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| Chapter 6 provides a detailed examination of costs relevant to operations. Cost reduction is a universal approach to increasing productivity. Cost reduction increases net income, which improves all profitability measures. The practice of reducing costs by minimizing process inputs has become known as lean production or lean manufacturing. Lean manufacturing minimizes wastes and stresses efficient use of resources. In addition to improving profitability measures by reducing investments required to obtain the same output levels, lean production also improves quality levels and can respond more quickly to changes in customer needs because. | VIDEOlp1 |
| Lean production isn't just a random reduction of all possible costs. It is an integrated system that affects all aspects of the business, from order taking to shipping. | VIDEOlp2 |
| Lean approaches reduce lead times, improving response time and also improving the predictability of lead times, which makes for a higher level of dependability for delivery promises. | VIDEOlp3 |
| Caterpillar has been extremely successful in utilizing the lean approach to production. Even in expansion, with many different models of tractors, caterpillar has continued to stress lean production approaches. Rather than have one large factory, Caterpillar separates its production into smaller focused plants which are separate strategic business units (SBUs). Small SBU's are common among manufacturers that practice lean production approaches. The smaller size provides greater flexibility and responsiveness to customers and marketing. | VIDEOlp4 |
| Another company that has reaped benefits from lean production is Cummins engine. They have incorporated group technology into a cellular manufacturing layout. This improves lead times as well as inventory, and provides quicker response to customer orders. REduced time in the productive system and reduced inventory levels provides a substantial reduction in cost. | VIDEOlp5 |
| Another aspect of lean production is jidoka which stresses quality attention throughout production processes. This effort eliminates waste and all of the costs associated with it. | VIDEOlp6 |