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1¥¥ 2002 South-Western/Thomson Learning2002 South-Western/Thomson Learning TMTM

Slides preparedSlides prepared

by John Loucksby John Loucks

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Chapter 12Chapter 12

JustJust--InIn--Time and Lean ManufacturingTime and Lean Manufacturing

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OverviewOverview

The JustThe Just--inin--Time Manufacturing PhilosophyTime Manufacturing Philosophy

Prerequisites for JIT ManufacturingPrerequisites for JIT Manufacturing

Elements of JIT ManufacturingElements of JIT Manufacturing

Benefits of JIT ManufacturingBenefits of JIT Manufacturing Success and JIT ManufacturingSuccess and JIT Manufacturing

JIT in ServicesJIT in Services

WrapWrap--Up: What WorldUp: What World--Class Companies DoClass Companies Do

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APICS Definition of JITAPICS Definition of JITAPICS Definition of JITAPICS Definition of JIT

³A philosophy of manufacturing based on planned ³A philosophy of manufacturing based on planned 

elimination of waste and continuous improvement of elimination of waste and continuous improvement of  productivity ««´ productivity ««´

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APICS Definition of JITAPICS Definition of JITAPICS Definition of JITAPICS Definition of JIT

³The primary elements of Just³The primary elements of Just--inin--Time are:Time are:

to have only the required inventory when needed;to have only the required inventory when needed;

to improve quality to zero defects;to improve quality to zero defects;

to reduce lead times by reducing setup times,to reduce lead times by reducing setup times,queue lengths, and lot sizes;queue lengths, and lot sizes;

to incrementally revise the operations themselves;to incrementally revise the operations themselves;

and to accomplish these things at minimum cost´.and to accomplish these things at minimum cost´.

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JIT SynonymsJIT SynonymsJIT SynonymsJIT Synonyms

IBMIBM -- Continuous Flow ManufacturingContinuous Flow Manufacturing

HPHP -- Stockless ProductionStockless Production

-- Repetitive Manufacturing SystemRepetitive Manufacturing System

GEGE -- Management by SightManagement by Sight MotorolaMotorola -- Short Cycle ManufacturingShort Cycle Manufacturing

JapaneseJapanese -- The Toyota SystemThe Toyota System

BoeingBoeing -- Lean ManufacturingLean Manufacturing

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APICS Definition of Lean ManufacturingAPICS Definition of Lean ManufacturingAPICS Definition of Lean ManufacturingAPICS Definition of Lean Manufacturing

³A philosophy of production that emphasizes the minimization³A philosophy of production that emphasizes the minimization

of the amount of all the resources (including time) used in theof the amount of all the resources (including time) used in the

various activities of the enterprise. It involves:various activities of the enterprise. It involves:

« identifying and eliminating non« identifying and eliminating non--valuevalue--adding activities,adding activities,

« employing teams of multi« employing teams of multi--skilled workers, skilled workers,

« using highly flexible, automated machines´« using highly flexible, automated machines´

American Production and Inventory Control Society (American Production and Inventory Control Society (APICSAPICS))is an organization for professionals working in the field of is an organization for professionals working in the field of 

Operations ManagementOperations Management

 

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Traditional View of ManufacturingTraditional View of ManufacturingTraditional View of ManufacturingTraditional View of Manufacturing

K ey objective was to fully utilize capacity so thatK ey objective was to fully utilize capacity so thatmore products were produced by fewer workers andmore products were produced by fewer workers andmachinesmachines

How? With large queues of inHow? With large queues of in--process inventory process inventory

waiting at work centerswaiting at work centers Workers and machines never had to wait for productWorkers and machines never had to wait for product

to work on, so capacity utilization was high andto work on, so capacity utilization was high and production costs were low production costs were low

Result: Products spent most of their time inResult: Products spent most of their time inmanufacturing just waiting, an arrangement that ismanufacturing just waiting, an arrangement that isunacceptable in today¶s timeunacceptable in today¶s time--based competition based competition

 

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JIT PhilosophyJIT PhilosophyJIT PhilosophyJIT Philosophy

 

