The Business Book

(Joyce) #1


arket globalization and
fast-paced technological
change have raised
customer expectations, and
companies can succeed or fail
depending on their ability to deliver
the right goods at the right price, at
the right time, via the right
distribution channels.
If getting it wrong can be costly,
getting it right takes time. It means
constantly evaluating every part of
the production process to see
where it can be made more efficient
without a perceived drop in quality
or sales. Henry Ford was the first
industrialist to recognize the value
of offering customers “more for
less,” and made it his business to
make improvements to his cars
every year, while simultaneously
dropping their price. Today, many
use a “low cost, good quality”
strategy to attract customers,
especially during times of recession.

Low-cost efficiency
One of the most effective ways of
lowering costs while maintaining
value is to reduce waste. Known as
“lean production,” it entails
identifying and cutting waste
across the process, from production
to delivery. Lean production
developed from the ideas of Joseph
Juran, a management consultant

who developed innovative ways of
improving quality and efficiency at
the same time. In the 1950s, the
Union of Japanese Scientists and
Engineers invited him to lecture to
hundreds of top-level executives,
who quickly put his ideas to
practical use. Toyota was among
the many businesses who
implemented his methods. The
company’s approach ultimately grew
into the “just-in-time” production
system that is widely used today.
Stock control plays a large part
in the “just-in-time” system, and is
vital to a balanced cash flow. Too
much stock in the warehouse
represents money that is doing

nothing; if there is not enough stock
to meet demand, customers may
search out alternative suppliers.
Cost reduction is the holy grail
of production managers, and one
way to achieve this is to simplify
production methods. This involves
removing unnecessary and costly
steps, or innovating so that stages
become faster or less wasteful.
Entrepreneur Michael Dell saved
time and money by cutting out the
retailer and letting customers design
their own computers; these were
produced to order (“just in time”)
and sold directly to the end user.

Creativity and innovation
Innovation can come from any part
of the business. The Japanese idea
of kaizen—meaning continuous
improvement—is an ancient
philosophy, but it was first used in
an industrial setting by Toyota in
the 1950s. Founder Elji Toyoda
expected all employees—from the
factory floor to senior executives—
to constantly come up with ideas
for improving products or production.
This idea took hold around the
world. Companies recognized value
in setting up teams to increase
creativity. However, large companies
often limit innovation—or at least
the testing of its validity—to an
R&D (research and development)


Manufacturing is more than
just putting parts together.
It’s coming up with ideas,
testing principles and
perfecting the engineering,
as well as final assembly.
James Dyson
UK inventor (1947–)
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