1. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-1 Operations Management Just-in-Time and Lean Production Systems Chapter 16

2. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-2 Outline  JUST-IN-TIME AND LEAN PRODUCTION  GLOBAL COMPANY PROFILE: GREEN GEAR CYCLING  SUPPLIERS  Goals of JIT Partnerships  Concerns of Suppliers  JIT LAYOUT  Distance Reduction  Increased Flexibility  Impact on Employees  Reduced Space and Inventory

3. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-3 Outline - Continued  INVENTORY  Reduce Variability  Reduce Inventory  Reduce Lot Sizes  Reduce Setup Costs  SCHEDULING  Level Schedules  Kanban  QUALITY  EMPLOYEE EMPOWERMENT  LEAN PRODUCTION  JIT IN SERVICES

4. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-4 Waste is ‘anything other than the minimum amount of equipment, materials, parts, space, and worker’s time, which are absolutely essential to add value to the product.’ — Shoichiro Toyoda President, Toyota © 1995 Corel Corp. Introductory Quotation

5. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-5  Management philosophy of continuous and forced problem solving  Supplies and components are ‘pulled’ through system to arrive where they are needed when they are needed. What is Just-in-Time?

6. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-6 Lean Production  Lean Production supplies customers with exactly what the customer wants, when the customer wants, without waste, through continuous improvement.

7. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-7  Attacks waste  Anything not adding value to the product  From the customer’s perspective  Exposes problems and bottlenecks caused by variability  Deviation from optimum  Achieves streamlined production  By reducing inventory What Does Just-in-Time Do?

8. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-8  Overproduction  Waiting  Transportation  Inefficient processing  Inventory  Unnecessary motion  Product defects © 1995 Corel Corp. Types of Waste

9. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-9 Waste Reduction (%) 82% 50% 30% 20% 40% 0%20%40%60%80%100% Work-in-Process Inventory Raw Material Inventory Lead Time Space Finished Goods Inventory Scrap Setup Time JIT Reduced Waste at Hewlett-Packard

10. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-10 Variability Occurs Because  Employees, machines, and suppliers produce units that do not conform to standards, are late, or are not the proper quantity  Engineering drawings or specifications are inaccurate  Production personnel try to produce before drawings or specifications are complete  Customer demands are unknown

11. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-11 Push versus Pull  Push system: material is pushed into downstream workstations regardless of whether resources are available  Pull system: material is pulled to a workstation just as it is needed

12. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-12  Suppliers  reduced number of vendors  supportive supplier relationships  quality deliveries on time  Layout  work-cell layouts with testing at each step of the process  group technology  movable, changeable, flexible machinery  high level of workplace organization and neatness  reduced space for inventory  delivery direct to work areas JIT Contribution to Competitive Advantage

13. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-13  Inventory  small lot sizes  low setup times  specialized bins for holding set number of parts  Scheduling  zero deviation from schedules  level schedules  suppliers informed of schedules  Kanban techniques JIT Contribution to Competitive Advantage - Continued

14. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-14 JIT Contribution to Competitive Advantage - Continued  Preventive Maintenance  scheduled  daily routine  operator involvement  Quality Production  statistical process control  quality by suppliers  quality within firm

15. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-15 JIT Contribution to Competitive Advantage - Continued  Employee Empowerment  empowered and cross-trained employees  few job classifications to ensure flexibility of employees  training support  Commitment  support of management, employees, and suppliers

16. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-16 Results  Queue and delay reduction, speedier throughput, freed assets, and winning orders  Quality improvement, reduces waste and wins orders  Cost reduction increases margin or reduces selling price  Variability reductions in the workplace reduces waste and wins orders  Rework reduction, reduces waste and wins orders

17. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-17 Yielding Faster response to the customer at lower cost and higher quality A competitive advantage!

18. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-18 Suppliers Preventive Maintenance Layout Inventory Scheduling Quality Employee Empowerment JIT Just-in-Time Success Factors

19. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-19  Incoming material and finished goods involve waste  Buyer and supplier form JIT partnerships  JIT partnerships eliminate  Unnecessary activities  In-plant inventory  In-transit inventory  Poor suppliers Suppliers

20. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-20  Few  Nearby  Repeat business  Analysis and support to enable desirable suppliers to become or stay price competitive  Competitive bidding mostly limited to new purchases  Buyer resists vertical integration and subsequent wipeout of supplier business  Suppliers encouraged to extend JIT to their suppliers (2 nd and 3 rd tier suppliers) Characteristics of JIT Partnerships Characteristics of JIT Partnerships Suppliers

21. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-21 Characteristics of JIT Partnerships Characteristics of JIT Partnerships Quantities  Steady output rate  Frequent deliveries in small-lot quantities  Long-term contract agreements  Minimal or no paperwork (use EDI or internet)  Delivery quantities fixed for whole contract term  Little or no permissible overage or underage  Suppliers package in exact quantities  Suppliers reduce their production lot sizes

22. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-22  Minimal product specifications imposed on suppliers  Help suppliers meet quality requirements  Close relationship between buyers’ and suppliers quality assurance people  Suppliers use poka-yoke and process control charts instead of lot-sampling techniques Characteristics of JIT Partnerships Characteristics of JIT Partnerships Quality

23. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-23 Characteristics of JIT Partnerships Characteristics of JIT Partnerships Shipping  Scheduling of inbound freight  Gain control by use of company-owned or contract shipping and warehousing  Use of Advanced Shipping Notice (ASN)

24. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-24 Goals of JIT partnerships ¬Elimination of unnecessary activities ·Elimination of in-plant inventory ®Elimination of in-transit inventory ÍElimination of poor suppliers

25. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-25  Diversification  Poor customer scheduling  Frequent engineering changes  Quality assurance  Small lot sizes  Physical proximity Concerns of Suppliers

26. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-26 Streamlined Production Flow with JIT Traditional Flow Customers Suppliers Customers Suppliers Production Process (stream of water) Inventory (stagnant ponds) Material (water in stream)

27. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-27  JIT objective: Reduce movement of people and material  Movement is waste!  JIT requires  Work cells for product families  Moveable or changeable machines  Short distances  Little space for inventory  Delivery directly to work areas Layout

28. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-28 Process LayoutWork Cell Saw Lathe Grinder Heat Treat Lathe Saw Heat Treat Grinder Press 1 1 2 3 4 5 2 6 Saw Press Work Cell versus Process Layout

29. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-29 Layout Tactics  Build work cells for families of products  Minimize distance  Design little space for inventory  Improve employee communication  Use poka-yoke devices  Build flexible or movable equipment  Cross train workers to add flexibility

30. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-30  Traditional: inventory exists in case problems arise  JIT objective: eliminate inventory  JIT requires  Small lot sizes  Low setup time  Containers for fixed number of parts  JIT inventory: Minimum inventory to keep system running Inventory

31. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-31 JIT Inventory Tactics  Use a pull system to move inventory  Reduce lot size  Reduce setup time  Develop Just-in-Time delivery systems with suppliers  Deliver directly to point of use  Perform-to-schedule  Reduce setup time  Use group technology

32. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-32 Scrap Work in process inventory level (hides problems) Unreliable Vendors Capacity Imbalances Lowering Inventory Reduces Waste

33. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-33 Scrap Reducing inventory reveals problems so they can be solved. Unreliable Vendors Capacity Imbalances WIP Lowering Inventory Reduces Waste

34. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-34 Scrap Reducing inventory reveals problems so they can be solved. Unreliable Vendors Capacity Imbalances WIP Lowering Inventory Reduces Waste

35. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-35 To Lower Inventory, Reduce Lot Sizes Time Inventory Level Lot Size 200 Lot Size 80 Average inventory = 100 Average inventory = 40 Average inventory = (Lot size)/2

36. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-36 Customer orders 10 Lot size = 5 Lot 1 Lot 2 Lot size = 2 Lot 1Lot 2Lot 3Lot 4Lot 5 Reducing Lot Sizes Increases the Number of Lots

37. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-37 …Which Increases Inventory Costs Lot Size Cost Holding Cost Total Cost Setup Cost Optimal Lot Size Smaller Lot Size

38. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-38 Unless Setup Costs are Reduced Lot Size Cost Holding Cost Total Cost Setup Cost Original optimal lot size New optimal lot size

39. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-39 Frequent Orders can Reduce Average Inventory Time Inventory 100 200 Q 1 When average order size = 200, average inventory is 100 Q 2 When average order size = 100, average inventory is 50

40. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-40 Lower Total Cost Requires Small Lot Sizes and Lower Setup Costs Lot size Sum of ordering and holding cost T1T1 T2T2 S2S2 S1S1 Cost

41. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-41  Involves timing of operations  JIT requires  Communicating schedules to suppliers  Level schedules  Freezing part of schedule nearest due date  Small lots  Kanban techniques Scheduling

42. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-42 JIT Scheduling Tactics  Communicate the schedule to suppliers  Make level schedules  Freeze part of the schedule  Perform to schedule  Seek one-piece-make and one-piece-move  Eliminate waste  Produce in small lots  Use kanbans  Make each operation produce a perfect part

43. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-43  Reduce ripple effect of small variations in schedules (e.g., final assembly)  Production quantities evenly distributed over time (e.g., 7/day)  Build same mix of products every day  Results in many small lots  ItemMonthly QuantityDaily Quantity A402 B603 Level Schedules

44. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-44 A AABBBC JIT Small Lots Large-Lot Approach Time AABB B C AAABBBBBB C C JIT produces same amount in same time if setup times are lowered Small versus Large Lots Small lots also increase flexibility to meet customer demands

45. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-45 Comparison of Level and Large Lot Material-use Approaches

46. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-46  Japanese word for card  Pronounced ‘kahn-bahn’ (not ‘can-ban’)  Authorizes production from downstream operations  ‘Pulls’ material through plant  May be a card, flag, verbal signal etc.  Used often with fixed-size containers  Add or remove containers to change production rate Kanban

47. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-47 Diagram of Outbound Stockpoint with Warning-Signal Marker

48. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-48 Kanban Signals “Pull” Material Through the Process

49. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-49 Kanban: Additional Points  When producer and user are not in visual contact, a card may be used; otherwise, a light, flag, or empty spot on the floor may work.  Because a pull station may require several resupply components, several kanban pull techniques can be used at the same station.  Usually, each card controls a specific quantity of parts, although multiple card systems can be used if the producing cell produces several components or the lot size is different from the move size.  In an MRP system, the schedule can be thought of as a “build” authorization and the kanban as a type of “pull” system that initiates the actual production.

50. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-50 Kanban: Additional Points - Continued  The kanban cards provide direct control (limit) on the amount of work-in-process between cells.  If there is an intermediate storage area, a two- card system may be used; one card circulates between user and storage area, and the other circulates between the storage area and the producing area.

51. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-51  All activities involved in keeping equipment in working order  Done to prevent failure  JIT requires  Scheduled & daily PM  Operator performs PM  Knows machines  Responsible for product quality Preventive Maintenance (PM)

52. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-52  JIT exposes quality problems by reducing inventory  JIT limits number defects with small lots  JIT requires TQM  Statistical process control  Worker involvement  Inspect own work  Quality circles  Immediate feedback Quality

53. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-53 JIT Quality Tactics  Use statistical process control  Empower employees  Build failsafe methods (poka-yoke, checklists, etc.)  Provide immediate feedback

54. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-54  Get employees involved in product & process improvements  Employees know job best!  JIT requires  Empowerment  Cross-training  Training support  Few job classifications © 1995 Corel Corp. Employee Empowerment

55. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-55 JIT in Services All the techniques used in manufacturing are used in services SuppliersLayoutsInventoryScheduling

56. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-56 Attributes of Lean Producers - They  use JIT to eliminate virtually all inventory  build systems to help employees product a perfect part every time  reduce space requirements  develop close relationships with suppliers  educate suppliers  eliminate all but value-added activities  develop the workforce  make jobs more challenging  reduce the number of job classes and build worker flexibility