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TimeTime--Based CompetitionBased CompetitionTimeTime--Based CompetitionBased Competition

It is not enough for firms to be highIt is not enough for firms to be high--quality and lowquality and low--

cost producerscost producers

Today, they must also be first in getting products andToday, they must also be first in getting products and

services to the customer fastservices to the customer fast To compete in this new environment, theTo compete in this new environment, the order order--toto--

delivery cycledelivery cycle must be drastically reducedmust be drastically reduced

JIT is the weapon of choice today to reduce theJIT is the weapon of choice today to reduce the

elapsed time of this cycleelapsed time of this cycle

 

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OrderOrder--toto--Delivery CycleDelivery CycleOrderOrder--toto--Delivery CycleDelivery Cycle

DistriDistri--

 bution and bution and

Customer Customer 

ServiceService

CustoCusto--

mer mer 

PlacesPlaces

Order Order 

Order Order 

EntryEntry

EngiEngi--neeringneering

DesignDesign

SchedSched--

ulinguling

ManufacturingManufacturing

Lead TimesLead Times

PurchasingPurchasing

Lead TimesLead Times

ManufacturingManufacturing

Cumulative Lead TimeCumulative Lead Time

Order Order--toto--Delivery CycleDelivery Cycle

 

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Customers Final Assy

Sub

Sub

Fab

Fab

Fab

Fab

Vendor 

Vendor 

Vendor 

Vendor 

JIT LogicJIT LogicJIT LogicJIT Logic

 

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JIT Manufacturing PhilosophyJIT Manufacturing PhilosophyJIT Manufacturing PhilosophyJIT Manufacturing Philosophy

The main objective of JIT manufacturing is to reduceThe main objective of JIT manufacturing is to reduce

manufacturing lead timesmanufacturing lead times

This is primarily achieved by drastic reductions inThis is primarily achieved by drastic reductions in

work work--inin--process (WIP) process (WIP) The result is a smooth, uninterrupted flow of smallThe result is a smooth, uninterrupted flow of small

lots of products throughout productionlots of products throughout production

  

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Management philosophy

Pull system though the plant

WHAT IT IS

Employee participation

Industrial engineering/basics

Continuing improvement

Total quality control

Small lot sizes

WHAT IT REQUIRES

Attacks waste

Exposes problems and bottlenecks

Achieves streamlined production

WHAT IT DOES

Stable environment

WHAT ITASSUMES

JIT ProductionJIT ProductionJIT ProductionJIT Production

 

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Successful JIT ApplicationsSuccessful JIT ApplicationsSuccessful JIT ApplicationsSuccessful JIT Applications

Most successful JIT applications have been inMost successful JIT applications have been in

repetitive manufacturingrepetitive manufacturing, where batches of standard, where batches of standard

 products are produced at high speeds and in high products are produced at high speeds and in high

volumes.volumes.

Successful use of JIT is rare in large, highly complexSuccessful use of JIT is rare in large, highly complex

 job shops where production planning and control is job shops where production planning and control is

extremely complicated.extremely complicated.

Smaller, less complex job shops have used JIT, butSmaller, less complex job shops have used JIT, butoperations have been changed so that they behaveoperations have been changed so that they behave

somewhat like repetitive manufacturing.somewhat like repetitive manufacturing.

 

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Elements of JIT ManufacturingElements of JIT ManufacturingElements of JIT ManufacturingElements of JIT Manufacturing

Eliminating wasteEliminating waste Enforced problem solving and continuousEnforced problem solving and continuous

improvementimprovement

People make JIT work People make JIT work 

Total Quality Management (TQM)Total Quality Management (TQM)

Parallel processingParallel processing

K anban production controlK anban production control

JIT purchasingJIT purchasing Reducing inventoriesReducing inventories

Working toward repetitive manufacturingWorking toward repetitive manufacturing

 

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(1) Waste from overproduction(1) Waste from overproduction

(2) Waste of waiting time(2) Waste of waiting time

(3) Transportation waste(3) Transportation waste

(4) Inventory waste(4) Inventory waste

(5) Processing waste(5) Processing waste

(6) Waste of motion(6) Waste of motion

(7) Waste from product defects(7) Waste from product defects

WasteWaste----OperationsOperationsWasteWaste----OperationsOperations

 

