JIT/Lean Production ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Some Statistics from 1986 ... A comparison of: assembly hours defects per 100 cars average inventory levels Framingham (GM) 40.7 hours 130 defects 2 weeks Toyota Takaoka 16 hours 45 defects 2 hours ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Post World War II Growing and rebuilding world economy Demand > Supply US Manufacturing: Higher volumes Capital substitution “Breakthrough” improvements “The production problem has been solved” ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

View from Japan Very little capital War-ravaged workforce Little space Poor or no raw materials Lower demand levels Little access to latest technologies  U.S. methods would not work ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Japanese Approach to Operations Maximize use of people Simplify first, add technology second Gradual, but continuous improvement Minimize waste (including poor quality)  Led to the development of the approach known as Just-in-Time ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Repetitive production system Just-in-Time Repetitive production system in which processing and movement of materials and goods occur just as they are needed ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Pre-JIT: Traditional Mass Production ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Post-JIT: “Lean Production” Tighter coordination along the supply chain Goods are pulled along — only make and ship what is needed ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

JIT Goals (throughout the supply chain) Eliminate disruptions Make the system flexible Reduce setup times and lead times Minimize inventory Eliminate waste ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Waste Definition: 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 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Forms of Waste: Overproduction Waiting time Transportation Processing Inventory Motion Product Defects ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Inventory as a Waste Requires more storage space Requires tracking and counting Increases movement activity Hides yield, scrap, and rework problems Increases risk of loss from theft, damage, obsolescence ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Examples of Eliminating “Wastes” Big Bob’s Automotive Axles: Wheels bought from outside supplier Axles made and assembled in house ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

BEFORE: Shipping in Wheels Truck Cost: $500 (from Peoria) Maximum load of wheels: 10,000 Weekly demand of wheels: 500 ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

AFTER: Shipping in Wheels Truck Cost: $50 (from Burlington) Maximum load of wheels: 500 Weekly demand of wheels: 500 What wastes have been reduced? ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

BEFORE: Making Axles (Different lengths) ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

BEFORE: Making Axles (Oops!) What is the outcome of detecting defective axles at the end? ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

After: Making Axles I (Different lengths) ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

After: Making Axles II (More improvements) What wastes have been reduced? ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Building Blocks of JIT Product design Process design Standard parts Modular design Quality Process design Personnel and organizational elements Manufacturing planning and control ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Process Design “Focused Factories” Group Technology Simplified layouts with little storage space Jidoka and Poka-Yoke Minimum setups Jidoka is Japanese for “Stop everything when something goes wrong”, a form of stopping quality problems at their source. Poka-Yoke is Japanese for failproofing: Examples are gasoline nozzles, VCR cassettes (they are ejected if inserted incorrectly), inkjet cartridges, etc. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Multi-Task Work Cells 500 chairs per hour Seats Packing Assembly Packing Legs Slats Backposts Planning takes place for one area: What does the BOM look like? What about lead times? ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Personnel and Organizational Elements Workers as assets Cross-trained workers Greater responsibility at lower levels Leaders as facilitators, not order givers ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Classic Organizational View ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

JIT Organization View ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Planning and Control Systems “Small” JIT Stable and level schedules Mixed Model Scheduling “Push” versus “Pull” Kanban Systems ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Kanban Uses simple visual signals to control production Examples: empty slot in hamburger chute empty space on floor kanban card ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Kanban Example Workcenter B uses parts produced by Workcenter A How can we control the flow of materials so that B always has parts and A doesn’t overproduce? ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Kanban card: Signal to produce When a container is opened by Workcenter B, its kanban card is removed and sent back to Workcenter A. This is a signal to Workcenter A to produce another box of parts. ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Empty Box: Signal to pull Empty box sent back. Signal to pull another full box into Workcenter B. Question: How many kanban cards here? Why? ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

How Many Kanbans? y = number of kanban cards D = demand per unit of time T = lead time C = container capacity X = fudge factor ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Example Hourly demand = 300 units Lead time = 3 hours Each container holds 300 units Assuming no variation in lead-time or demand (x = 0): y = (300  3) / 300 = 3 kanban cards ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Example: 8:00 AM ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

One Hour Later at 9:00 AM ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Extended Out Further . . . ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Note: For a kanban system to work, we NEED CONSISTENT demand across the work centers Example - think “McDonald’s” How do we ensure this? ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Mixed Model Sequencing Product Monthly Demand Daily Requirement A 800 40 B C 200 10 Largest integer that divides evenly into daily requirement is 10: A: 40 / 10 = 4 B: 40 / 10 = 4 C: 10 / 10 = 1 Mixed model sequence: A-B-A-B-A-B-A-B-C ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Mini-Quiz: Mixed Model Scheduling and Establishing Kanbans Product Monthly Demand Daily Requirement D 1200 60 E 400 20 F 600 30 What would sequence be if NO minimum job size? ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Sequence with Minimum of 5: 60 / 4 = 15 D’s 20 / 4 = 5 E’s 30 / 4 = 7.5 F’s 5D - 7F - 5D - 5D - 5E - 5D - 8F - 5D - 5D - 5E Sequence of 55 (27.5×2) ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Kanbans Required: Product D Hourly Requirements = 60/8 = 7.5 Lead time = 2 hours Container size = 2 units “Fudge” factor = 10% ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Kanban Cards Required: Implications? Impact of container size? ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Implementing JIT What about automation? ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield

Putting the Squeeze on Resources . . . ©2006 Pearson Prentice Hall — Introduction to Operations and Supply Chain Management — Bozarth & Handfield