1. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-1 Operations Management Just-in-Time Systems Supplement 12

2. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-2 Outline  Just-in-Time Philosophy  Suppliers  Goals of JIT Partnerships  Concerns of Suppliers  JIT Layout  Distance Reduction  Increased Flexibility  Impact on Employees  Reduced Space and Inventory

3. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-3 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. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-4 Learning Objectives When you complete this supplement, you should be able to :  Identify or Define:  Types of waste  Variability  Kanban  Describe or Explain :  Just-in-Time (JIT) philosophy  Pull systems  Push systems  The goals of JIT partnerships  The impact of JIT on layout  How JIT affects quality and employees

5. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-5 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

6. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-6 Supplier – Production – Distribution System Supplier Distribution Inventories Raw material in-transit Sub-assembly parts in-transit Maintenance, repair, and ordering supplies in-transit Raw Material Inventory Work-in-process Inventory Factory Finished Goods Inventory Component Inventory MRO Inventory Purchasing Production and Inventory Control Shipping and Traffic Retailer Inventory Orders Warehouse Inventory Productions Inventories Customer Distribution Inventories Orders

7. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-7  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?

8. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-8  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?

9. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-9  Overproduction  Waiting  Transportation  Inefficient processing  Inventory  Unnecessary motion  Product defects © 1995 Corel Corp. Types of Waste

10. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-10 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

11. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-11 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

12. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-12 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

13. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-13 JIT Contribution to Competitive Advantage  Suppliers  reduced number of vendors  supportive supplier relationships  quality deliveries on time

14. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-14  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 - continued

15. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-15  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

16. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-16 JIT Contribution to Competitive Advantage - continued  Preventive Maintenance  scheduled  daily routine  operator involvement  Quality Production  statistical process control  quality by suppliers  quality within firm

17. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-17 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

18. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-18 Results  Queue and delay reduction, speeds throughput, frees assets, and wins orders  Quality improvement, reduces waste and wins orders  Cost reductions, increases margin or reduces selling price  Variability reductions in the workplace, reduces waste and wins orders  Rework reduction, reduces waste and wins orders

19. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-19 Yielding  Faster response to the customer and higher quality A competitive advantage!

20. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-20 Suppliers Preventive Maintenance Layout Inventory Scheduling Quality Employee Empowerment JIT Just-in-Time Success Factors

21. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-21  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

22. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-22  Few  Nearby  Repeat business  Analysis 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 Characteristics of JIT Partnerships Suppliers

23. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-23 Characteristics of JIT Partnerships Quantities  Steady output rate  Frequent deliveries in small-lot quantities  Long term contract agreements  Minimal paperwork  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 or store unreleased material

24. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-24  Minimal product specifications imposed on suppliers  Help suppliers to meet quality requirements  Close relationship between buyers’ and suppliers quality assurance people  Suppliers use process control charts instead of lot- sampling techniques Characteristics of JIT Partnerships Quality

25. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-25 Characteristics of JIT Partnerships Shipping  Scheduling of inbound freight  Gain control by use of company-owned or contract shipping and warehousing

26. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-26 Goals of JIT partnerships ¬ Elimination of unnecessary activities · Elimination of in-plant inventory ® Elimination of in-transit inventory Í Elimination of poor suppliers

27. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-27  Diversification  Poor customer scheduling  Frequent engineering changes  Quality assurance  Small lot sizes  Physical proximity Supplier Worries

28. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-28 Streamlined Production Flow with JIT Traditional Flow Customers Suppliers Customers Suppliers Production Process (stream of water) Inventory (stagnant ponds) Material (water in stream)

29. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-29  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

30. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-30 Process LayoutWork Cell Saw Lathe Grinder Heat Treat Lathe Lathe Saw Heat Treat Grinder Grinder Press Press 1 1 2 3 4 5 2 6 Saw Press Work Cell versus Process Layout

31. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-31 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

32. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-32  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

33. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-33 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

34. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-34 Scrap Work in process inventory level (hides problems) Unreliable Vendors Capacity Imbalances Lowering Inventory Reduces Waste

35. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-35 Scrap Reducing inventory reveals problems so they can be solved. Unreliable Vendors Capacity Imbalances WIP Lowering Inventory Reduces Waste

36. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-36 Scrap Reducing inventory reveals problems so they can be solved. Unreliable Vendors Capacity Imbalances WIP Lowering Inventory Reduces Waste

37. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-37 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

38. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-38 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

39. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-39 …Which Increases Inventory Costs Lot Size Cost Holding Cost Total Cost Setup Cost Optimal Lot Size Smaller Lot Size

40. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-40 Unless Setup Costs are Reduced Lot Size Cost Holding Cost Total Cost Setup Cost Original optimal lot size New optimal lot size

41. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-41 Steps to Reduce Setup Time Initial Setup Time Separate setup into preparation, and actual setup, doing as much as possible while the machine/process is running (save 30 minutes) Move material closer and improve material handling (save 20 minutes) Standardize and improve tooling (save 15 minutes) 90 min 60 min 45 min 25 min 15 min Use one-touch system to eliminate adjustments (save 10 minutes) Training operators and standardizing work procedures (save 2 minutes) Step 1 Step 2 Step 3 Step 4 Step 5 13 min Step 4

42. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-42  Involves timing of operations  JIT requires  Communicating schedules to suppliers  Level schedules  Freezing part of schedule nearest due date  Small lots  Kanban techniques Scheduling

43. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-43 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

44. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-44  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

45. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-45 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

46. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-46  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. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-47 Figure S12.5

48. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-48 Photo S12.4

49. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-49  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)

50. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-50  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

51. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-51 JIT Quality Tactics  Use statistical process control  Empower employees  Build failsafe methods (poka-yoke, checklists, etc.)  Provide immediate feedback

52. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-52  Getting 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

53. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-53 JIT in Services All the techniques used in manufacturing are used in services SuppliersLayoutsInventoryScheduling

54. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render) © 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 S12-54 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