Final answer:
Lean operations are characterized by production in self-contained cells, employee empowerment, and JIT inventory systems, all aimed at enhancing efficiency, reducing costs, and improving quality. Such operations also focus on economies of scale, where increased output leads to lower per-unit costs.
Step-by-step explanation:
Lean operations are generally characterized by production in self-contained cells, employee empowerment, and JIT (Just-In-Time) inventory systems. Self-contained cells allow for a more flexible and efficient production process as products move through a cell of workers and machines dedicated to a single product or a small range of products.
Employee empowerment fosters a culture where workers have the authority to stop production to correct quality issues, leading to a higher overall quality and fewer defects. JIT inventory systems, a key Japanese business innovation, eliminate the need for large warehouses to store parts, ensuring parts are delivered as needed, which enhances quality control and reduces warehousing costs.
However, as just-in-time delivery can create leverage for workers, disruptions such as strikes at parts sub-assembly plants can have a significant impact, potentially shutting down the entire supply chain due to the lack of inventory buffers.
Once a firm has chosen the least costly production technology, it can look at the optimal scale of production to take advantage of economies of scale, where the cost per unit goes down as the quantity of output goes up. This principle underlies the operations of large retailers like Costco or Walmart, where larger scale operations result in lower average costs compared to smaller operations.