Just-in-Time (JIT) and Lean Systems Chapter 7

Management 326 Operations and Operations Strategy Designing an Operations System Managing an Operations System Improving an Operations System (Just-in-Time)

Presentation Outline The philosophy of JIT 7 Elements of JIT Philosophy Examples of waste 3 key principles of JIT JIT in services Blockbuster's lean systems project Principles of lean processes (JIT) in services

Presentation Outline (2) JIT in manufacturing Inventory reduction Cost of inventory Kanban pull system Small lot sizes and quick setups Uniform plant loading Flexible resources (people & equipment) Efficient plant layouts

Presentation Outline (3) Other topics in JIT and lean systems Respect for people: the role of employees The role of managers Benefits of JIT and lean systems

Just-in-Time & Lean Systems Just-in-time: an operations system for producing the right goods and services in the right place, at the right time, in a quality manner Lean systems: A broad view of JIT that shows how the entire organization contributes to JIT production (of goods and services), customer service, and customer satisfaction Value-adding activities 1. Necessary steps in completing a product or service 2. Customer service activities that increase the value of the service to customers

The Philosophy of JIT 7 Elements of JIT Philosophy All waste must be eliminated- non value items Waste is any amount of a resource that is not required to produce and deliver a quality good or service when it is needed Broad view that entire organization must focus on serving customers Serving customers requires cooperation throughout the organization: serve external & internal customers

The Philosophy of JIT (2) 7 Elements of JIT Philosophy (2) JIT is built on simplicity - the simpler the better Focuses on improving every operation- Kaizen Install simple, visible control systems Provide flexibility to produce different models/features The same philosophy also applies in Lean Systems

Examples of Waste Producing items before they are needed Waiting time: high WIP. idle machines, or idle people Needless movement of materials or people Unneeded process steps Inventory Searching for materials, tools, etc. Defects People who are not challenged by their jobs and are not allowed to give input into decisions

3 Key Principles of JIT and Lean Systems Just-in-time processes Total quality management Respect for people

Blockbuster's Project Store Lean Systems Project Business objectives Give customers a better experience & increase sales Allow employees to spend more time with customers Reduce costs Eliminate unnecessary work activities Reduce employee stress

Blockbuster's Process Re-Design The goal was to simplify and standardize processes across U.S. stores Key process re-design principles Eliminate tasks that did not add value Separate customer-related tasks from those that did not involve customers (example: shelving videos) Reallocate the time saved to customer service

Blockbuster Steps in Process Re-Design 1. Collected data on Processes used – these were not standard Customer experiences Customer satisfaction How employees spent time (only 40% with customers) Employee frustrations

Blockbuster Steps in Process Re-Design (2) 2. Worked with employees to identify improvement ideas (brainstorming) 3. Tested the ideas in "learning" stores Involved employees in designing new processes Gave employees "ownership" of the process Refined the ideas Eliminated waste and unnecessary steps Did cost/benefit analysis Developed flowcharts for the new processes

Blockbuster Steps in Process Re-Design (3) 4. Trained employees in "pilot" stores to use the new processes Return videos to the shelves at fewer times during the day Simpler, shorter process for re-shelving videos 5. National rollout: Implemented new processes in all U. S. stores Human factors were the biggest obstacle to implementation – some employees did not enjoy spending time with customers

Elements of Lean Systems in Services Improved quality – consistency Uniform facility loading when possible Multifunctional workers More efficient processes and shorter cycle time Shorter setup times Parallel processing Clean, well-organized workplace See pages for details

Elements of JIT Manufacturing Inventory reduction exposes problems Kanbans & pull production systems Small lots & quick setups Uniform plant loading Flexible resources Efficient facility layouts (cellular layout)

Cost Impact of Inventory Figure 7-1, page 225 High inventory  high inventory holding costs High inventory hides problems, and the company pays for the cost of the problems In manufacturing, high inventory requires large lot sizes Long manufacturing lead times Harder to meet changing customer demand Delays in introducing new or improved products

Reducing Inventory Kanban Pull System (Figure 7-3, p. 229) Production kanban: authorization to make a container of parts No production can be done without a production kanban and an empty container Withdrawal kanban: authorization to get a container of parts for use in the next process step Work in process (WIP) inventory WIP < (number of kanbans)(lot size) Lot size = number of parts of a certain type produced at one time

Reducing Inventory Small Lot Sizes and Quick Setups Benefits of small lot sizes Shorter manufacturing lead time  Faster response to changes in customer demand Lower inventory and inventory holding costs Small lot sizes require more setups Setups must be done more quickly and at lower costs. This is necessary To ensure adequate capacity To control setup costs To avoid production delays

Inventory Reduction 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 reduces inventory along the whole supply chain See Table 7.1, page 233, for a schedule example.

JIT in Manufacturing 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

JIT in Manufacturing Effective Facility Layouts Workstations that are close to each other reduce transport & movement Streamlined flow of material Often use: Cellular Manufacturing (instead of process focus) – reduces WIP, transportation time and costs. Simplifies scheduling. U-shaped lines: (allows material handler to quickly drop off materials & pick up finished work) See Figure 7.6, page 235.

JIT and TQM Build quality into all processes Focus on continuous improvement - Kaizen Quality at the source - immediate inspection Jidoka (authority to stop line) Poka-yoke (fail-safe all processes) Preventive maintenance – scheduled to minimize the impact on production 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

Respect for People: The Role of Employees Associates gather performance data Team approaches used for problem-solving Many decisions are made from the bottom up Everyone (in a manufacturing plant) 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

Benefits of JIT and Lean Systems Smaller inventories Shorter lead times Improved quality Reduced space requirements Lower operations costs Increased productivity Greater flexibility