Final answer:
True, underutilization of employee knowledge/skill is considered waste in a lean production environment because it represents a failure to maximize productivity and create value. This form of waste can lead to demotivation among employees and represents a lack of leveraging the company's comparative advantage.
Step-by-step explanation:
Underutilization of employee knowledge/skill is indeed considered waste in a lean production environment. In lean production, any resource that does not directly contribute to the creation of value for the end customer is seen as a form of waste. This includes the skills and knowledge of employees, which are valuable resources. When an employee's full potential is not harnessed, it not only results in lost productivity but can also lead to demotivation and decreased morale, reducing overall efficiency even further.
An analogy can be drawn from the principles of comparative advantage in economics. Just as two economies can benefit from trade by focusing on the production where they have the greatest efficiency, in a business context, fully utilizing an employee's skills can similarly maximize productivity and efficiency. Lack of full utilization means that the company is not leveraging its comparative advantage within its labor force.
Allocative inefficiency is also considered wasteful because it implies that the company is not allocating its resources in a way that corresponds with the preferences and needs of the market. Hence, the company may be producing something that is either not desired at all or not in the quantity that the market demands. This type of inefficiency leads to lost opportunity for revenue and market engagement.