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Just-In-Time and Lean Production. JIT In Services. Competition on speed & quality Multifunctional department store workers Work cells at fast-food restaurants Just-in-time publishing for textbooks - on demand publishing a growing industry Construction firms receiving material just as needed.

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jit in services
JIT In Services
  • Competition on speed & quality
  • Multifunctional department store workers
  • Work cells at fast-food restaurants
  • Just-in-time publishing for textbooks - on demand publishing a growing industry
  • Construction firms receiving material just as needed
what is jit
What is JIT ?
  • Producing only what is needed, when it is needed
  • A philosophy
  • An integrated management system
  • JIT’s mandate: Eliminate all waste
lean operations best implementation is toyota production system
Lean Operations: Best Implementation is Toyota Production System
  • TPS is a production management system that aims for the “ideal” through continuous improvement
  • Includes, but goes way beyond JIT. Pillars:
    • Synchronization
      • Reduce transfer batch sizes
      • Level load production
      • Pull production control systems (vs. push): Kanban
      • Quality at source
      • Layout: Cellular operations
    • Continuous Improvement (Kaizen): through visibility & empowerment

....

basic elements of jit
Basic Elements of JIT

Flexible resources

Cellular layouts

Pull production system

Kanban production control

Small-lot production

Quick setups

Uniform production levels

Quality at the source

Total productive maintenance

Supplier networks

toyota s waste elimination in operations
Toyota’s waste elimination in Operations

1. Overproduction

2. Waiting

3. Inessential handling

4. Non-value adding processing

5. Inventory in excess of immediate needs

6. Inessential motion

7. Correction necessitated by defects

other important points
Other Important Points
  • Only make what you need
  • only buy what you need, when you need it
  • continuous process improvement
  • as the level of the water lowers, new problems or inefficiencies are identified
flexible resources
Flexible Resources
  • Multifunctional workers
  • General purpose machines
  • Study operators & improve operations
kanban production control system
Kanban Production Control System
  • Kanban card indicates standard quantity of production
  • Derived from two-bin inventory system
  • Kanban maintains discipline of pull production
  • Production kanban authorizes production
  • Withdrawal kanban authorizes movement of goods
types of kanbans
Types of Kanbans
  • Bin Kanban - when bin is empty replenish
  • Kanban Square
    • Marked area designed to hold items
  • Signal Kanban
    • Triangular kanban used to signal production at the previous workstation
  • Material Kanban
    • Used to order material in advance of a process
  • Supplier Kanbans
    • Rotate between the factory and suppliers
determining number of kanbans

average demand during lead time + safety stock

container size

No. of Kanbans =

dL + S

C

N =

Determining Number of Kanbans

where

N = number of kanbans or containers

d = average demand over some time period

L = lead time to replenish an order

S = safety stock

C = container size

determining the number of kanbans

75 + 7.5

25

dL + S

C

(150 x 0.5) + 7.5

25

Determining the Number of Kanbans

d = 150 bottles per hour

L = 30 minutes = 0.5 hours

S = 0.10(150 x 0.5) = 7.5

C = 25 bottles

N = =

= = 3.3 kanbans or containers

Round up to 4 (to allow some slack) or down to 3 (to force improvement)

components of lead time
Components of Lead Time
  • Processing time
    • Reduce number of items or improve efficiency
  • Move time
    • Reduce distances, simplify movements, standardizeroutings
  • Waiting time
    • Better scheduling, sufficient capacity
  • Setup time
    • Generally the biggest bottleneck
common techniques for reducing setup time
Common Techniques for Reducing Setup Time
  • Preset Buttons/settings
  • Quick fasteners
  • Reduce tool requirements
  • Locator pins
  • Guides to prevent misalignment
  • Standardization
  • Easier movement
quality at the source
Quality at the Source
  • Jidoka is authority to stop production line
  • Andon lights signal quality problems
  • Undercapacity scheduling allows for planning, problem solving & maintenance
  • Visual control makes problems visible
  • Poka-yoke prevents defects (mistake proof the system)
visual control
Visual Control

In use at Harley-Davidson

and at Opal Plant - Russelsheim

kaizen
Kaizen
  • Continuous improvement
  • Requires total employment involvement
  • Essence of JIT is willingness of workers to
    • Spot quality problems
    • Halt production when necessary
    • Generate ideas for improvement
    • Analyze problems
    • Perform different functions
total productive maintenance tpm
Total Productive Maintenance (TPM)

Commercial industry answer to PMCS

  • Breakdown maintenance
    • Repairs to make failed machine operational
  • Preventive maintenance
    • System of periodic inspection & maintenance to keep machines operating
  • TPM combines preventive maintenance & total quality concepts
tpm requires management to
TPM Requires Management to:
  • Design products that can be easily produced on existing machines
  • Design machines for easier operation, changeover, maintenance
  • Train & retrain workers to operate machines
  • Purchase machines that maximize productive potential
  • Design preventive maintenance plan spanning life of machine
goals of jit
Goals of JIT

Reduced inventory - where?