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JIT: A Pull SystemJIT: A Pull SystemJIT: A Pull SystemJIT: A Pull System

In aIn a push system push system, such as an MRP system, we look at, such as an MRP system, we look atthe schedule to determine what to produce nextthe schedule to determine what to produce next

In aIn a pull system pull system, such as JIT, we look only at the next, such as JIT, we look only at the next

stage of production and determine what is neededstage of production and determine what is neededthere, and then we produce only thatthere, and then we produce only that

As Robert Hall states, ³You don¶t never makeAs Robert Hall states, ³You don¶t never make

nothing and send it no place. Somebody has got tonothing and send it no place. Somebody has got to

come and get it´come and get it´

 

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Changes Required for JITChanges Required for JITChanges Required for JITChanges Required for JIT

JIT requires certain changes to the factory and theJIT requires certain changes to the factory and theway it is managed:way it is managed:

Stabilize production schedulesStabilize production schedules

Make the factories more focusedMake the factories more focused Increase work center capacitiesIncrease work center capacities

Improve product qualityImprove product quality

CrossCross--train workerstrain workers

Reduce equipment breakdownsReduce equipment breakdowns

Develop longDevelop long--term supplier relationsterm supplier relations

 

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Capacity UtilizationCapacity UtilizationCapacity UtilizationCapacity Utilization

1010 2020 3030 40 5040 50 60 70 8060 70 80 90 10090 100

3030

1010

2020

% Capacity% Capacity

UtilizationUtilization

6060Production Lead Times (days)Production Lead Times (days)

4040

5050TraditionalTraditional

ManufacturingManufacturing

JITJIT

ManufacturingManufacturing

 

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Increasing Production CapacityIncreasing Production Capacity

Reduces Manufacturing Lead TimesReduces Manufacturing Lead Times

Increasing Production CapacityIncreasing Production Capacity

Reduces Manufacturing Lead TimesReduces Manufacturing Lead Times

Only slight increases in production capacities canOnly slight increases in production capacities canlead to:lead to:

Significant reduction of manufacturing lead timesSignificant reduction of manufacturing lead times

Significant reduction of work Significant reduction of work--inin--process inventory process inventory Queuing theory can be used to analyze waitingQueuing theory can be used to analyze waiting--lineline

 production problems production problems

 

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We know from queuing theory (Chapter 9) that theWe know from queuing theory (Chapter 9) that theaverage time in the system (manufacturing lead time)average time in the system (manufacturing lead time)

is:is:

If we have an average lead time in mind, we canIf we have an average lead time in mind, we can

solve for the required production rate:solve for the required production rate:

Necessary Production CapacityNecessary Production CapacityNecessary Production CapacityNecessary Production Capacity

1

( )st Q P!

1

st

Q P!

 

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Work Work--inin--Process InventoryProcess InventoryWork Work--inin--Process InventoryProcess Inventory

We also know from queuing theory that the averageWe also know from queuing theory that the averagenumber of jobs in the system (work number of jobs in the system (work--inin--process process

inventory) is:inventory) is:

( )s

n PQ P

!

 

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Example: Necessary Production CapacityExample: Necessary Production CapacityExample: Necessary Production CapacityExample: Necessary Production Capacity

A production manager believes reducing theA production manager believes reducing thefirm¶s manufacturing lead time will give the firm afirm¶s manufacturing lead time will give the firm a

significant competitive advantage. Two days is thesignificant competitive advantage. Two days is the

lead time goal.lead time goal.

Currently, jobs are arriving at the rate of 6 per Currently, jobs are arriving at the rate of 6 per 

day and the operation can process an average of 6.125 day and the operation can process an average of 6.125 

 jobs per day. jobs per day.

What is the current average lead time for a job?What is the current average lead time for a job?What is the necessary production rate to achieve theWhat is the necessary production rate to achieve the

twotwo--day lead time goal?day lead time goal?

