Chapter 7 Just-in-Time and Lean Systems Operations Management by R. Dan Reid & Nada R. Sander s 2nd Edition © Wiley 2005 PowerPoint Presentation by R.B. Clough - UNH

Learning Objectives Explain the core beliefs of the JIT philosophy Describe the meaning of waste in JIT Explain the differences between “push” and “pull” systems Explain the key elements of JIT manufacturing Explain TQM’s role in JIT manufacturing Describe the role of people in JIT Understand impact of JIT on service and manufacturing Understand functional impact of JIT on all areas

The Philosophy of JIT JIT means getting the right quantity of goods at the right place and the right time Often termed “Lean Systems” All waste must be eliminated- non value items Broad view that entire organization must focus on serving customers JIT is built on simplicity- the simpler the better Focuses on improving every operation- Kaizen Install simple visible control systems Flexibility to produce different models/features

Three Elements of JIT

Elements of JIT Manufacturing JIT Manufacturing is a philosophy of value-added manufacturing Achieved by Inventory reduction - exposes problems Kanbans & pull production systems Small lots & quick setups Uniform plant loading Flexible resources Efficient facility layouts

Role of Inventory Reduction Inventory = Lead Time (less is better) Inventory hides problems

The Pull System

Number of Kanbans Required N = number of containers D = demand rate at the withdraw station T = lead time from supply station C = container size S = safety stock

Computing the Number of Kanbans: an aspirin manufacturer has converted to JIT manufacturing using kanban containers. They wish to determine the number of containers at the bottle filling operation which fills at a rate of 200 per hour. Each container holds 25 bottles, it takes 30 minutes to receive more bottles, safety stock is 10% of demand during LT.

Small Lot Sizes & Quick Setups Small lots mean less average inventory and shorten manufacturing lead time Small lots with shorter setup times increase flexibility to respond to demand changes Strive for single digit setups- < 10 minutes Setup reduction process is well-documented External tasks- do as much preparation while present job is still running Internal tasks- simplify, eliminate, shorten steps involved with location, clamping, & adjustments Ultimate goal is single unit lot sizes

Uniform Plant Loading A “level” schedule is developed so that the same mix of products is made every day in small quantities Leveling the schedule can have big impact along whole supply chain Monday Tuesday Wednesday Thursday Friday AAAAA BBBBB CCCCC EEEEE DDDDD AABBBB CDEE 5 units 10 units Weekly Production Required Traditional Production Plan JIT Plan with Level Scheduling A B C D E 20 units

Flexible Resources Moveable, general purpose equipment: Portable equipment with plug in power/air E.g.: drills, lathes, printer-fax-copiers, etc. Capable of being setup to do many different things with minimal setup time Multifunctional workers: Workers assume considerable responsibility Cross-trained to perform several different duties Trained to also be problem solvers

Effective Facility Layouts Workstations in close physical proximity to reduce transport & movement Streamlined flow of material Often use: Cellular Manufacturing (instead of process focus) U-shaped lines: (allows material handler to quickly drop off materials & pick up finished work)

Traditional Process Focused Layout Jumbled flows, long cycles, difficult to schedule

JIT Cellular Manufacturing Product focused cells, flexible equipment, high visibility, easy to schedule, short cycles

Group Technology

JIT and TQM- Partners Build quality into all processes Focus on continuous improvement - Kaizen Quality at the source- sequential inspection Jidoka (authority to stop line) Poka-yoke (fail-safe all processes) Preventive maintenance- scheduled Work environment- everything in its place, a place for everything

Respect for People: The Role of Employees Genuine and meaningful respect for associates Willingness to develop cross-functional skills Actively engage in problem-solving (quality circles) Everyone is empowered Everyone is responsible for quality: understand both internal and external customer needs Associates gather performance data Team approaches used for problem-solving Decisions made from bottom-up Everyone is responsible for preventive maintenance

The Role of Management Responsible for culture of mutual trust Serve as coaches & facilitators Support culture with appropriate incentive system including non-monetary Responsible for developing workers Provide multi-functional training Facilitate teamwork

