Inventories and lean production Edexcel International GCSE Business revision
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In plain words
Inventory, or stock, is what a business has on its shelves: materials waiting to be used, part-finished goods, and finished products waiting to be sold. Hold too little and production stops. Hold too much and money sits idle in a warehouse.
Lean production is the idea of cutting out every kind of waste, including stock that is not needed.
6 things to know
- Why businesses hold inventories: so that production does not stop when a delivery is late, to meet a sudden rise in demand, and to get discounts for buying in bulk.
- The costs of holding them: storage, money tied up, and the risk of damage, theft or goods going out of date.
- Lean production means producing goods and services with the minimum waste of time, materials and other resources.
- Just-in-time (JIT): materials are delivered just as they are needed, and little or no inventory is held. Storage costs and waste fall, but production stops if a supplier is late.
- Kaizen: continuous improvement through many small changes, suggested by the workers themselves.
- Benefits of lean production: lower costs, better quality, and faster response to customers.
Tips and tricks
- JIT depends completely on reliable suppliers. That is the risk to mention every time.
- Kaizen is not one big change. It is a habit of small improvements, and it works because the people doing the job know it best.
It lands in your notebook with its questions as flashcards.
Inventories and lean production: 5 questions and answers
These are the quiz’s questions. Do the quiz first, then come back here for the ones that got you.
Which is a cost of holding large inventories?
Cash spent on stock cannot be used for anything else.
What is just-in-time?
Stock arrives as it is needed, so almost none is stored.
Which is the main risk of just-in-time?
There is no buffer of stock to fall back on.
Kaizen means
Improvements are small, frequent and suggested by staff.
What is the aim of lean production?
Waste of time, materials and space all add cost without adding value.
Quiz
5 questions
Tap an answer and you’ll see straight away whether it’s right, and why.
Worksheet
3 questions, 8 marks. Write your answers on paper, then check them.
Inventories and lean production
Edexcel International GCSE Business 4BS1 · 8 marks · papermunch.org
Name ______________________________ Date ______________
State two reasons why a business holds inventories.[2]
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Any two of: to keep production going if deliveries are late, to meet unexpected demand, to benefit from bulk-buying discounts.
Explain one advantage and one disadvantage of just-in-time inventory control.[3]
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Advantage: little stock is held, so storage costs are low and less money is tied up. Disadvantage: if a delivery is late, there is nothing in reserve and production has to stop.
Explain how Kaizen can improve efficiency.[3]
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Workers are encouraged to suggest small improvements to the way they do their jobs. Many small changes add up, reducing waste and raising productivity and quality over time.
Answers: Inventories and lean production
- 1. Any two of: to keep production going if deliveries are late, to meet unexpected demand, to benefit from bulk-buying discounts.
- 2. Advantage: little stock is held, so storage costs are low and less money is tied up. Disadvantage: if a delivery is late, there is nothing in reserve and production has to stop.
- 3. Workers are encouraged to suggest small improvements to the way they do their jobs. Many small changes add up, reducing waste and raising productivity and quality over time.