 

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Example: Necessary Production CapacityExample: Necessary Production CapacityExample: Necessary Production CapacityExample: Necessary Production Capacity

Current Lead TimeCurrent Lead Time

 Necessary Production Rate Necessary Production Rate

ConclusionConclusion

A 6% increase in the production rate (from 6.125 A 6% increase in the production rate (from 6.125 to 6.5) results in a 75% reduction in manufacturingto 6.5) results in a 75% reduction in manufacturinglead time (from 8 to 2).lead time (from 8 to 2).

1 1 18 days

( ) (6.125 6.0) 0.125st

Q P! ! ! !

1 16.0 6.5 jobs per day

2st

Q P! ! !

 

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Example: Reduction in WIPExample: Reduction in WIPExample: Reduction in WIPExample: Reduction in WIP

In the preceding example, the production rate wasIn the preceding example, the production rate wasincreased from 6.125 jobs per day to 6.5. This 6%increased from 6.125 jobs per day to 6.5. This 6%

increase in the production rate yielded a 75%increase in the production rate yielded a 75%

reduction in manufacturing lead time!reduction in manufacturing lead time!

How much of a reduction in WIP will result fromHow much of a reduction in WIP will result from

the 6 % production rate increase?the 6 % production rate increase?

 

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Example: Reduction in WIPExample: Reduction in WIPExample: Reduction in WIPExample: Reduction in WIP

WIPWIP before before production rate increase production rate increase

WIPWIP after after production rate increase production rate increase

ConclusionConclusionA 6% increase in the production rate (from 6.125 A 6% increase in the production rate (from 6.125 

to 6.5) results in a 75% reduction in work to 6.5) results in a 75% reduction in work--inin--process process(from 48 to 12).(from 48 to 12).

6old 48 jobs

( ) (6.125 6)s

nP

Q P! ! !

6new 12 jobs

( ) (6.500 6)s

nP

Q P! ! !

 

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Problem Solving and Continuous ImprovementProblem Solving and Continuous ImprovementProblem Solving and Continuous ImprovementProblem Solving and Continuous Improvement

JIT is a system of enforced problem solving.JIT is a system of enforced problem solving.

One approach is to lower inventory gradually toOne approach is to lower inventory gradually to

expose problems and force their solution.expose problems and force their solution.

With no buffer inventories to rely on in times of With no buffer inventories to rely on in times of  production interruptions, problems are highly visible production interruptions, problems are highly visible

and cannot be ignored.and cannot be ignored.

The job of eliminating production problems is never The job of eliminating production problems is never 

finished.finished. Continuous improvementContinuous improvement -- a practice the Japanesea practice the Japanese

callcall kaizenkaizen -- is central to the philosophy of JIT.is central to the philosophy of JIT.

  

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Uncovering Production ProblemsUncovering Production ProblemsUncovering Production ProblemsUncovering Production Problems

QualityQuality

ProblemsProblems

MaterialMaterial

ShortagesShortages

MachineMachine

BreakdownsBreakdowns

WorkloadWorkload

ImbalancesImbalances

Worker Worker 

A bsenteeismA bsenteeism

OutOut--of of--SpecSpec

MaterialsMaterials

QualityQuality

ProblemsProblems

InIn--ProcessProcess

InventoryInventory

We must lower the water level!We must lower the water level! Visible ProductionVisible ProductionProblems are OnlyProblems are Only

5% of the Total!5% of the Total!

 

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People Make JIT Work People Make JIT Work People Make JIT Work People Make JIT Work 

JIT has a strong element of training and involvementJIT has a strong element of training and involvementof workers.of workers.

A culture of mutual trust and teamwork must beA culture of mutual trust and teamwork must be

developed.developed.

An attitude of loyalty to the team and self An attitude of loyalty to the team and self--disciplinediscipline

must be developed.must be developed.

Another crucial element of JIT isAnother crucial element of JIT is empowerment of empowerment of 

workersworkers, giving them the authority to solve, giving them the authority to solve production problems. production problems.

