S12-1 Operations Management Just-in-Time and Lean Production Systems Chapter 16.

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Operations Operations ManagementManagement

Just-in-Time and Lean Production Just-in-Time and Lean Production SystemsSystems

Chapter 16Chapter 16

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Just-In-Time and Lean Production. Role of inventory. Just-In-Time components.

Suppliers. Layout. Scheduling. Quality.

Lean Production.

OutlineOutline

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Just-In-Time Management philosophy of continuous problem solving.

Internal focus on production scheduling, inventory, layout, quality, suppliers, etc.

Produce “just-in-time”, only to meet actual demand.

Lean Production Extension of Just-In-Time to eliminate waste (“fat”).

External focus on satisfying the customer.

Originated in Japan; Popularized by Toyota; now used globally.

Just-in-Time and Lean ProductionJust-in-Time and Lean Production

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Demand is uncertain and variable. Same equipment/people are used to make a

variety of products, and switching products takes time.

Things go wrong: Materials are defective. Deliveries are variable (late). Equipment fails, people make mistakes, etc. Production documents are incorrect.

Why is Production Difficult?Why is Production Difficult?

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Use inventory to:

Match supply with varying demand.

Allow production of a variety of products on the same equipment.

Overcome defective materials, late deliveries, equipment failures, mistakes, etc.

One Solution: Inventory One Solution: Inventory

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Forecast demand. Produce in large lots (to reduce expensive

setups). PUSH product to customer.

Large lot sizes mean: Large work-in-process inventories. Large final product inventories. Slow response to changes and defects.

““Traditional” Production Traditional” Production

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Produce in small lots to replenish stock actually sold.

Sales PULL product (and parts) through plant. Supplies and components are ‘pulled’ through system

to arrive where they are needed when they are needed.

Small lot sizes mean: Small work-in-process inventories. Small final product inventories. Quick response to changes and defects.

““Just-in-Time” Production Just-in-Time” Production

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Push versus PullPush versus Pull

Push system: Material is pushed (according to forecasts) downstream (along assembly line, to warehouses, etc.).

Pull system: Material is pulled (by sales to customers) downstream (along assembly line, to warehouses, etc.) just as it is needed.

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Just-in-time requires identifying and solving problems that create inventory.

Reduce setup costs to switch products.

Eliminate all waste: Defective materials, late deliveries, equipment failures, mistakes, etc.

Just-In-Time is Not Easy Just-In-Time is Not Easy

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Overproduction.

Waiting.

Transportation.

Inefficient processing.

Inventory.

Unnecessary motion.

Product defects.

Types of WasteTypes of Waste

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Reduces waste and improves quality. Waste = Anything not adding value to the product.

Exposes problems caused by variability. Variability in demand, deliveries, materials, equipment, etc.

Streamlines production by reducing inventory.

Reduces delays and increases throughput.

Benefits: Reduced cost and/or increased profit. Faster response to the customer.

What Does Just-in-Time Do?What Does Just-in-Time Do?

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Suppliers

Preventive Maintenance

Layout

Inventory

Scheduling

Quality

Employee Empowerment

JIT

Just-in-TimeJust-in-TimeSuccess FactorsSuccess Factors

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JIT objective: Eliminate inventory. Hold minimum inventory to keep system running.

JIT requires: Small lot sizes.

Low setup times.

Just-in-time deliveries.

Deliveries direct to point of use (not stockroom).

InventoryInventory

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Scrap

Work in process inventory level(hides problems)

Unreliable Vendors

Capacity Imbalances

Lowering InventoryLowering Inventory Reduces Waste Reduces Waste

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Scrap

Reducing inventory revealsproblems so they can be solved.

Unreliable Vendors

Capacity Imbalances

WIP

Lowering InventoryLowering Inventory Reduces Waste Reduces Waste

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Large Lot Sizes = Large InventoryLarge Lot Sizes = Large Inventory

Time

Inventory Level

Lot Size 200 Average inventory = 100

Average inventory = (Lot size)/2

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To Lower Inventory, Reduce Lot SizeTo Lower Inventory, Reduce Lot Size

Time

Inventory Level

Lot Size 200

Average inventory = (Lot size)/2

Lot Size 80

Average inventory = 40

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EPQ Minimizes Total CostsEPQ Minimizes Total Costs

Lot Size

Cost

Holding CostTotal Cost

Setup Cost

Optimal Lot Size

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Reducing Setup Costs Reduces Reducing Setup Costs Reduces Lot Size and Total Cost!Lot Size and Total Cost!

Lot Size

Cost

Holding CostTotal Cost

Setup Cost

Original optimal lot size

New optimal lot

size

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Separate setup into preparation (while machine is running) and actual setup (while machine is stopped). Do as much as possible while the machine is

running.

Move material closer and improve material handling.

Standardize and improve tooling.

Steps to Reduce Setup TimeSteps to Reduce Setup Time

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JIT objective: Frequent on-time deliveries of small lots of high quality.

Buyer and supplier form JIT partnerships to eliminate: Unnecessary activities.

In-plant inventory.

In-transit inventory.

SuppliersSuppliers

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JIT objective: Reduce movement of people and material.

JIT requires: Delivery directly to work areas – not to

stockroom.

Short distances to ensure on-time deliveries.

Little space for inventory.

Flexibility: Moveable or changeable machines.

LayoutLayout

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JIT objective: Simple system to pull product through plant in small lots.

JIT requires: Communicating schedules to suppliers.

“Level” schedules: production each day equals demand.

Freezing part of schedule nearest due date.

Small lots.

Kanban techniques.

SchedulingScheduling

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Japanese word for card. Authorizes production from downstream operations.

‘Pulls’ material through plant.

May be a card, flag, verbal signal etc.

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

KanbanKanban

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Kanban Signals “Pull” Material Kanban Signals “Pull” Material Through the ProcessThrough the Process

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JIT objective: Prevent failure. Cleanliness and simplicity are keys. Maintain equipment so it does not break.

JIT requires: Scheduled & daily preventive maintenance. Operator performs preventive maintenance. Operator knows machine and is responsible for

product quality.

Preventive Maintenance (PM)Preventive Maintenance (PM)

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JIT exposes quality problems by reducing inventory.

JIT limits number of defects produced with small lots.

JIT requires TQM. Statistical process control.

Worker involvement & empowerment.

Immediate feedback.

QualityQuality

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Lean ProductionLean Production

Use JIT to eliminate virtually all inventory.

Eliminate all but value-added activities.

Build systems to help employees produce a perfect part every time.

Reduce space requirements.

Develop partnerships with suppliers.

Educate suppliers and workers.

Enrich jobs.

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JIT/Lean Production Partnerships JIT/Lean Production Partnerships

To achieve frequent deliveries of high quality small-lot quantities: Use few suppliers, each with a larger share of

business and longer-term contracts. Helps ensure quality and reliability.

Prefer nearby suppliers for reliable scheduling. Example: 4 deliveries each day, 2 hours apart.

Suppliers encouraged to extend JIT to their suppliers.

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Just-In-Time and JapanJust-In-Time and Japan

Area of Japan = 144,000 square miles. California = 158,000 square miles Missouri = 70,000 square miles

Population of Japan is about 1/2 of USA. Japan is islands (80% mountainous).

Land is expensive.Facilities are not far apart.Natural resources are limited.Minimizing waste is crucial.