Improved quality

Lower costs

Reduced space requirements

Shorter lead time

Increased productivity

Greater flexibility

Better relations with suppliers

Simplified scheduling and control activities

Increased capacity

Better use of human resources

More product variety

Continuous Process Improvement

jit implementation
JIT Implementation
  • Use JIT to finely tune an operating system
  • Somewhat different in USA than Japan
  • JIT is still evolving
  • JIT as an inventory reduction program isn’t for everyone - JIT as a CPI program is!
  • Some systems need Just-in-Case inventory
reverse logistics important or irritant

Reverse Logistics: Important or Irritant?

Estimated $100 billion industry in 2006

slide28

“In an ideal world,

reverse logistics would not exist.”

Jim Whalen, “In Through the Out Door,”

Warehousing Management, March 2001

slide29

“Now, more than ever,

reverse logistics is seen

as being important.”

Dale Rogers, Going Backwards, 1999

reverse logistics what is it the army s definition
Reverse Logistics - What is it?The Army’s Definition

The return of serviceable supplies that are surplus to the needs of the unit or are unserviceable and in need of rebuild or remanufacturing to return the item to a serviceable status

reverse logistics what is it the commercial perspective
Reverse Logistics - What is it?The Commercial Perspective
  • Reverse Logistics is the process of moving products from their typical final destination to another point, for the purpose of capturing value otherwise unavailable, or for the proper disposal of the products.
typical reverse logistics activities
Typical Reverse Logistics Activities
  • Processing returned merchandise - damaged, seasonal, restock, salvage, recall, or excess inventory
  • Recycling packaging materials/containers
  • Reconditioning, refurbishing, remanufacturing
  • Disposition of obsolete stuff
  • Hazmat recovery
why reverse logistics
Why Reverse Logistics?
  • Competitive advantage
  • Customer service

- Very Important: 57%

- Important: 18%

- Somewhat/unimportant:23%

  • Bottom line profits
reverse logistics new problem
Reverse Logistics - New Problem?
  • Sherman
  • Montgomery Ward’s - 1894
  • Recycling/remanufacturing in 1940s
  • World War II - 77,000,000 square feet of storage across Europe with over $6.3 billion in excess stuff
  • Salvage and reuse of clothing and shoes in the Pacific Theater World War II
key dates in reverse logistics
Key Dates in Reverse Logistics
  • World War II – the advent of refurbished automobile parts due to shortages
  • 1984 - Tylenol Scare - Johnson and Johnson
  • 1991 - German ordinance that put teeth in environmental reverse pipeline
  • Summer 1996 – UK Packaging and Packaging Waste Legislation
  • 1998 - first real study of reverse logistics in the US - University of Nevada, Reno
  • 2001 – EU goal of 50-65% recovering or recycling of packaging waste
reverse logistics

Reverse Logistics

A US Army Perspective

operation iraqi freedom
Operation Iraqi Freedom

The US Army moved the equivalent of 150 Wal-Mart Supercenters to Kuwait in a matter of a few months

military operations and excess
Military Operations and Excess

“In battle, troops get temperamental and ask for things which they really do not need. However, where humanly possible, their requests, no matter how unreasonable, should be answered.” George S. Patton, Jr.

jane s defence weekly
Jane’s Defence Weekly

“Recent report (Aug 2003):

There is a 40 hectare (~100 acres)

area in Kuwait with items waiting

to be retrograded back to the US.”

slide40

Does this create a problem?

From GAO Audit Report

reverse logistics42

Reverse Logistics

The Commercial Perspective

commercial definition
Commercial Definition
  • Anytime money is taken from a company reserves to support a product that has already shipped is a reverse logistics operation.

