Explain how lean manufacturing improves the economy’s efficiency in allocation.

Lean manufacturing refers to applying lean practices, principles, and tools to the development and manufacture of physical products aimed primarily to reduce times within the production system and response times from suppliers and customers.

Lean production incorporates robotics and further standardizes production, leading to advanced manufacturing processes.

Lean production is designed to be highly responsive to changes in the desired output mix. Quickly shifting the production of goods that are more in demand is an example of lean production. This is possible because of the efficient allocation of resources.

Industries using lean manufacturing practices employ a strategy to increase efficiency by receiving goods at the production process, thus reducing inventory costs. This reduces wastage and improves productivity and profit.

However, the practice requires accurate forecasting by the producers as the productivity might be hampered due to delays in the supply chain.