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© 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
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-6
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
© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 0745816-17
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