 

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TQM and JITTQM and JITTQM and JITTQM and JIT

LongLong--term relationships with suppliersterm relationships with suppliers

Certified suppliers eliminate incoming inspectionCertified suppliers eliminate incoming inspection

Share design process for new productsShare design process for new products

Simplify design/processesSimplify design/processes PokaPoka--yokeyoke

Process capable of meeting tolerancesProcess capable of meeting tolerances

Operators responsible for quality of own work Operators responsible for quality of own work 

 

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Operations performed in series:Operations performed in series:

Op 1Op 1 Op 2Op 2 Op 3Op 3 Op 4Op 4 Op 5Op 5 Op 6Op 6 Op 7Op 7 Op 8Op 8

Operations performed in parallel:Operations performed in parallel:

Cycle Time for Each Operation = 1 HourCycle Time for Each Operation = 1 Hour

Total Product Cycle Time = 1 x 5 =Total Product Cycle Time = 1 x 5 = 5 Hours5 Hours

Operations 2 and 4 start theOperations 2 and 4 start the

same time as Operation 1same time as Operation 1

Parallel ProcessingParallel ProcessingParallel ProcessingParallel Processing

Cycle Time for Each Operation = 1 HourCycle Time for Each Operation = 1 Hour

Total Product Cycle Time = 1 x 8 =Total Product Cycle Time = 1 x 8 = 8 Hours8 Hours

Op 1Op 1Op 2Op 2Op 3Op 3

Op 4Op 4

Op 5Op 5

Op 6Op 6 Op 7Op 7 Op 8Op 8

 

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Group Technology & JITGroup Technology & JITGroup Technology & JITGroup Technology & JIT

 

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K anban Production ControlK anban Production ControlK anban Production ControlK anban Production Control

At the core of JIT manufacturing at Toyota isAt the core of JIT manufacturing at Toyota isK anbanK anban, an amazingly simple system of planning and, an amazingly simple system of planning and

controlling productioncontrolling production

K anbanK anban, in Japanese, means card or marquee, in Japanese, means card or marquee

K anbanK anban is the means of signaling to the upstreamis the means of signaling to the upstream

workstation that the downstream workstation is readyworkstation that the downstream workstation is ready

for the upstream workstation to produce another for the upstream workstation to produce another 

 batch of parts batch of parts

 

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K anbans and Other SignalsK anbans and Other SignalsK anbans and Other SignalsK anbans and Other Signals

There are two types of K anban cards:There are two types of K anban cards:

a conveyance card (Ca conveyance card (C--K anban)K anban)

a production card (Pa production card (P--K anban)K anban)

Signals come in many forms other than cards,Signals come in many forms other than cards,including:including:

an empty cratean empty crate

an empty designated location on the floor an empty designated location on the floor 

 

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How K anban OperatesHow K anban OperatesHow K anban OperatesHow K anban Operates

When a worker at downstream Work Center #2 needs aWhen a worker at downstream Work Center #2 needs acontainer of parts, she does the following:container of parts, she does the following:

She takes the CShe takes the C--K anban from the container she justK anban from the container she justemptiedemptied

She finds a full container of the needed part inShe finds a full container of the needed part instoragestorage

She places the CShe places the C--K anban in the full container andK anban in the full container andremoves the Premoves the P--K anban from the full container andK anban from the full container and

 places it on a post at Work Center #1 places it on a post at Work Center #1

She takes the full container of parts with its CShe takes the full container of parts with its C--K anban back to Work Center #2K anban back to Work Center #2

 

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K anban CardsK anban CardsK anban CardsK anban Cards

Conveyance K anban CardConveyance K anban Card

Part number to produce:Part number to produce: M471M471--3636 Part description:Part description: Valve HousingValve Housing

Lot size needed:Lot size needed: 4040 Container type:Container type: R ED CrateR ED Crate

Card number:Card number: 2 of 52 of 5 Retrieval storage location:Retrieval storage location: NW53DNW53D

From work center:From work center: 2222 To work center:To work center: 3535

 

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K anban CardsK anban CardsK anban CardsK anban Cards

Production K anban CardProduction K anban Card

Part number to produce:Part number to produce: M471M471--3636 Part description:Part description: Valve HousingValve Housing

Lot size needed:Lot size needed: 4040 Container type:Container type: R ED crateR ED crate