Supplier Relationships and JIT Use single-source suppliers when possible Build long-term relationships Work together to certify processes Co-locate facilities to reduce transport if possible Stabilize delivery schedules Share cost & other information Early involvement during new product designs

Benefits of JIT Smaller inventories Shorter lead times Improved quality Reduced space requirements Lower production costs Increased productivity Greater flexibility

Expected Results of JIT General 50-90% reduction in throughput times 50-90% reduction in WIP 60-80% reduction in scrap and rework 50-90% reduction in setup times 30-60% reduction in space requirements 10-1000X improvement in quality specifics In three to seven years 5-10X improvement in overall quality 4-10X improvement in inventory turns improvements in return on assets

Implementing JIT Implementation needs a designated “Champion” Make quality improvements- all processes O-P Reorganize workplace Remove clutter & minimize storage Reduce setup times Reduce lot sizes & lead times Implement layout changes Cellular manufacturing & close proximity Switch to pull production Extend methods to suppliers

JIT in Services Most of the JIT concepts apply equally to Service companies Cellular layouts, product focused, & flexible employees shorten response times Service inventory, “paperwork”, should be eliminated, simplified, examined for “waste” “Fail-safe” all processes from Orders-Payment Team based organizations

Lean Thinking Muda (waste): any activity that uses resources but creates no value. Principles: Specify value by specific product. Identify the value stream for each product. Make value flow without interruption. Let the customer pull value from the producer. Pursue perfection. Womack and Jones, 1996.

Lean Thinking: Value Defined by ultimate customer (end user). Must be expressed in terms in terms of a specific product and/or service which meets the customer’s needs at a specific price at a specific time. Created by the producer.

Lean Thinking: Value Stream APICS Dictionary (10th Edition): “the process of creating, producing, and delivering a good or service to the market… For a service, the value stream consists of suppliers, support personnel and technology, the service ‘producer’ and the distribution channel. The value stream may be controlled by a single business or a network of several businesses.” Systems analysis is needed to maximize value in the value stream—the focus needs to be on the whole stream, and not just on individual activities within the stream.

Lean Thinking: Flow A service being provided for a customer needs to move through the system without interruption. Womack and Jones: find “ways to line up all of the essential steps needed to get a job done into a steady, continuous flow, with no wasted motions, no interruptions, no batches, and no queues.” Waiting adds no value—it’s a waste. Flow versus batch-and-queue in the traditional mode of functions and departments. Must be achieved in small-lot production as well as high-volume assembly line operations.

Lean Thinking: Pull Jack: “We don’t make it until you order it.” Most services can’t be created for inventory—so it is necessary to reduce lead times and excess inventories of support materials to eliminate waste and add value. Let the customer pull products from you as needed rather than pushing products, often unwanted, onto the customer. Deal with orders rather than forecasts and inventory.

Lean Thinking: Perfection Interactive results from implementing the first four concepts. Transparency: in a lean system, everyone can see everything, so it’s easy to discover ways to create value. Feedback from employees spurs continuous improvement. Seek perfection in product/service, flow, and pull processes. This concept focuses on continuous improvement. Measurements change (PPT, PPM, PPB,……) Services may delight a customer—but it is always possible to make changes that will delight them even more.

Chapter 7 Highlights JIT manufacturing has become the standard for many industries; concept incorporates TQM and respect for people. JIT views waste as anything that does not add value. JIT converts traditional “push” systems to a “pull” production system. Key elements of JIT are “pull”, kanbans, small lots, quick setups, uniform plant loading, flexibility, and work cells.

Chapter 7 Highlights (Continued) TQM concepts must be incorporated JIT manufacturing. Team based work systems, empowerment, cross-functional flexibility, with appropriate reward systems are all part of JIT. Most of the JIT concepts are equally applicable to “Service Organizations.” JIT requires changes to be made in all functional areas and examination of all processes for waste.

Chapter 7 Homework Hints 7.4: (a) Time must be consistent (e.g.; everything in minutes or hours or days). Safety stock is omitted if not stated. Number of containers must be a whole number—round up, not down. (b) Ignore demand changes, just think about the affect on the formula if the system were improved.