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Operations Management Just-in-Time and Lean Production Systems Chapter 16

Operations Management Just-in-Time and Lean Production Systems Chapter 16. Outline. JUST-IN-TIME AND LEAN PRODUCTION GLOBAL COMPANY PROFILE: GREEN GEAR CYCLING SUPPLIERS Goals of JIT Partnerships Concerns of Suppliers JIT LAYOUT Distance Reduction Increased Flexibility

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Operations Management Just-in-Time and Lean Production Systems Chapter 16

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  1. Operations ManagementJust-in-Time and Lean Production SystemsChapter 16 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  2. Outline • JUST-IN-TIME AND LEAN PRODUCTION • GLOBAL COMPANY PROFILE: GREEN GEAR CYCLING • SUPPLIERS • Goals of JIT Partnerships • Concerns of Suppliers • JIT LAYOUT • Distance Reduction • Increased Flexibility • Impact on Employees • Reduced Space and Inventory © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  3. Outline - Continued • INVENTORY • Reduce Variability • Reduce Inventory • Reduce Lot Sizes • Reduce Setup Costs • SCHEDULING • Level Schedules • Kanban • QUALITY • EMPLOYEE EMPOWERMENT • LEAN PRODUCTION • JIT IN SERVICES © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  4. Learning Objectives When you complete this supplement, you should be able to : Identify or Define: • Types of waste • Variability • Kanban Describe or Explain: • Just-in-Time (JIT) philosophy • Pull systems • Push systems • The goals of JIT partnerships • Lean Production © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  5. Introductory Quotation Waste is ‘anything other than the minimum amount of equipment, materials, parts, space, and worker’s time, which are absolutely essential to add value to the product.’ — Shoichiro Toyoda President, Toyota © 1995 Corel Corp. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  6. Green Gear Cycling • Designs and manufacturers high performance travel bicycles (bike-in-a-suitcase!) • Strategy is mass customization with low inventory, work cells, and elimination of machine setups. • Major focus on JIT and supply-chain management. • Two lines with seven work cells • One day throughput time • Focus on quality © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  7. Customer Distribution Inventories Supplier Distribution Inventories Productions Inventories Work-in-process Inventory Raw Material Inventory Factory Finished Goods Inventory Retailer Inventory Raw material in-transit Orders Component Inventory Warehouse Inventory Sub-assembly parts in-transit MRO Inventory Orders Maintenance, repair, and ordering supplies in-transit Production and Inventory Control Shipping and Traffic Purchasing Supplier – Production – Distribution System © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  8. What is Just-in-Time? • Management philosophy of continuous and forced problem solving • Supplies and components are ‘pulled’ through system to arrive where they are needed when they are needed. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  9. Lean Production • Lean Production supplies customers with exactly what the customer wants, when the customer wants, without waste, through continuous improvement. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  10. What Does Just-in-Time Do? • Attacks waste • Anything not adding value to the product • From the customer’s perspective • Exposes problems and bottlenecks caused by variability • Deviation from optimum • Achieves streamlined production • By reducing inventory © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  11. Types of Waste • Overproduction • Waiting • Transportation • Inefficient processing • Inventory • Unnecessary motion • Product defects © 1995 Corel Corp. © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  12. Waste Reduction (%) Setup Time 20% Scrap 30% Finished Goods Inventory 30% Space 40% Lead Time 50% Raw Material Inventory 50% Work-in-Process Inventory 82% 0% 20% 40% 60% 80% 100% JIT Reduced Wasteat Hewlett-Packard © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  13. Variability Occurs Because • Employees, machines, and suppliers produce units that do not conform to standards, are late, or are not the proper quantity • Engineering drawings or specifications are inaccurate • Production personnel try to produce before drawings or specifications are complete • Customer demands are unknown © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  14. Push versus Pull • Push system: material is pushedinto downstream workstations regardless of whether resources are available • Pull system: material is pulled to a workstation just as it is needed © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  15. JIT Contribution to Competitive Advantage • Suppliers • reduced number of vendors • supportive supplier relationships • quality deliveries on time • Layout • work-cell layouts with testing at each step of the process • group technology • movable, changeable, flexible machinery • high level of workplace organization and neatness • reduced space for inventory • delivery direct to work areas © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  16. JIT Contribution to Competitive Advantage - Continued • Inventory • small lot sizes • low setup times • specialized bins for holding set number of parts • Scheduling • zero deviation from schedules • level schedules • suppliers informed of schedules • Kanban techniques © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  17. JIT Contribution to Competitive Advantage - Continued • Preventive Maintenance • scheduled • daily routine • operator involvement • Quality Production • statistical process control • quality by suppliers • quality within firm © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  18. JIT Contribution to Competitive Advantage - Continued • Employee Empowerment • empowered and cross-trained employees • few job classifications to ensure flexibility of employees • training support • Commitment • support of management, employees, and suppliers © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  19. Results • Queue and delay reduction, speedier throughput, freed assets, and winning orders • Quality improvement, reduces waste and wins orders • Cost reduction increases margin or reduces selling price • Variability reductions in the workplace reduces waste and wins orders • Rework reduction, reduces waste and wins orders © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  20. Yielding Faster response to the customer at lower cost and higher quality A competitive advantage! © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  21. Suppliers Employee Empowerment Layout JIT Quality Inventory Preventive Maintenance Scheduling Just-in-TimeSuccess Factors © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  22. Suppliers • Incoming material and finished goods involve waste • Buyer and supplier form JIT partnerships • JIT partnerships eliminate • Unnecessary activities • In-plant inventory • In-transit inventory • Poor suppliers © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  23. Characteristics of JIT PartnershipsSuppliers • Few • Nearby • Repeat business • Analysis and support to enable desirable suppliers to become or stay price competitive • Competitive bidding mostly limited to new purchases • Buyer resists vertical integration and subsequent wipeout of supplier business • Suppliers encouraged to extend JIT to their suppliers (2nd and 3rd tier suppliers) © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  24. Characteristics of JIT Partnerships Quantities • Steady output rate • Frequent deliveries in small-lot quantities • Long-term contract agreements • Minimal or no paperwork (use EDI or internet) • Delivery quantities fixed for whole contract term • Little or no permissible overage or underage • Suppliers package in exact quantities • Suppliers reduce their production lot sizes © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  25. Characteristics of JIT Partnerships Quality • Minimal product specifications imposed on suppliers • Help suppliers meet quality requirements • Close relationship between buyers’ and suppliers quality assurance people • Suppliers use poka-yoke and process control charts instead of lot-sampling techniques © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  26. Characteristics of JIT Partnerships Shipping • Scheduling of inbound freight • Gain control by use of company-owned or contract shipping and warehousing • Use of Advanced Shipping Notice (ASN) © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  27. Goals of JIT partnerships • Elimination of unnecessary activities • Elimination of in-plant inventory • Elimination of in-transit inventory • Elimination of poor suppliers © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  28. Concerns of Suppliers • Diversification • Poor customer scheduling • Frequent engineering changes • Quality assurance • Small lot sizes • Physical proximity © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  29. Traditional Flow Production Process (stream of water) Suppliers Customers Inventory (stagnant ponds) Flow with JIT Material(water in stream) Suppliers Customers Streamlined Production © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  30. Layout • JIT objective: Reduce movement of people and material • Movement is waste! • JIT requires • Work cells for product families • Moveable or changeable machines • Short distances • Little space for inventory • Delivery directly to work areas © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  31. Process Layout Work Cell 1 Lathe Saw 2 Saw Press Lathe Saw 2 4 Lathe Lathe 5 Heat Treat Grinder 3 1 Press Grinder Heat Treat 6 Press Grinder Work Cell versus Process Layout © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  32. Layout Tactics • Build work cells for families of products • Minimize distance • Design little space