Card number:Card number: 4 of 54 of 5 Completed storage location:Completed storage location: NW53DNW53D

From work center:From work center: 2222 To work center:To work center: 3535

Materials required:Materials required:Material no.Material no. 744B744B Storage location:Storage location: NW48CNW48C

Part no.Part no. B238B238--55 Storage location:Storage location: NW47BNW47B

 

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How K anban OperatesHow K anban OperatesHow K anban OperatesHow K anban Operates

When a worker at downstream Work Center #2 needs aWhen a worker at downstream Work Center #2 needs a

container of parts, he does the following:container of parts, he does the following:

He takes the CHe takes the C--K anban from the container he justK anban from the container he just

emptied.emptied. He finds a full container of the needed part in storage.He finds a full container of the needed part in storage.

He places the CHe places the C--K anban in the full container andK anban in the full container and

removes the Premoves the P--K anban from the full container andK anban from the full container and

 places it on a post at Work Center #1. places it on a post at Work Center #1. He takes the full container of parts with its CHe takes the full container of parts with its C--K anbanK anban

 back to Work Center #2. back to Work Center #2.

 

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Flow of K anban Cards and ContainersFlow of K anban Cards and ContainersFlow of K anban Cards and ContainersFlow of K anban Cards and Containers

UpstreamUpstream

Work Center #1Work Center #1

DownstreamDownstream

Work Center #2Work Center #2

InIn--process process

storagestorage

Parts FlowParts Flow

PP--K anban andK anban andempty container empty container 

Full container Full container 

and Pand P--K anbanK anban

CC--K anban andK anban andempty container empty container 

Full container Full container 

and Cand C--K anbanK anban

 

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Containers in a K anban SystemContainers in a K anban SystemContainers in a K anban SystemContainers in a K anban System

K anban is based on the simple idea of replacement of K anban is based on the simple idea of replacement of containers of parts, one at a time.containers of parts, one at a time.

Containers are reserved for specific parts, areContainers are reserved for specific parts, are

 purposely kept small, and always contain the same purposely kept small, and always contain the same

standard number of parts for each part number.standard number of parts for each part number.

At Toyota the containers must not hold more thanAt Toyota the containers must not hold more than

about 10% of a day¶s requirements.about 10% of a day¶s requirements.

There is a minimum of two containers for each partThere is a minimum of two containers for each partnumber, one at the upstream ³ producing´ work center number, one at the upstream ³ producing´ work center 

and one at the downstream ³using´ work center.and one at the downstream ³using´ work center.

 

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 N = Total number of containers between 2 stations N = Total number of containers between 2 stationsU = Usage rate of downstream operationU = Usage rate of downstream operation

T =Average elapsed time for container to makeT =Average elapsed time for container to make

entire cycleentire cycle

P = Policy variable indicating efficiency... 0P = Policy variable indicating efficiency... 0 -- 11C = Capacity (number of parts) of standard container C = Capacity (number of parts) of standard container 

UT(1+P) N=

C

Calculating the Number of ContainersCalculating the Number of Containers

between Work Centersbetween Work Centers

Calculating the Number of ContainersCalculating the Number of Containers

between Work Centersbetween Work Centers

 

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Example: Number of ContainersExample: Number of ContainersExample: Number of ContainersExample: Number of Containers

There are two adjacent work centers, one of There are two adjacent work centers, one of which is fed parts from the other. The productionwhich is fed parts from the other. The production

rate of the using work center is 165 parts per hour.rate of the using work center is 165 parts per hour.

Each standard K anban container holds 24 parts.Each standard K anban container holds 24 parts.

It takes an average of 0.6 hour for a container toIt takes an average of 0.6 hour for a container to

make the entire cycle from the time it leaves themake the entire cycle from the time it leaves the

upstream center until it is returned, filled withupstream center until it is returned, filled with

 production, and leaves again. The efficiency of the production, and leaves again. The efficiency of the

system is observed to be 0.2.system is observed to be 0.2.

How many containers are needed?How many containers are needed?

