Lean Manufacturing
Tara Barker, president of Allen Autoparts, was deeply concerned about being competitive in a new environment. As the company prepared to enter China, it was evident that additional effort was needed to exercise better control, reduce costs, and become more efficient. The type of environment in which a firm operates can have a significant effect on the type of control and communication system chosen and implemented. Consider, for example, a firm that produces concrete pipes and blocks. The product sand production processes are well defined and relatively stable. Functional skills are specialized to gain operating efficiencies. Interactions with suppliers and customers are mostly limited to arm’s-length transactions. Competition tends to be local or regional as opposed to national or international. A successful firm operating in this type of environment would tend to emphasize maintaining the status quo: preservation of market share, stable growth, and continuation of efficient production.
On the other hand, a firm like Allen Autoparts, involved in producing chassis and drivetrain auto parts, operates in an environment where change is rapid. Products and processes are constantly being redesigned and improved, and stiff national and international competitors are always present. The competitive environment demands that firms offer customized products and services to diverse customer segments. This, in turn, means that firms must find cost-efficient ways of producing high-variety, low-volume product and paying more attention to linkages between the firm and its suppliers and customers. Furthermore, for many industries, product life cycles are shrinking, placing greater demands on the need for innovation. Thus, organizations operating in a dynamic, rapidly changing environment are finding that adaptation and change are essential to survival. To find ways to improve performance, firms operating in this kind of environment are forced to reevaluate how they do things. Improving performance translates into constantly searching for ways to eliminate waste and to undertake only those actions that bring value to the customer. This philosophical approach to manufacturing is often referred to as lean manufacturing. Lean manufacturing is thus an approach designed to eliminate waste and maximize customer value. It is characterized by delivering the right product, in the right quantity, with the right quality (zero-defect), at the exact time the customer needs it and at the lowest possible cost.