JIT and Lean Operations CHAPTER 14 JIT and Lean Operations Operations Management, Eighth Edition, by William J. Stevenson Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

JIT/Lean Production Just-in-time (JIT): A highly coordinated processing system in which goods move through the system, and services are performed, just as they are needed, JIT   lean production JIT  pull (demand) system JIT operates with very little “fat”

Benefits of JIT Reduced inventory (up to 90%) Reduced lead time (up to 90%) Reduced labor cost (up to 30%) Reduced manufacturing & storage space (up to 50%) Improvement of quality (up to 90%) Increased flexibility and adaptability to changes Increased productivity

Goal of JIT The ultimate goal of JIT is a balanced system. Achieves a smooth, rapid flow of materials through the system

Summary JIT Goals and Building Blocks Figure 14.1 Product Design Process Personnel Elements Manufactur- ing Planning Eliminate disruptions Make the system flexible Eliminate waste A balanced rapid flow Ultimate Goal Supporting Goals Building Blocks

Supporting Goals Eliminate disruptions Make system flexible Eliminate waste, especially excess inventory

Sources of Waste Overproduction Waiting time Unnecessary transportation Processing waste Inefficient work methods Product defects

JIT Building Blocks Product design Process design Personnel/organizational elements Manufacturing planning and control

Product Design Standard parts Modular design Highly capable production systems Concurrent engineering

Process Design Small lot sizes Setup time reduction Manufacturing cells Limited work in process Quality improvement Production flexibility Little inventory storage

Benefits of Small Lot Sizes Reduces inventory Less storage space Less rework Problems are more apparent Increases product flexibility Easier to balance operations

Lot Size and Cycle Inventory Average cycle inventory Lot size = 100 Lot size = 50 On-hand inventory 5 10 15 20 25 30 Time (hours) 100 – 75 – 50 – 25 – 0 – Figure 16.1

HOOD & FENDER SETUP COMPARISON (800 TON PRESS) Toyota U.S.A. Sweden W. Germany Setup Time 10 min 6 hr. 4 hr. Setups/Day 3 1 - 1/2 Lot Size 1 day* 10 days 1 month * For low demand items (less than 1000/month) Up to 7 days

Personnel/Organizational Elements Workers as assets Cross-trained workers Continuous improvement Cost accounting Leadership/project management

Manufacturing Planning and Control Pull systems Level loading Visual systems Close vendor relationships Reduced transaction processing Preventive maintenance

Pull/Push Systems Pull system: System for moving work where a workstation pulls output from the preceding station as needed. (e.g. Kanban) Push system: System for moving work where output is pushed to the next station as it is completed

LEVELED ASSEMBLY INSTRUCTIONS Pull System LEVELED ASSEMBLY INSTRUCTIONS PRODUCTION SCHEDULE C B A FAB FAB VENDOR B A SUB FAB FAB VENDOR FINAL ASSEMBLY FAB FAB SUB VENDOR FAB FAB VENDOR VENDOR FAB

Kanban Production Control System Kanban: Card or other device that communicates demand for work or materials from the preceding station Kanban is the Japanese word meaning “signal” or “visible record” Paperless production control system Authority to pull, or produce comes from a downstream process.

Traditional Supplier Network Figure 14.4a Buyer Supplier

Tiered Supplier Network Figure 14.4b Supplier Buyer First Tier Supplier Second Tier Supplier Third Tier Supplier

Comparison of JIT and Traditional Table 14.3 Factor Traditional JIT Inventory Much to offset forecast errors, late deliveries Minimal necessary to operate Deliveries Few, large Many, small Lot sizes Large Small Setup; runs Few, long runs Many, short runs Vendors Long-term relationships are unusual Partners Workers Necessary to do the work Assets

JIT II JIT II: a supplier representative works right in the company’s plant, making sure there is an appropriate supply on hand.

Benefits of JIT Systems Reduced inventory levels High quality Flexibility Reduced lead times Increased productivity

Benefits of JIT Systems (cont’d) Increased equipment utilization Reduced scrap and rework Reduced space requirements Pressure for good vendor relationships Reduced need for indirect labor