Imagine comparing a manufacturing operation using regular lot-sizing and the same operation with a kanban/lean production approach. What would be your expectations of the difference between the total cost (i.e., inventory holding costs + setup/ordering costs) of each?
A) Inventory holding cost will increase nonlinearly with inventory.
B) Total costs will be lower for the regular lot-size operation.
C) Total costs will be lower for the kanban/lean production operation.
D) The order quantity will be larger for the kanban/lean production approach.
E) As long as the total quantity is the same, total costs will be the same.

Question

Quizplus · Accepted Answer

Kanban/lean production systems are designed to minimize inventory holding costs by only producing what is needed when it is needed, thus reducing the risk of overproduction and excess inventory. This results in lower total costs compared to regular lot-sizing operations. While the order quantity may be smaller for kanban/lean production systems, this does not necessarily mean higher costs as the focus is on minimizing waste and improving efficiency. Therefore, option C is the correct choice.

Imagine Comparing a Manufacturing Operation Using Regular Lot-Sizing and the Same