 

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Example: Number of ContainersExample: Number of ContainersExample: Number of ContainersExample: Number of Containers

Number of Containers, NNumber of Containers, N

 N = UT(1 + P) / C N = UT(1 + P) / C

= 165(0.6)(1 + 0.2) / 24= 165(0.6)(1 + 0.2) / 24

= 99(1.2) / 24= 99(1.2) / 24

= 118.8 / 24= 118.8 / 24

= 4.95 or  5 containers= 4.95 or  5 containers

 

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Essential Elements of JIT PurchasingEssential Elements of JIT PurchasingEssential Elements of JIT PurchasingEssential Elements of JIT Purchasing

Cooperative and longCooperative and long--term relationship betweenterm relationship betweencustomer and supplier.customer and supplier.

Supplier selection based not only on price, but alsoSupplier selection based not only on price, but also

delivery schedules, product quality, and mutual trust.delivery schedules, product quality, and mutual trust.

Suppliers are usually located near the buyer¶s factory.Suppliers are usually located near the buyer¶s factory.

Shipments are delivered directly to the customer¶sShipments are delivered directly to the customer¶s

 production line. production line.

Parts are delivered in small, standardParts are delivered in small, standard--size containerssize containerswith a minimum of paperwork and in exact quantities.with a minimum of paperwork and in exact quantities.

Delivered material is of near Delivered material is of near--perfect quality. perfect quality.

 

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EE--Commerce and JIT PurchasingCommerce and JIT PurchasingEE--Commerce and JIT PurchasingCommerce and JIT Purchasing

InternetInternet--based information systems allow firms to based information systems allow firms toquickly place orders for materials with their suppliersquickly place orders for materials with their suppliers

This is an efficient and effective purchasing processThis is an efficient and effective purchasing process

Saves the time of paperwork Saves the time of paperwork  Avoids errors associated with paperwork Avoids errors associated with paperwork 

Reduces procurement lead timeReduces procurement lead time

Reduces labor costsReduces labor costs

« and K anbans can be sent to suppliers« and K anbans can be sent to suppliers

 

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Reducing InventoriesReducing Inventories

through Setup Time Reductionthrough Setup Time Reduction

Reducing InventoriesReducing Inventories

through Setup Time Reductionthrough Setup Time Reduction

Central to JIT is the reduction of production lot sizesCentral to JIT is the reduction of production lot sizesso that inventory levels are reduced.so that inventory levels are reduced.

Smaller lot sizes result in more machine setupsSmaller lot sizes result in more machine setups

More machine setups, if they are lengthy, result in:More machine setups, if they are lengthy, result in: Increased production costsIncreased production costs

Lost capacity (idle machines during setup)Lost capacity (idle machines during setup)

The answer is: REDUCE MACHINE SETUP TIMESThe answer is: REDUCE MACHINE SETUP TIMES

 

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Setup Time Required for an EOQSetup Time Required for an EOQSetup Time Required for an EOQSetup Time Required for an EOQ

The economic production lot size (EOQ) modelThe economic production lot size (EOQ) model(detailed in Chapter 14) is:(detailed in Chapter 14) is:

where:where: D = annual demand rateD = annual demand rated = daily demand rated = daily demand rate

 p = daily production rate p = daily production rateC = carrying cost per unit per year C = carrying cost per unit per year S = cost per setupS = cost per setup

« more« more

2DS pEOQ =

C p-d

¨ ¸

© ¹ª º

 

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Setup Time Required for an EOQSetup Time Required for an EOQSetup Time Required for an EOQSetup Time Required for an EOQ

The setupThe setup costcost required for a given lot size can berequired for a given lot size can bederived from the EOQ model as:derived from the EOQ model as:

The setupThe setup timetime can be derived from the setup cost, S:can be derived from the setup cost, S:

2C(EOQ) p-dS =

2D p

¨ ¸

© ¹ª º

SSetup Time =Labor rate

 

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Example: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time Required

A firm wants to determine what the length of theA firm wants to determine what the length of thesetup time of an operation should be in order to makesetup time of an operation should be in order to make

an production lot size (EOQ) of 50 economical.an production lot size (EOQ) of 50 economical. AnAn

analyst has made the following estimates:analyst has made the following estimates:

