Module 4

Just in time manufacturing: Introduction,

Elements of JIT, Pull versus Push method,
Kanban system.

MMEPI 102 MANUFACTURING

SYSTEMS MANAGEMENT

What is JIT?
a corporate system designed to
produce output within the minimum lead
time and at the lowest total cost by
continuously identifying and eliminating
all forms of corporate waste and
variance.

MMEPI 102 MANUFACTURING

SYSTEMS MANAGEMENT

Seven Basic Types of Waste

Transportation waste
Process Waste
Inventory Waste
Waste of motion
Waste from product defects
Waiting time
Overproduction
MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT


Waste of overproduction: eliminate by reducing setup times, synchronizing
quantities and timing between processes, compacting layout, visibility, and
so forth. Make only what is needed now.
Waste of waiting: eliminate through synchronizing work flow as much as
possible, and balance uneven loads by flexible workers and equipment.
Waste of transportation: establish layouts and locations to make transport and
handling unnecessary if possible. Then rationalize transport and material
handling that cannot be eliminated.
Waste of processing itself: First question why this part or product should be
made at all, then why each process is necessary. Extend thinking beyond
economy of scale or speed.
Waste of stocks: Reduce by shortening setup times and reducing lead times,
by synchronizing work flows and improving work skills, and even by
smoothing fluctuations in demand for the product. Reducing all the other
wastes reduces the waste of stocks.
Waste of motion: Study motion for economy and consistency. Economy
improves productivity, and consistency improves quality. First improve the
motions, then mechanize or automate. Otherwise there is danger of
automating waste.
Waste of making defective products: Develop the production process to
prevent defects from being made so as to eliminate inspection. At each
process, accept no defects and make no defects. Make process failsafe to
do this. From a quality process
a quality product automatically. 4
MMEPI comes
102 MANUFACTURING
SYSTEMS MANAGEMENT

Common Causes of Waste

Layout (distance)
Long setup time
Incapable processes
Poor maintenance
Poor work methods
Lack of training

Inconsistent
performance
measures
Ineffective production
planning
Lack of workplace
organization
Poor supply
quality/reliability

MMEPI 102 MANUFACTURING

SYSTEMS MANAGEMENT

Objective of JIT
Produce only the products the customer
wants.
Produce products only at the rate that
the customer wants them.
Produce with perfect quality
Produce with minimum lead time.
Produce products with only those
features the customer wants.
MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT

Objectives
Produce with no waste of labor, material or
equipment -- every movement must have
a purpose so that there is zero idle
inventory.
Produce with methods that allow for the
development of people

MMEPI 102 MANUFACTURING

SYSTEMS MANAGEMENT

JIT Principles
Create flow production
one piece flow
machines in order of processes
small and inexpensive equipment
U cell layout, counter clockwise
multi-process handling workers
easy moving/standing operations
standard operations defined
MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT

Push Vs. Pull Scheduling

Push Scheduling
traditional approach
move the job on when finished
problems - creates excessive inventory
Pull scheduling
coordinated production
driven by demand (pulled through system)
extensive use of visual triggers
(production/withdrawal kanbans)
MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT

MMEPI 102 MANUFACTURING

SYSTEMS MANAGEMENT

10

MMEPI 102 MANUFACTURING

SYSTEMS MANAGEMENT

11

MMEPI 102 MANUFACTURING

SYSTEMS MANAGEMENT

12

ADVANTAGES OF JIT Advocates of JIT claim it is a revolutionary

concept that all manufacturers will have to adopt in order to remain
competitive .JIT encompasses the successful execution of all
production activities required to produce a product, from designing to
delivery. Its benefits are many:
1. Shortened lead time. 2. Reduced time spent on non-process work.
3. Eliminate waste and rework and consequently reduce
requirements for raw materials, person, power and machine capacity
4. It increases worker motivation and teamwork. 5. Reduced
inventory. As a result: Frees up working capital for other projects.
Less space is needed. Customer responsiveness increases.
6. Reduce or eliminate setup times 7. Reduce lot sizes
(manufacturing and purchase): reducing setup times allows
economical pro-duction of smaller lots; close cooperation with
suppliers is necessary to achieve reductions in order lot sizes for
purchased items, since this will require more frequent deliveries.
8. Problem clarification. 9. Cost savings10. Total product cycle time
drops. 11. Product quality improved. 12. Reduced scrap and rework
13. Smoother production flow 14. Less inventory, of raw materials,
work-in-progress and finished goods. 15. Higher productivity 16.
Higher worker participation 17. More skilled workforce, able and
willing to switch roles 18. Reduced space requirement 19. Improved
relationships with suppliers
MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT

