1. BUSN 6110
Webster
Fall
2012

2. Just-In-Time and Lean Production

3. JIT In Services Competition on speed & quality
Multifunctional department store workers
Work cells at fast-food restaurants
Just-in-time publishing for textbooks - on demand publishing a growing industry
Construction firms receiving material just as needed

4. What is JIT ? Producing only what is needed, when it is needed
A philosophy
An integrated management system
JIT’s mandate: Eliminate all waste

5. Lean Operations: Best Implementation is Toyota Production System
TPS is a production management system that aims for the “ideal” through continuous improvement
Includes, but goes way beyond JIT. Pillars:
Synchronization
Reduce transfer batch sizes
Level load production
Pull production control systems (vs. push): Kanban
Quality at source
Layout: Cellular operations
Continuous Improvement (Kaizen): through visibility & empowerment
....

6. Toyota’s waste elimination in Operations
1. Overproduction
2. Waiting
3. Inessential handling
4. Non-value adding processing
5. Inventory in excess of immediate needs
6. Inessential motion
7. Correction necessitated by defects

7. Flexible Resources Multifunctional workers General purpose machines
Study operators & improve operations

8. The Push System
Pre-planned issues of supplies/merchandise regardless of customer demand criteria
Creates excess and shortages
not efficient over the long run

9. The Pull System Material is pulled through the system when needed
Reversal of traditional push system where material is pushed according to a schedule
Forces cooperation
Prevent over and underproduction

10. Kanban Production Control System
Kanban card indicates standard quantity of production
Derived from two-bin inventory system
Kanban maintains discipline of pull production
Production kanban authorizes production
Withdrawal kanban authorizes movement of goods

11. Types of Kanbans Bin Kanban - when bin is empty replenish
Kanban Square
Marked area designed to hold items
Signal Kanban
Triangular kanban used to signal production at the previous workstation
Material Kanban
Used to order material in advance of a process
Supplier Kanbans
Rotate between the factory and suppliers

12. Components of Lead Time
Processing time
Reduce number of items or improve efficiency
Move time
Reduce distances, simplify movements, standardize routings
Waiting time
Better scheduling, sufficient capacity
Setup time
Generally the biggest bottleneck

13. Common Techniques for Reducing Setup Time
Preset Buttons/settings
Quick fasteners
Reduce tool requirements
Locator pins
Guides to prevent misalignment
Standardization
Easier movement

14. Uniform Production Results from smoothing production requirements
Kanban systems can handle +/- 10% demand changes
Smooths demand across planning horizon
Mixed-model assembly steadies component production

15. Quality at the Source Jidoka is authority to stop production line
Andon lights signal quality problems
Undercapacity scheduling allows for planning, problem solving & maintenance
Visual control makes problems visible
Poka-yoke prevents defects (mistake proof the system)

16. Kaizen Continuous improvement Requires total employment involvement
Essence of JIT is willingness of workers to
Spot quality problems
Halt production when necessary
Generate ideas for improvement
Analyze problems
Perform different functions

17. Goals of JIT Reduced inventory - where?
Improved quality
Lower costs
Reduced space requirements
Shorter lead time
Increased productivity
Greater flexibility
Better relations with suppliers
Simplified scheduling and control activities
Increased capacity
Better use of human resources
More product variety
Continuous Process Improvement

18. JIT Implementation Use JIT to finely tune an operating system
Somewhat different in USA than Japan
JIT is still evolving
JIT as an inventory reduction program isn’t for everyone - JIT as a CPI program is!
Some systems need Just-in- Case inventory

19. Reverse Logistics: Important or Irritant?
The Reverse Logistics Association was founded in 2002 when research studies were completed which revealed that over $750 billion annually was being spent on reverse logistics processes in North America alone.

20. reverse logistics would not exist.”
“In an ideal world,
reverse logistics would not exist.”
Jim Whalen, “In Through the Out Door,”
Warehousing Management, March 2001

21. reverse logistics is seen
“Now, more than ever,
reverse logistics is seen
as being important.”
Dale Rogers, Going Backwards, 1999

22. Reverse vs. Forward Forecasting Distribution Centers Quality
Disposition
Marketing

23. Reverse Logistics - What is it? The Commercial Perspective
Reverse Logistics is the process of moving products from their typical final destination to another point, for the purpose of capturing value otherwise unavailable, or for the proper disposal of the products.