D = 16,800 units (annual demand)D = 16,800 units (annual demand)

d = 84 units (daily demand rate @ 200 days/yr)d = 84 units (daily demand rate @ 200 days/yr)

 p = 140 units (daily production rate) p = 140 units (daily production rate)

C = $20 (carrying cost per unit per year)C = $20 (carrying cost per unit per year)Labor rate = $25.00/hour Labor rate = $25.00/hour 

 

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Example: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time Required

Setup Cost Required for EOQ = 50Setup Cost Required for EOQ = 502C(EOQ) p-d

S =2D p

¨ ¸© ¹ª º

2$42(50) 140 84= $1.25

2(16,800) 140

¨ ¸ !© ¹ª º

 

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Example: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time Required

Setup Time Required for EOQ = 50Setup Time Required for EOQ = 50

.0833 hours = 5.0 minutes.0833 hours = 5.0 minutes

S $1.25Setup Time = = = 0.833 hours

Labor rate $15.00/hr 

 

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Working Toward Repetitive ManufacturingWorking Toward Repetitive ManufacturingWorking Toward Repetitive ManufacturingWorking Toward Repetitive Manufacturing

Reduce setup times and lot sizes to reduce inventoriesReduce setup times and lot sizes to reduce inventories

Change factory layout to allow streamlined flowsChange factory layout to allow streamlined flows

Convert processConvert process--focused layout to cellular focused layout to cellular 

manufacturing (CM) centersmanufacturing (CM) centers Install flexible manufacturing systems (FMS)Install flexible manufacturing systems (FMS)

«..more«..more

 

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Working Toward Repetitive ManufacturingWorking Toward Repetitive ManufacturingWorking Toward Repetitive ManufacturingWorking Toward Repetitive Manufacturing

Standardize parts designsStandardize parts designs

Train workers for several jobsTrain workers for several jobs

Implement preventive maintenance (PM) programsImplement preventive maintenance (PM) programs

Install effective quality control programsInstall effective quality control programs Develop an effective subcontractor network Develop an effective subcontractor network 

 

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Benefits of JITBenefits of JITBenefits of JITBenefits of JIT

Inventory levels are drastically reduced:Inventory levels are drastically reduced:

frees up working capital for other projectsfrees up working capital for other projects

less space is neededless space is needed

customer responsiveness increasescustomer responsiveness increases Total product cycle time dropsTotal product cycle time drops

Product quality is improvedProduct quality is improved

Scrap and rework costs go downScrap and rework costs go down

Forces managers to fix problems and eliminate wasteForces managers to fix problems and eliminate waste

.... or it won¶t work!.... or it won¶t work!

 

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Organize ProblemOrganize Problem--Solving GroupsSolving Groups

Upgrade HousekeepingUpgrade Housekeeping

Upgrade QualityUpgrade Quality

Clarify Process FlowsClarify Process Flows

Revise Equipment and Process TechnologiesRevise Equipment and Process Technologies

JIT in Services (Examples)JIT in Services (Examples)JIT in Services (Examples)JIT in Services (Examples)

 

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Level the Facility LoadLevel the Facility Load

Eliminate Unnecessary ActivitiesEliminate Unnecessary Activities

Reorganize Physical ConfigurationReorganize Physical Configuration

Introduce DemandIntroduce Demand--Pull SchedulingPull Scheduling

Develop Supplier NetworksDevelop Supplier Networks

JIT in Services (Examples)JIT in Services (Examples)JIT in Services (Examples)JIT in Services (Examples)

 

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WrapWrap--Up:WorldUp:World--Class PracticeClass PracticeWrapWrap--Up:WorldUp:World--Class PracticeClass Practice

Focus on timeFocus on time--based competition to capture market based competition to capture marketshareshare

JIT method to reduce order JIT method to reduce order--toto--delivery cycledelivery cycle

Prerequisites must be present to successfullyPrerequisites must be present to successfullyimplement JITimplement JIT

 behave like repetitive manufacturing behave like repetitive manufacturing

stable schedulesstable schedules

 

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End of Chapter 12End of Chapter 12End of Chapter 12End of Chapter 12