Wednesday, September 18, 2013

Some Risks of the "Lean" Approach

Although one does not deny the benefits of lean manufacturing processes, some risks are apparent when using a lean approach.

Running out of supplies
If an organization is good at following a lean approach, there is a constant risk of running out of supplies. Natural disasters or human factors (such as labor strikes) may bring production to a complete halt, leading to huge losses, if low levels of supplies are maintained all the time. It is therefore critical to have a comprehensive risk mitigation strategy, which may requires a great amount of expertise and planning.

Standardization trade-offs
Standardized components across different products is one of the aspects of lean manufacturing, but can lead to large scale recalls across all products due to a defect in the common part used. It is a major, but necessary risk taken by the manufacturers of products from automobiles to home appliances in order to keep costs downs.

Supplier relations
The fact that an organization is extremely lean (which makes its account books look good), it is not necessary that its suppliers may be better off. Dell’s suppliers carry 20 to 80 days’ worth of inventory, but it carries only a few days’ worth. The varying demand forces its suppliers to carry greater risk and still charge lower prices, because of the sheer volume of products shipped to Dell. This may work for an organization in the short run, but it keeps getting built in to the long term cost and will hurt supplier relations in the long term.

In addition to the class readings, I found the following articles interesting, and have used some thoughts from the authors:
How Lean Manufacturing Can Backfire - Daisuke Wakabayashi, Wall Street Journal

Can managers reduce the risks of lean production? - Financial Times

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.