© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-1 Operations Management...

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-1

Operations Operations ManagementManagement

Just-in-Time and Lean SystemsJust-in-Time and Lean SystemsChapter 16Chapter 16

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-2

Building on TQMBuilding on TQM

Note our goal in TQM was to eliminate variance from our processes

Perfect JIT requires perfect quality

Pursuing JIT (particularly reducing inventory) exposes problems which can then be eliminated

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-3

Lean ProductionLean Production Lean Production supplies customers with exactly what

the customer wants, when the customer wants, without waste, through continuous improvement.

Just – in – TimeJust – in – TimeManagement philosophy of continuous and forced problem solving that supports lean production.

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-4

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 of Toyota

© 1995 Corel Corp.

WasteWaste

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-5

Overproduction Waiting Transportation Inefficient processing Inventory Unnecessary motion Product defects

© 1995 Corel Corp.

Types of WasteTypes of Waste

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Waste reduction Things that do not add value from the customer perspective

Variability reduction Any deviation from the optimum process that delivers

perfect product on time, every time

Pull vs. Push Pull systems where material is produced only as needed / when

requested

Key Elements of Just-in-TimeKey Elements of Just-in-Time

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-7

A method in which production of the item begins in advance of customer needs

Push MethodPush Method

Allows closer control of inventory and production Requires high repeatability in production process Helps to expose problems

Pull MethodPull Method A method in which customer demand activates production

of the item

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-8

Suppliers Layout Inventory Scheduling Preventive Maintenance Quality Production Employee Empowerment Commitment

JIT Contribution to JIT Contribution to Competitive AdvantageCompetitive Advantage

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-9

Suppliers reduced number of vendors supportive supplier relationships quality deliveries on time

Layout Inventory Scheduling Preventive Maintenance Quality Production Employee Empowerment Commitment

JIT Contribution to JIT Contribution to Competitive AdvantageCompetitive Advantage

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-10

Goals of JIT partnershipsGoals of JIT partnerships Elimination of unnecessary activities Elimination of in-plant inventory Elimination of in-transit inventory Elimination of poor suppliers

Diversification Poor customer scheduling Frequent engineering changes Quality assurance Small lot sizes Physical proximity

Concerns of SuppliersConcerns of Suppliers

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-11

Streamlined ProductionStreamlined Production

Flow with JIT

Traditional Flow

CustomersSuppliers

Customers

Suppliers

Production Process (stream of water)

Inventory (stagnant ponds)

Material(water in stream)

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-12

Suppliers

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 directly to work areas

Inventory Scheduling Preventive Maintenance Quality Production Employee Empowerment Commitment

JIT Contribution to JIT Contribution to Competitive AdvantageCompetitive Advantage

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-13

Process Layout Work Cell

Saw

Lathe

Grinder

HeatTreat

Lathe

Lathe

Lathe Saw

HeatTreat

Grinder

Grinder

Press

Press 1

1

2

3

45

2

6

Saw

Press

Work Cell vs. Process LayoutWork Cell vs. Process Layout

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-14

Suppliers Layout

Inventory small lot sizes low setup times specialized bins for holding set number of parts

Scheduling Preventive Maintenance Quality Production Employee Empowerment Commitment

JIT Contribution to JIT Contribution to Competitive AdvantageCompetitive Advantage

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-15

Firms hold inventory to: decouple activities provide a buffer (safety stock) for

supplier reliability, quality problems, etc.

From a Just-in-Time perspective, inventory is being used to mask problems rather than solve them

InventoryInventory

Just-in-Case

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-16

Scrap Unreliable suppliers

Capacity imbalance

Inventory hides problemsInventory hides problemsInventory hides problemsInventory hides problems

Inventory Level

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To Lower Inventory, Reduce Lot SizesTo Lower Inventory, Reduce Lot SizesO

n-h

and

inve

nto

ry

5 10 15 20 2530

Time (hours)

100 –

75 –

50 –

25 –

0 –

Lot size = 100Average cycle inventory = 50

Lot size = 50Average cycle inventory = 25

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-18

Customer orders 10

Lot size = 5

Lot 1 Lot 2

Lot size = 2Lot 1 Lot 2 Lot 3 Lot 4 Lot 5

Reducing Lot Sizes Reducing Lot Sizes Increases the Number of LotsIncreases the Number of Lots

