Lean Production: Choosing the Right Production Technology
Which production technology should a firm choose according to lean production principles?
A firm should choose the production technology with the lowest total cost, which may result in differing levels of automation based on the relative costs of labor and machinery. For instance, if machine hours are cheaper, the firm would lean towards more automated systems. Conversely, if the cost of machinery increases, there would be a shift towards more labor-intensive methods.
Answer:
In lean production, a firm should choose the production technology with the lowest total cost, which may result in differing levels of automation based on the relative costs of labor and machinery.
The Lean approach to business processes, originally derived from the enormously influential Toyota production system (TPS), is based on three fundamental principles: delivering value as defined by the customer, eliminating waste, and continuous improvement. In the context of choosing the right production technology, lean principles emphasize the importance of minimizing waste and maximizing efficiency in the manufacturing process.
When evaluating different production technologies, lean principles suggest that a firm should prefer the option that offers the lowest total cost. For example, if production technology 3 has the lowest total cost due to cheaper machine hours, it would be the logical choice under lean thinking. This is because lean advocates for a cost-effective production setup, which often means incorporating more automation and relying less on labor when machinery becomes less expensive.
In contrast, if machine costs increase, as in the scenario where production technology 2 becomes the most cost-effective, the firm should gravitate towards this option. The change in relative costs would lead to a production process that is less capital intensive and more labor-intensive, reflecting a shift towards less machinery and more labor.
The historical trend, such as Ford's assembly line approach, also reflects lean production's emphasis on efficiency, where the goal was to reduce labor costs and simplify tasks to the extent that workers did not require advanced skills, illustrating a move towards mechanization and standardized products.