The Business Book

M

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)

286 INTRODUCTION

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–)