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-19

……Which Increases Inventory CostsWhich Increases Inventory Costs

Lot Size

Cost

Holding Cost

Total Cost

Setup Cost

Optimal Lot Size

SmallerLot Size

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-20

Unless Setup Costs are ReducedUnless Setup Costs are Reduced

Lot Size

Cost

Holding CostTotal Cost

Setup Cost

Original optimal lot size

New optimal lot size

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-21

Suppliers Layout Inventory

Scheduling zero deviation from schedules level schedules suppliers informed of schedules Kanban techniques

Preventive Maintenance Quality Production Employee Empowerment Commitment

JIT Contribution to JIT Contribution to Competitive AdvantageCompetitive Advantage

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-22

A

Large-Lot Approach

Time

A A A B B B B B B C C

Large Lots vs. Small LotsLarge Lots vs. Small Lots

A A B B C A

Small-Lot Approach

Time

A C B B C A

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-23

A

Large-Lot Approach

Time

A A A B B B B B B C C

Large Lots vs. Small LotsLarge Lots vs. Small Lots

A A B B C A

Small-Lot Approach

Time

A C B B C A

Small lots: • reduce inventory • increase flexibility to meet customer demands (cut lead times)• help achieve a uniform operating system workload

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-24

KanbanKanban Japanese word for card – may be a card, flag, empty

container, space on shelf, etc. Authorizes production from downstream operations

Pulls material through plant

Used often with fixed-size containers Add or remove containers to change production rate

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-25

KanbanKanban Japanese word for card – may be a card, flag, empty

container, space on shelf, etc. Authorizes production from downstream operations

Pulls material through plant

Used often with fixed-size containers Add or remove containers to change production rate

Pull systems: • reduce inventory • increase flexibility to meet customer demands (cut lead times)• help achieve a uniform operating system workload• make problems immediately evident

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-26

Suppliers Layout Inventory Scheduling

Preventive Maintenance scheduled daily routine operator involvement

Quality Production Employee Empowerment Commitment

JIT Contribution to JIT Contribution to Competitive AdvantageCompetitive Advantage

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-27

Breakdown

Non-routine inspection & servicing

Remedial Basis for doing

Equipment failure

Types of MaintenanceTypes of Maintenance

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-28

Preventive

Routine inspection & servicing

Prevents failures Bases for doing

Time: Every day Usage: Every 300 pieces Inspection: Control chart

deviations

Breakdown

Non-routine inspection & servicing

Remedial Basis for doing

Equipment failure

Types of MaintenanceTypes of Maintenance

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-29

Maintenance Commitment

Cost

Preventive Maintenance CostTotTotal Maintenance Cost

Breakdown Cost

Optimal

Traditional View of MaintenanceTraditional View of Maintenance

Full-Cost View of MaintenanceFull-Cost View of MaintenanceCost

Optimal

Total costsFull cost of breakdowns

Preventive maintenance costs

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-30

Suppliers Layout Inventory Scheduling Preventive Maintenance

Quality Production statistical process control quality suppliers quality within firm

Employee Empowerment Commitment

JIT Contribution to JIT Contribution to Competitive AdvantageCompetitive Advantage

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-31

JIT exposes quality problems by reducing inventory JIT limits the number of defects produced with small lots JIT requires TQM

Statistical process control Worker involvement

Inspect own work Quality circles

Fail-safe methods Immediate feedback

QualityQuality

JIT

QUALITY

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-32

Suppliers Layout Inventory Scheduling Preventive Maintenance Quality Production

Employee Empowerment empowered and cross-trained employees training support few job classifications to ensure flexibility of employees

Commitment

JIT Contribution to JIT Contribution to Competitive AdvantageCompetitive Advantage

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-33

Suppliers Layout Inventory Scheduling Preventive Maintenance Quality Production Employee Empowerment

Commitment support of management, employees, and suppliers

JIT Contribution to JIT Contribution to Competitive AdvantageCompetitive Advantage

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-34

Suppliers Layout Inventory Scheduling Preventive Maintenance Quality Production Employee Empowerment Commitment

JIT Contribution to JIT Contribution to Competitive AdvantageCompetitive Advantage

© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-35

JIT Contribution to JIT Contribution to Competitive Advantage – ResultsCompetitive Advantage – Results

Queue and delay reduction speeds throughput, frees assets, and wins orders

Quality improvement reduces waste and wins orders Cost reduction increases margin or reduces selling price Variability reduction reduces waste and wins orders Rework reduction reduces waste and wins orders

FASTER BETTER CHEAPER