Contents

• Introduction
• Supply chain
• Pull system of production – an integral part of lean process
• Toyota Motor Corporation – best example of Pull system
• Pull system of production at McDonald’s
• Push system of production – the conventional approach
• Push and Pull – a practical coexistence
• Push and Pull as observed at Toyota – the leagile system
• Some other managerial tools implemented by Toyota to ensure leanness
• Lean and agile management in service industries
• References

Description

The basic objective of a producer is to earn profit and that is possible only when cost of production is less than revenue generated through sales. One very important element of cost is the cost of capital. Cost of capital has two components – cost of fixed capital and cost of working capital. While cost of fixed capital is more or less same for firms competing in the same industry, it is cost of working capital that differentiates the leader from rest of the pack. Working capital, however, depends almost entirely on supply chain management and inventory control. If a proper and taut control over inventory is not maintained, the level of capital employed can never be brought down while keeping the operational efficiency intact.
Production processes that are able to implement an efficient supply chain and also exert a strict control over inventories are lean management systems that do not carry unnecessary and wasteful load of slow and non-moving inventory. This drastically reduces working capital cost and automatically boosts profitability.