13

Disadvantages of JIT
The JIT method demands a much disciplined assembly-line
process. The entire factory has to be in sync to successfully exploit
its methods. Manufacturers can afford fewer errors in the delivery of
the suppliers component; if a part isnt there, the assembly line
stops, and that can result in the loss of manpower and cash.
Changes in production planning, inaccurate forecasting procedures
resulting in under or over forecasting of demand, equipment failures
creating capacity problems and employee absenteeism all create
problems in implementing JIT.
JIT requires special training and the reorganization of policies and
procedures. The organizational cultures vary from firm to firm.
There are some cultures that tie to JIT success but it is difficult for
an organization to change its cultures within a short time.
Difference in implementation of JIT. Because JIT was originally
established in Japan, the benefits may vary. Resistance to change.
JIT involves a change throughout the whole organization, but human
nature resists changing. The most common resistances are
emotional resistance and rational resistance. Emotional resistances
are those psychological feeling which hinder performance such as
anxiety. Rational resistance is the deficient of the needed
information for the workers to perform the job well.
JIT requires workers to be multi-skilled and flexible to change.
MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT

14

 A kanban is a card that is attached to a storage and

transport container. It identifies the part number and
container capacity, along with other information. There are
two main types of kanban (some other variations are also
used):
Production Kanban (P-kanban): This signals the need to
produce more parts. Conveyance Kanban (C-kanban):
This signals the need to deliver more parts to the next
work center (also called a move kanban or a withdrawal
kanban). A kanban system is a pull-system, in which the
kanban is used to pull parts to the next production stage
when they are needed; a MRP system (or any schedulebased system) is a push system, in which a detailed
production schedule for each part is used to push parts to
the next production stage when scheduled. The weakness
of a push system (MRP) is that customer demand must be
forecast and production lead times must be estimated.
Bad guesses (forecasts or estimates) result in excess
inventory, and the longer the lead time, the more room for
error.
MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT

15

 (a) Two Card Kanban (Double Kanban). This is the

original Toyota method, developed at a time when
replenishment supplies were routed through a
component or parts store (though it can also be used
when no stores intervention is involved). The card
released by the user authorizes the stores to move a
replenishment supply to the user. When they do so, a
second card, which is found on the pallet they are about
to supply, is removed and sent to the component
supplier as authority to produce another standard
quantity.
Dual-Card Kanban Rules No parts to be made unless
P-kanban authorizes production. Exactly one P-kanban
and one C-kanban should be there for each container
(the number of containers per part number is a
management decision). Only standard containers are
used, and they are always filled with the prescribed
(small)quantity.
MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT

16

(b)

The 1 Card Kanban. Similar to the 2-card system, but a single card acts as both move
andproduce authority. This method is typically used where the supply point is close to the user
point, so that the supply and user operatives move the empty and full pallets between the two
work centers themselves without the intervention of a stores function. It is also commonly used
where the movement of pallets is automated.
(c) The Container-Based Kanban. In this variant the Kanban card is dispensed with altogether.
Instead, there are a predetermined number of containers or pallets in the system, all uniquely
identified to a particular part number or component: if the maker of the component has an
empty container waiting he or she fills it; if there is no empty container waiting, then the operator
must stop production of that component and switch to some other task. This procedure is often
used when special-purpose containers or pallets are provided, so that there is no doubt as to
which components have to go into them. However, it is also possible to use multipurpose
containers in what is in effect a cross between the container-based and the 1 card systems, by
painting the appropriate part number and standard quantity on the containers itself. Another
useful technique is to paint containers for similar parts in different colors, so that operators can
identify the right container easily.
(d) The Shelf-space Kanban. Anyone who has used a motorway cafeteria will be familiar with
this method. At the cafeteria counter a range of dishes is provided to the customer via a
display/dispensing cabinet, which is subdivided into a number of pigeon-holes, each providing
one compartment for each type of dish. The instructions to the kitchen staff are ensure that
there is always at least one and not more than three of each type of dish available in the
cabinet. If there are three dishes available of all types of dish, stop producing and find
something else to do (like cleaning your equipment). The same principle, applied to the factory,
takes the form of shelf spaces marked up with the part number/description of different parts.
Someone is given the task of making sure that empty shelf places are filled. When all spaces
are filled, production of the item stops.
(e) The Floor Grid Kanban. Exactly the same as a shelf-space Kanban, but typically used for
bulky or heavy components which are unsuitable for putting on shelves.

