Keramika is a pottery business in Croatia. It was set up 8 years ago by Petra, who trained as a ceramics artist. She employs 6 workers who each produce hand...

(a) Lean production is a set of techniques aimed at reducing all forms of waste in the production process [1] in order to improve efficiency and lower costs while maintaining or improving quality. [1]

(b) Two examples of waste in a production process:

1. Defective or faulty products that must be scrapped or reworked. [1]
2. Excess inventory or stock held in storage that is not immediately needed. [1]

(c) Two ways Keramika could reduce its current 15% defect rate:

1. Introduce quality control checks at each stage of production [1] - Rather than inspecting items only when they are finished, Petra could have workers check each piece during the shaping and glazing process. This allows faults to be identified and corrected early, before further time and materials are wasted on a piece that will ultimately be discarded. [1]
2. Invest in training for workers [1] - Better-trained workers will develop more consistent techniques when shaping and glazing the pottery, reducing the proportion of mistakes. With only 6 workers, targeted training would be cost-effective and could bring the defect rate well below 15%. [1]

(d) Two advantages to Keramika of using lean production techniques for the retailer's contract:

1. Reduced waste lowers production costs [1] - Lean production aims to eliminate defective output. Instead of discarding 15% of items, Keramika would waste far fewer materials and less labour time per unit. [1] On an order of 5,000 plant pots per month, even a small reduction in waste would translate into significant cost savings over time. [1]
2. Just-in-time stock management reduces storage costs [1] - Lean production means ordering clay and glaze only when they are needed, rather than holding large quantities in a warehouse. [1] This frees up cash flow for a small business taking on a large new contract, and reduces the risk of materials deteriorating or becoming surplus. [1]

(e) Whether Petra should accept the retailer's contract depends on weighing the opportunities against the risks:

Arguments for accepting:

• A guaranteed regular order of 5,000 pots per month provides stable, predictable income, giving financial security to a small business.
• Adopting lean production techniques to fulfil the contract would also reduce the current 15% defect rate across all operations, improving efficiency for Keramika's existing handmade products too.
• Working with a large home decoration retailer raises Keramika's profile and could lead to further commercial opportunities.

Arguments against accepting:

• Producing 5,000 identical plant pots each month is fundamentally different from making unique, handmade items. The skills and processes are very different.
• Workers accustomed to creative, varied work may resist the change. Some skilled artisans could leave if the work becomes repetitive.
• Petra may need expensive new equipment such as moulds or an upgraded kiln, and if the contract ends, these investments may be wasted.
• The retailer may demand low prices, squeezing margins on the pots.

Conclusion: Petra should accept the contract but plan the transition carefully. The regular income and the operational improvements from lean production are valuable. However, she should maintain a separate handmade production line so that Keramika's reputation for unique pottery is preserved. Running both operations simultaneously allows the business to benefit from the retailer's contract while protecting the brand identity that built its strong reputation over 8 years. [5-6 marks for balanced evaluation with justified recommendation; 3-4 for some analysis; 1-2 for limited points]