S12-1 Operations Management Just-in-Time and Lean Production Systems Chapter 16

S12-2  Just-In-Time and Lean Production.  Role of inventory.  Just-In-Time components.  Suppliers.  Layout.  Scheduling.  Quality.  Lean Production. Outline

S12-3  Just-In-Time  Management philosophy of continuous problem solving.  Internal focus on production scheduling, inventory, layout, quality, suppliers, etc.  Produce “just-in-time”, only to meet actual demand.  Lean Production  Extension of Just-In-Time to eliminate waste (“fat”).  External focus on satisfying the customer.  Originated in Japan; Popularized by Toyota; now used globally. Just-in-Time and Lean Production

S12-4  Demand is uncertain and variable.  Same equipment/people are used to make a variety of products, and switching products takes time.  Things go wrong:  Materials are defective.  Deliveries are variable (late).  Equipment fails, people make mistakes, etc.  Production documents are incorrect. Why is Production Difficult?

S12-5  Use inventory to:  Match supply with varying demand.  Allow production of a variety of products on the same equipment.  Overcome defective materials, late deliveries, equipment failures, mistakes, etc. One Solution: Inventory

S12-6  Forecast demand.  Produce in large lots (to reduce expensive setups).  PUSH product to customer.  Large lot sizes mean:  Large work-in-process inventories.  Large final product inventories.  Slow response to changes and defects. “Traditional” Production

S12-7  Produce in small lots to replenish stock actually sold.  Sales PULL product (and parts) through plant.  Supplies and components are ‘pulled’ through system to arrive where they are needed when they are needed.  Small lot sizes mean:  Small work-in-process inventories.  Small final product inventories.  Quick response to changes and defects. “Just-in-Time” Production

S12-8 Push versus Pull  Push system: Material is pushed (according to forecasts) downstream (along assembly line, to warehouses, etc.).  Pull system: Material is pulled (by sales to customers) downstream (along assembly line, to warehouses, etc.) just as it is needed.

S12-9  Just-in-time requires identifying and solving problems that create inventory.  Reduce setup costs to switch products.  Eliminate all waste: Defective materials, late deliveries, equipment failures, mistakes, etc. Just-In-Time is Not Easy

S12-10  Overproduction.  Waiting.  Transportation.  Inefficient processing.  Inventory.  Unnecessary motion.  Product defects. Types of Waste

S12-11  Reduces waste and improves quality.  Waste = Anything not adding value to the product.  Exposes problems caused by variability.  Variability in demand, deliveries, materials, equipment, etc.  Streamlines production b y reducing inventory.  Reduces delays and increases throughput.  Benefits:  Reduced cost and/or increased profit.  Faster response to the customer. What Does Just-in-Time Do?

S12-12 Suppliers Preventive Maintenance Layout Inventory Scheduling Quality Employee Empowerment JIT Just-in-Time Success Factors

S12-13  JIT objective: Eliminate inventory.  Hold minimum inventory to keep system running.  JIT requires:  Small lot sizes.  Low setup times.  Just-in-time deliveries.  Deliveries direct to point of use (not stockroom). Inventory

S12-14 Scrap Work in process inventory level (hides problems) Unreliable Vendors Capacity Imbalances Lowering Inventory Reduces Waste

S12-15 Scrap Reducing inventory reveals problems so they can be solved. Unreliable Vendors Capacity Imbalances WIP Lowering Inventory Reduces Waste

S12-16 Large Lot Sizes = Large Inventory Time Inventory Level Lot Size 200 Average inventory = 100 Average inventory = (Lot size)/2

S12-17 To Lower Inventory, Reduce Lot Size Time Inventory Level Lot Size 200 Average inventory = (Lot size)/2 Lot Size 80 Average inventory = 40

S12-18 EPQ Minimizes Total Costs Lot Size Cost Holding Cost Total Cost Setup Cost Optimal Lot Size

S12-19 Reducing Setup Costs Reduces Lot Size and Total Cost! Lot Size Cost Holding Cost Total Cost Setup Cost Original optimal lot size New optimal lot size

S12-20  Separate setup into preparation (while machine is running) and actual setup (while machine is stopped).  Do as much as possible while the machine is running.  Move material closer and improve material handling.  Standardize and improve tooling. Steps to Reduce Setup Time

S12-21  JIT objective: Frequent on-time deliveries of small lots of high quality.  Buyer and supplier form JIT partnerships to eliminate:  Unnecessary activities.  In-plant inventory.  In-transit inventory. Suppliers

S12-22  JIT objective: Reduce movement of people and material.  JIT requires:  Delivery directly to work areas – not to stockroom.  Short distances to ensure on-time deliveries.  Little space for inventory.  Flexibility: Moveable or changeable machines. Layout

S12-23  JIT objective: Simple system to pull product through plant in small lots.  JIT requires:  Communicating schedules to suppliers.  “Level” schedules: production each day equals demand.  Freezing part of schedule nearest due date.  Small lots.  Kanban techniques. Scheduling

S12-24  Japanese word for card.  Authorizes production from downstream operations.  ‘Pulls’ material through plant.  May be a card, flag, verbal signal etc.  Used often with fixed-size containers.  Add/remove containers to change production rate. Kanban

S12-25 Kanban Signals “Pull” Material Through the Process

S12-26  JIT objective: Prevent failure.  Cleanliness and simplicity are keys.  Maintain equipment so it does not break.  JIT requires:  Scheduled & daily preventive maintenance.  Operator performs preventive maintenance.  Operator knows machine and is responsible for product quality. Preventive Maintenance (PM)

S12-27  JIT exposes quality problems by reducing inventory.  JIT limits number of defects produced with small lots.  JIT requires TQM.  Statistical process control.  Worker involvement & empowerment.  Immediate feedback. Quality

S12-28 Lean Production  Use JIT to eliminate virtually all inventory.  Eliminate all but value-added activities.  Build systems to help employees produce a perfect part every time.  Reduce space requirements.  Develop partnerships with suppliers.  Educate suppliers and workers.  Enrich jobs.

S12-29 JIT/Lean Production Partnerships  To achieve frequent deliveries of high quality small-lot quantities:  Use few suppliers, each with a larger share of business and longer-term contracts.  Helps ensure quality and reliability.  Prefer nearby suppliers for reliable scheduling.  Example: 4 deliveries each day, 2 hours apart.  Suppliers encouraged to extend JIT to their suppliers.

S12-30 Just-In-Time and Japan  Area of Japan = 144,000 square miles.  California = 158,000 square miles  Missouri = 70,000 square miles  Population of Japan is about 1/2 of USA.  Japan is islands ( 80% mountainous).  Land is expensive.  Facilities are not far apart.  Natural resources are limited.  Minimizing waste is crucial.