Impact of lean production and TQM

Impact of Lean Production and TQM

This topic is assessed in IBDP Business Management at Higher Level (HL) only.

Lean production and Total Quality Management (TQM) are the two most influential operational improvement philosophies of the modern era. When implemented well, they transform not only the efficiency and quality of the production process but also the culture, cost structure, and competitive position of the business. Understanding their impact — and the conditions under which that impact is realised or falls short — is the synthesis challenge that draws together the themes of Sections 5.3.

Impact on costs

The most direct financial impact of lean production is cost reduction through waste elimination. As each of the seven forms of muda is identified and removed, the resources previously consumed by that waste are freed — working capital is released from excess inventory, labour productivity rises as motion and waiting waste is eliminated, and material costs fall as defect rates reduce. These savings are not merely one-off — the kaizen culture of continuous improvement ensures that cost reduction is an ongoing process rather than a single event. Meridian Logistics Ltd's lean implementation reduced assembly throughput time by 38% and released £36,000 of inventory-tied working capital, with further improvements continuing each quarter.

TQM contributes to cost reduction through the reduction of failure costs — the most expensive component of the total cost of quality. As defect prevention improves and the cost of rework, scrap, and customer returns falls, the total quality cost budget reduces significantly. Research consistently suggests that quality failure costs in non-TQM organisations typically represent 5–20% of revenue — eliminating a significant proportion of this is a substantial profit improvement available without any new product development or market expansion.

Impact on quality and customer satisfaction

TQM directly improves the consistency and level of product and service quality by embedding quality responsibility throughout the organisation and continuously improving the processes that deliver it. Higher quality reduces customer returns, warranty claims, and reputation damage from defective products. More fundamentally, it improves customer satisfaction — customers who consistently receive what they were promised become loyal advocates rather than occasional purchasers. Lean production contributes by reducing defects (the defect muda category) and by shortening lead times — faster delivery is itself a quality attribute that customers value.

Impact on employees

The impact on employees is positive in principle but complex in practice. Lean production and TQM require employees to take greater responsibility, develop broader skills, and participate actively in improvement activities. For many workers, this is motivating — the enriched, varied work and the sense of ownership over quality and process improvement increases engagement and job satisfaction. However, lean production also creates pressure — tighter processes, reduced buffers, and higher accountability mean that problems are immediately visible and cannot be absorbed by the system. Workers in poorly implemented lean environments may experience lean as pressure for speed and cost-cutting rather than empowerment, leading to stress and resistance. The human resource implications of lean must be managed carefully for the productivity and engagement benefits to be realised.

Impact on suppliers

Lean production — particularly JIT — significantly changes the relationship between a business and its suppliers. The elimination of buffer stock means that supply failures halt production immediately rather than being absorbed by inventory. This requires much closer, more collaborative supplier relationships, with shared production schedules, joint quality improvement, and often geographical proximity. Suppliers must meet far higher standards of on-time, in-full delivery and quality than in a traditional inventory-buffered relationship. This transformation of supplier relationships can improve quality and delivery performance across the supply chain — but it concentrates supply chain risk and may disadvantage smaller suppliers who cannot meet the operational standards required.