24. Typical Reverse Logistics Activities
Processing returned merchandise - damaged, seasonal, restock, salvage, recall, or excess inventory
Recycling packaging materials/containers
Reconditioning, refurbishing, remanufacturing
Disposition of obsolete stuff
Hazmat recovery

25. Why Reverse Logistics?
Competitive advantage
Customer service
- Very Important: 57%
- Important: 18%
- Somewhat/unimportant:23%
Bottom line profits

26. Reverse Logistics - New Problem?
Sherman
Montgomery Ward’s
Recycling/remanufacturing in 1940s
World War II - 77,000,000 square feet of storage across Europe with over $6.3 billion in excess stuff
Salvage and reuse of clothing and shoes in the Pacific Theater World War II

27. Key Dates in Reverse Logistics
World War II – the advent of refurbished automobile parts due to shortages
1982/ Tylenol Scare - Johnson and Johnson - 31 million bottles of Tylenol
German ordinance that put teeth in environmental reverse pipeline
Summer 1996 – UK Packaging and Packaging Waste Legislation
2001 – EU goal of 50-65% recovering or recycling of packaging waste

28. Reverse Logistics
A US Army Perspective

29. Jan-Mar 2003
The US Army moved the equivalent of 150 Wal-Mart Supercenters to Kuwait in a matter of a few months

30. Jane’s Defence Weekly “Recent report (Aug 2003):
There is a 40 hectare (~100 acres)
area in Kuwait with items waiting
to be retrograded back to the US.”

31. The Commercial Perspective
Reverse Logistics
The Commercial Perspective

32. Mattel's expanded product recall
of 19 million toys is pushing a lot
of product back through the supply chain.
Recall of 3912 items from Peanut Corporation of America Salmonella problems causing “constipation” of forward supply chains
Dell recall of faulty laptop batteries
2010 – toys, pallets, Tylenol
2011 – 4 million Toyotas

33. Reverse Logistics Rate of returns? Cost to process a return?
Time to get the item back on the shelf if resaleable?

34. Costs - above the cost of the item
Merchandise credits to the customers.
The transportation costs of moving the items from the retail stores to the central returns distribution center.
The repackaging of the serviceable items for resale.
The cost of warehousing the items awaiting disposition.
The cost of disposing of items that are unserviceable, damaged, or obsolete.

35. Process inbound shipment at a major distribution center = 1.1 days
Costs
Process inbound shipment at a major distribution center = 1.1 days
Process inbound return shipment = 8.5 days
Cost of lost sales
Wal-Mart: Christmas returns = 4 Days of Supply for all of Wal-Mart = 2000 Containers

36. More Costs
Hoover - $40 Million per year
Cost of processing $85 per item
Unnamed Distribution Company - $700K items on reverse auction
over $60 billion in returns; $52 billion excess to systems; $40 billion to process

37. Is it a problem? Estimate of 2004 holiday returns: $13.2 billion
% of estimated holiday returns: 25%
If true, value of 2011 returns ~ $120 billion
Wal-Mart: $6 Billion in annual returns = 17,000 truck loads (>46 trucks a day)
Personal Computers: approximately $95 per PC sold
79% of returned PCs have no defects
Home Depot ~ $10 million in returns in the stores

38. More consequences
Increased Customer Wait Times
Loss of Confidence in the Supply System
Multiple orders for the same items
Excess supplies in the forward pipeline
Increase in “stuff” in the reverse pipeline
Constipated supply chain

39. Impact?
Every resaleable item that is in the reverse supply chain results in a potential stock out or “zero balance” at the next level of supply.
Creates a “stockout” do-loop

40. Results?
This potential for a stock out results in additional parts on the shelves at each location to prevent a stock out from occurring.
More stocks = “larger logistics footprint” = the need for larger distribution centers and returns centers.

41. Reverse Logistics
According to the Reverse Logistics Executive Council, the percent increase in costs for processing a return, as compared to a forward sale, “is an astounding %.”
Typically, as many as 8-12 more steps per item in the reverse pipeline than items in the forward pipeline

42. Electronics Reverse Logistics
$677 billion
$132 billion
60 million – 12 million
100 million
20-50 million metric tons
2-5%
70 %
4 billion pounds
4 million pounds
75 pounds/40,000 pounds

43. “The truth is, for one reason or another,
materials do come back and it is up to
those involved in the warehouse to
effectively recover as much of the cost for
these items as possible.”
- Whalen, “In Through the Out Door”

44. Impacts of Reverse Logistics
Forecasting
Carrying costs
Processing costs
Warehousing
Distribution
Transportation
Personnel
Marketing
Customer Service
Bottom line profits