- Reverse Logistics Association

  • Apparel and Catalog sales - ~35 %
  • Nokia call center operations - $1.3 bn
recalls and reverse logistics
Recalls and Reverse Logistics
  • Brand Damage – Toyota resale value
  • 4+ million vehicles recalled by Toyota
  • Mattel recall
  • PCA recall
reverse logistics46
Reverse Logistics
  • Rate of returns?
  • Cost to process a return?
  • Time to get the item back on the shelf if resaleable?
costs above the cost of the item
Costs - above the cost of the item
  • Merchandise credits to the customers.
  • The transportation costs of moving the items from the retail stores to the central returns distribution center.
  • The repackaging of the serviceable items for resale.
  • The cost of warehousing the items awaiting disposition.
  • The cost of disposing of items that are unserviceable, damaged, or obsolete.
costs
Costs
  • Process inbound shipment at a major distribution center = 1.1 days
  • Process inbound return shipment = 8.5 days
  • Cost of lost sales
  • Wal-Mart: Christmas 2003 - returns = 4 Days of Supply for all of Wal-Mart = 2000 Containers
  • PalmOne - 25% return rate on PDAs
more costs
More Costs
  • Hoover - $40 Million per year
  • Cost of processing $85 per item
  • Unnamed Distribution Company - $700K items on reverse auction
  • 2001 - over $60 billion in returns; $52 billion excess to systems; $40 billion to process
is it a problem
Is it a problem?
  • Estimate of 2004 holiday returns: $13.2 billion
  • % of estimated 2004/2005 holiday returns: 25%
  • At 25% - returns for 2009 ~ $117 billion
  • Wal-Mart: $6 Billion in annual returns = 17,000 truck loads (>46 trucks a day)
  • Electronics: $10 Billion annually in returns
  • Personal Computers: $1.5 Billion annually = approximately $95 per PC sold
  • 79% of returned PCs have no defects
  • Home Depot ~ $10 million in returns in the stores alone
  • Local Wal-Mart ~ $1 million a month in returns
is it a problem51
Is it a Problem?
  • European influence – spread to US - Green Laws
  • Estee Lauder - $60 million a year into land fills
  • FORTUNE 500 Company - $200 million over their $300 million budget for returns
  • Same Provider - 40,000 products returned per month; 55% no faults noted
  • K-Mart - $980 million in returns 1999
  • Warranty vice paid repairs
more consequences
More consequences
  • Increased Customer Wait Times
  • Loss of Confidence in the Supply System
  • Multiple orders for the same items
  • Excess supplies in the forward pipeline
  • Increase in “stuff” in the reverse pipeline
  • Constipated supply chain
impact
Impact?
  • Every resaleable item that is in the reverse supply chain results in a potential stock out or “zero balance” at the next level of supply.
  • Creates a “stockout” do-loop
results
Results?
  • This potential for a stock out results in additional parts on the shelves at each location to prevent a stock out from occurring.
  • More stocks = “larger logistics footprint” = the need for larger distribution centers and returns centers.
reverse logistics55
Reverse Logistics
  • According to the Reverse Logistics Executive Council, the percent increase in costs for processing a return, as compared to a forward sale, is an astounding 200-300%.
  • Typically, as many as 8-12 more steps per item in the reverse pipeline than items in the forward pipeline
slide56

“The truth is, for one reason or another,

materials do come back and it is up to

those involved in the warehouse to

effectively recover as much of the cost for

these items as possible.”

- Whalen, “In Through the Out Door”

wireless industry returns
Wireless Industry Returns
  • 1.1 billion handsets produced in 2009
  • 4.4 bn subscribers worldwide
  • 4% of handsets fail – average cost per phone to OEMs = $90
  • 176 mm failed phones in 2009 –
  • Less than ½ insured
returns importance
Returns importance
  • 85% of customers will not buy
  • 95% will return
rfid and returns
RFID and Returns
  • Visibility Tracking
  • Component tracking
  • Data Warehouse on what, why, when
  • Altered products
  • Not for every product
impacts of reverse logistics
Impacts of Reverse Logistics
  • Forecasting
  • Carrying costs
  • Processing costs
  • Warehousing
  • Distribution
  • Transportation
  • Personnel
  • Marketing
next week
Next Week
  • No class – 22 Jul
  • 29 Jul: Resource Planning, Scheduling, Quality
  • Take Home Final Exam to be posted by this weekend – due by Friday, 30 Jul
  • Harley paper due by Friday, 30 Jul