for inventory • Improve employee communication • Use poka-yoke devices • Build flexible or movable equipment • Cross train workers to add flexibility © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  33. Inventory • Traditional: inventory exists in case problems arise • JIT objective: eliminate inventory • JIT requires • Small lot sizes • Low setup time • Containers for fixed number of parts • JIT inventory: Minimum inventory to keep system running © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  34. JIT Inventory Tactics • Use a pull system to move inventory • Reduce lot size • Reduce setup time • Develop Just-in-Time delivery systems with suppliers • Deliver directly to point of use • Perform-to-schedule • Reduce setup time • Use group technology © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  35. Process downtime Process downtime Scrap Scrap Setup time Setup time Quality problems Quality problems Late deliveries Late deliveries Inventory Hides Problems Just as Water in a Lake Hides Rocks Inventory level Inventory level © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  36. Work in process inventory level(hides problems) Unreliable Vendors Capacity Imbalances Scrap Lowering Inventory Reduces Waste © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  37. Reducing inventory revealsproblems so they can be solved. WIP Unreliable Vendors Capacity Imbalances Scrap Lowering Inventory Reduces Waste © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  38. Reducing inventory revealsproblems so they can be solved. WIP Unreliable Vendors Capacity Imbalances Scrap Lowering Inventory Reduces Waste © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  39. Reducing Lot Sizes Increases the Number of Lots Customer orders 10 Lot size = 5 Lot 2 Lot 1 Lot size = 2 Lot 1 Lot 2 Lot 3 Lot 4 Lot 5 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  40. …Which Increases Inventory Costs Cost Total Cost Holding Cost Setup Cost Lot Size SmallerLot Size Optimal Lot Size © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  41. Cost Total Cost Holding Cost Setup Cost Original optimal lot size New optimal lot size Lot Size Unless Setup Costs are Reduced © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  42. Q1 When average order size = 200, average inventory is 100 Q2 When average order size = 100, average inventory is 50 200 Inventory 100 Time Frequent Orders can Reduce Average Inventory © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  43. Sum of ordering and holding cost Cost T1 T2 S1 S2 Lot size Lower Total Cost Requires Small Lot Sizes and Lower Setup Costs © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  44. Steps to Reduce Setup Time 90 min Initial Setup Time Separate setup into preparation, and actual setup, doing as much as possible while the machine/process is running (save 30 minutes) Step 1 60 min Move material closer and improve material handling (save 20 minutes) Step 2 45 min Standardize and improve tooling (save 15 minutes) Step 3 25 min Use one-touch system to eliminate adjustments (save 10 minutes) Training operators and standardizing work procedures (save 2 minutes) Step 4 15 min 13 min Step 5 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  45. Scheduling • Involves timing of operations • JIT requires • Communicating schedules to suppliers • Level schedules • Freezing part of schedule nearest due date • Small lots • Kanban techniques © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  46. JIT Scheduling Tactics • Communicate the schedule to suppliers • Make level schedules • Freeze part of the schedule • Perform to schedule • Seek one-piece-make and one-piece-move • Eliminate waste • Produce in small lots • Use kanbans • Make each operation produce a perfect part © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  47. Level Schedules • Reduce ripple effect of small variations in schedules (e.g., final assembly) • Production quantities evenly distributed over time (e.g., 7/day) • Build same mix of products every day • Results in many small lots • Item Monthly Quantity Daily Quantity A 40 2 B 60 3 © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  48. Small versus Large Lots JIT produces same amount in same time if setup times are lowered JIT Small Lots C A A B B B C A A B B B Time Small lots also increase flexibility to meet customer demands Large-Lot Approach C A A A A B B B B B B C Time © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  49. Comparison of Level and Large Lot Material-use Approaches © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

  50. Kanban • Japanese word for card • Pronounced ‘kahn-bahn’ (not ‘can-ban’) • Authorizes production from downstream operations • ‘Pulls’ material through plant • May be a card, flag, verbal signal etc. • Used often with fixed-size containers • Add or remove containers to change production rate © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

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