MMEPI 102 MANUFACTURING

SYSTEMS MANAGEMENT

17

 We apply JIT concept in many of our routine activities

even without feeling about it. We get the newspapers
delivered to our doorsteps on JIT basis everyday
because we want to read them when the news items are
fresh and current. We wont accept the newspapers if
they are two days old - after all who wants to read them
as history. Even the nature likes many things the JIT way.
We are supplied oxygen by nature on JIT basis. We dont
store them normally. Many consumers prefer to have their
food items (chapati or flat bread, pizzas, burger, tea,
coffee, etc.) supplied on JIT basis right at the time of
need - not before or after. This means there is an inbuilt
desire to have the JIT implemented in our day to day life
but it is because of our mindset that we dont do so in
industries.
MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT

18

Limitations of JIT
Preconditions to JIT
trust must be present
labor/management
suppliers/consumers

recognition of processes
familiarity with problem solving
quality at the source
agreement over value and waste
MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT

19

Limitations of JIT
Right Settings
applicable in growth to maturity phases of
Product Life Cycle
standard product
Steinway and JIT

standard/fixed pay-rate
problems with piece-rate scheme

Universal agreement that change needed

MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT

20

Theoretical Benefits of JIT

Unpleasant surprises Less pressure on receiving
eliminated
docks and incoming
Less computerization inspection areas
Lower costs
visual control
Change in attitude
Improved quality
Defects are treasures
WIP reduced
Better
communications
MMEPI 102 MANUFACTURING
SYSTEMS MANAGEMENT

21

Supply Chain Management

Definition:
Supply Chain Management is primarily concerned with the
efficient integration of suppliers, factories, warehouses and
stores so that merchandise is produced and distributed in
the right quantities, to the right locations and at the right
time, and so as to minimize total system cost subject to
satisfying customer service requirements.
Notice:
Who is involved
Cost and Service Level
It is all about integration

Supply Chain
All facilities, functions, activities, associated
with flow and transformation of goods
and services from raw materials to
customer, as well as the associated
information flows
An integrated group of processes to
source, make, and deliver products

Copyright 2006 John

Wiley & Sons, Inc.

10-23

Supply Chain
Management (SCM)

Managing flow of information through supply

chain in order to attain the level of
synchronization that will make it more
responsive to customer needs while lowering
costs
Keys to effective SCM

information
communication
cooperation
trust

Copyright 2006 John

Wiley & Sons, Inc.

10-24

A picture is better than 1000 words!

How many words would be better than 3
pictures?
- A supply chain consists of
Supplier

Manufacturer

Distributor

Upstream

Retailer

Customer

Downstream

- aims to Match Supply and Demand,

profitably for products and services
SUPPLY SIDE

- achieves

The right

Product

+ + + + +

DEMAND SIDE

The right

The right

The right

The right

The right

Price

Store

Quantity

Customer

Time

Higher

Profits

Flows in a Supply Chain

Material

Supplier

Information
Funds

The flows resemble a chain reaction.

