.g. Regent Street or Oxford Street in london incurs large wasted transportation costs due to the high traffic and limited access problems for delivery. However, due to the reputation of these shopping venues, it is profitable for the company to incur this waste.
- lead times may be really important e.g. MK Electric was happy to incur higher transportation costs and motion costs to fly plugs to the Middle East if a low lead time was of significant value to the deal.
- Inventory has several benefits - it is a buffer against uncertainty of supply or demand, allows lower commodity costs/economics of scale to be taken advantage of, and allows the EOQ model to be used. These benefits may all suggest that inventory ‘waste’ will be financially viable and increase stability in volatile markets e.g. Mars and cocoa buying.
- Competitive effects - Nokia bought up the whole remaining stock when a key component provider’s factory burnt down, forcing Ericsson to be bailed out by Sony as this was the sole provider. This was not lean but allowed them market domination.