Customer

SCM in a Supply Network

Supply Chain Management (SCM) is concerned with the management and
control of the flows of material, information, and finances in supply chains.
Cash
Products and Services
Information
THAILAND
INDIA
N-Tier Suppliers Suppliers

Supply Side

MEXICO
Logistics

TEXAS
Distributors

OEM

US
Retailers

Demand Side

Demand
Supply

The task of SCM is to design, plan, and execute the activities at the different stages
so as to provide the desired levels of service to supply chain customers profitably

Push vs Pull System

What instigates the movement of the work in the system?
In Push systems, work release is based on downstream
demand forecasts
Keeps inventory to meet actual demand
Acts proactively
e.g. Making generic job application resumes today (e.g.: exempli gratia)

In Pull systems, work release is based on actual demand or

the actual status of the downstream customers
May cause long delivery lead times
Acts reactively
e.g. Making a specific resume for a company after talking to the recruiter

Push/Pull View of Supply

Chains
Procurement,
Manufacturing and
Replenishment cycles

PUSH PROCESSES

Customer Order
Cycle

PULL PROCESSES

Customer
Order Arrives
Push-Pull boundary

Drivers of Supply Chain

Performance
How to achieve
Efficiency
Responsiveness
Supply chain structure

Inventory

Information

Transportation

Sourcing

Facilities

Pricing

Logistical
Drivers

CrossFunctional
Drivers

1. Inventory
Convenience: Cycle inventory
No customer buys eggs one by one

Unstable demand: Seasonal inventory

Bathing suits
Xmas toys and computer sales

Randomness: Safety inventory

20% more syllabi than the class size were available
in the first class
Compaqs loss in 95

Pipeline inventory
Work in process or transit

2. Transportation

Air
Truck
Rail
Ship
Pipeline
Electronic

3. Facilities
Production
Flexible vs. Dedicated
Flexibility costs
Production: Remember BMW: a sports car disguised as a sedan
Service: Can your instructor teach music as well as SCM?
Sports: A playmaker who shoots well is rare.

Inventory-like operations: Receiving, Prepackaging,

Storing, Picking, Packaging, Sorting, Accumulating,
Shipping
Job Lot Storage: Need more space. Reticle storage in fabs.
Crossdocking: Wal-Mart

4. Information
Role in the supply chain
The connection between the various stages in the supply chain
Crucial to daily operation of each stage in a supply chain
E.g., production scheduling, inventory levels

Role in the competitive strategy

Allows supply chain to become more efficient and more
responsive at the same time (reduces the need for a trade-off)
Information technology
Andersen Windows
Wood window manufacturer, whose customers can choose from a library of
50,000 designs or create their own. Customer orders automatically sent to the
factory.

Characteristics of the Good

Information
Information

Global
Scope

Strategy

Information
Accurate?
Accessible?
Up-to-date?
In the Correct form?

Coordinated
Decisions

Supply Chain
Success

Analytical
Models

If not, database restricted ability. How difficult is it to import data into SAP?

$$$

Quality of Information
Information drives the decisions:
Good information means good decisions

IT helps: MRP, ERP, SAP, EDI

Relevant information?
How to use information?

5. Sourcing
Role in the supply chain
Set of processes required to purchase goods and services in a supply chain
Supplier selection, single vs. multiple suppliers, contract negotiation

Role in the competitive strategy

Sourcing is crucial. It affects efficiency and responsiveness in a supply chain
In-house vs. outsource decisions- improving efficiency and responsiveness
TI: More than half of the revenue spent for sourcing.
Cisco sources: Low-end products (e.g. home routers) from China.

Components of sourcing decisions

In-house versus outsource decisions
Supplier evaluation and selection
Procurement process:
Every department of a firm buy from suppliers independently, or all together.
EDS to reduce the number of officers with purchasing authorization.

6. Pricing
Role in the supply chain
Pricing determines the amount to charge customers in a supply chain
Pricing strategies can be used to match demand and supply
Price elasticity: Do you know yours?

Role in the competitive strategy

Use pricing strategies to improve efficiency and responsiveness
Low price and low product availability; vary prices by response times
Amazon: Faster delivery is more expensive

Components of pricing decisions

Pricing and economies of scale
Everyday low pricing versus high-low pricing
Fixed price versus menu pricing, depending on the product and services
Packaging, delivery location, time, customer pick up
Bundling products; products and services

Considerations for Supply

Chain Drivers