Operations

Management
Just-in-Time and Lean Production
Systems
Chapter 16
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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Outline
JUST-IN-TIME AND LEAN PRODUCTION
GLOBAL COMPANY PROFILE: GREEN GEAR
CYCLING
SUPPLIERS
Goals of JIT Partnerships
Concerns of Suppliers

JIT LAYOUT
Distance Reduction
Increased Flexibility
Impact on Employees
Reduced Space and Inventory

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16-2

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Outline - Continued
INVENTORY

Reduce Variability
Reduce Inventory
Reduce Lot Sizes
Reduce Setup Costs

SCHEDULING

Level Schedules
Kanban

QUALITY
EMPLOYEE EMPOWERMENT
LEAN PRODUCTION
JIT IN SERVICES
16-3
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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Learning Objectives
When you complete this supplement, you should
be able to :
Identify or Define:

Types of waste
Variability
Kanban

Just-in-Time (JIT) philosophy

Pull systems
Push systems
The goals of JIT partnerships
Lean Production

Describe or Explain:

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Introductory Quotation
Waste is anything other than the
minimum amount of equipment,
materials, parts, space, and
workers time, which are absolutely
essential to add value to the
product.
Shoichiro Toyoda
President, Toyota
1995 Corel Corp.
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16-5

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Green Gear Cycling

Designs and manufacturers high performance
travel bicycles (bike-in-a-suitcase!)
Strategy is mass customization with low inventory,
work cells, and elimination of machine setups.
Major focus on JIT and supply-chain management.
Two lines with seven work cells
One day throughput time
Focus on quality
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16-6

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Supplier Production Distribution

System
Supplier Distribution
Inventories

Productions Inventories
Raw Material
Inventory

Work-in-process
Inventory

Raw material
in-transit

Factory
Finished
Goods
Inventory

Orders

Maintenance,
repair, and ordering
supplies in-transit

Warehouse
Inventory

MRO
Inventory

Purchasing

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Retailer
Inventory

Orders

Component
Inventory

Sub-assembly
parts in-transit

Customer
Distribution
Inventories

Production and
Inventory Control

16-7

Shipping and
Traffic

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

What is Just-in-Time?
Management philosophy of continuous and forced
problem solving
Supplies and components are pulled through
system to arrive where they are needed when they
are needed.

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16-8

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Lean Production
Lean Production supplies customers with exactly
what the customer wants, when the customer
wants, without waste, through continuous
improvement.

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16-9

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

What Does Just-in-Time Do?

Attacks waste

Anything not adding value to the product

From the customers perspective

Exposes problems and bottlenecks caused by

variability

Deviation from optimum

Achieves streamlined production

By reducing inventory

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16-10

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Types of Waste
Overproduction
Waiting
Transportation
Inefficient processing
Inventory
Unnecessary motion
Product defects
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1995
Corel
Corp.

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

JIT Reduced Waste

at Hewlett-Packard
Waste Reduction (%)
Setup Time

20%

Scrap

30%

Finished Goods
Inventory
Space

30%
40%

Lead Time

50%

Raw Material
Inventory
Work-in-Process
Inventory

50%
82%
0%

20%

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40%
16-12

60%

80%

100%

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Push versus Pull

Push system: material is pushed into downstream
workstations regardless of whether resources are
available
Pull system: material is pulled to a workstation
just as it is needed

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16-13

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

JIT Contribution to Competitive

Advantage
Suppliers

reduced number of vendors

supportive supplier relationships
quality deliveries on time

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 direct to work areas

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16-14

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

JIT Contribution to Competitive

Advantage - Continued
Inventory

small lot sizes

low setup times
specialized bins for holding set number of parts

Scheduling

zero deviation from schedules

level schedules
suppliers informed of schedules
Kanban techniques

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16-15

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

JIT Contribution to Competitive

Advantage - Continued
Preventive Maintenance

scheduled
daily routine
operator involvement

Quality Production

statistical process control

quality by suppliers
quality within firm

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16-16

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

JIT Contribution to Competitive

Advantage - Continued
Employee Empowerment

empowered and cross-trained employees

few job classifications to ensure flexibility of employees
training support

Commitment

support of management, employees, and suppliers

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16-17

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Results
Queue and delay reduction, speedier throughput, freed
assets, and winning orders
Quality improvement, reduces waste and wins orders
Cost reduction increases margin or reduces selling
price
Variability reductions in the workplace reduces waste
and wins orders
Rework reduction, reduces waste and wins orders
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16-18

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Yielding
Faster response to the customer at lower cost and
higher quality

A competitive advantage!
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16-19

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Just-in-Time
Success Factors
Employee
Empowerment

Quality

Suppliers
Layout

JIT

Preventive
Maintenance
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Inventory

Scheduling
16-20

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Characteristics of JIT Partnerships

Suppliers

Few
Nearby
Repeat business
Analysis and support to enable desirable suppliers to

become or stay price competitive

Competitive bidding mostly limited to new purchases
Buyer resists vertical integration and subsequent wipeout of
supplier business
Suppliers encouraged to extend JIT to their suppliers (2 nd
and 3rd tier suppliers)
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16-21

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Characteristics of JIT Partnerships

Quantities

Steady output rate

Frequent deliveries in small-lot quantities
Long-term contract agreements
Minimal

or no paperwork (use EDI or internet)

Delivery quantities fixed for whole contract term
Little or no permissible overage or underage
Suppliers package in exact quantities
Suppliers reduce their production lot sizes
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16-22

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Characteristics of JIT Partnerships

Quality
Minimal product specifications imposed on

suppliers
Help suppliers meet quality requirements
Close relationship between buyers and
suppliers quality assurance people
Suppliers use poka-yoke and process control
charts instead of lot-sampling techniques

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16-23

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Characteristics of JIT Partnerships

Shipping
Scheduling of inbound freight
Gain control by use of company-owned or

contract shipping and warehousing

Use of Advanced Shipping Notice (ASN)

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16-24

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Goals of JIT partnerships

Elimination of unnecessary activities
Elimination of in-plant inventory
Elimination of in-transit inventory
Elimination of poor suppliers

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16-25

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

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

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16-26

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Streamlined Production
Traditional Flow

Production Process
(stream of water)

Suppliers

Flow with JIT

Customers
Inventory (stagnant
ponds)

Suppliers

Material
(water in
stream)
Customers

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16-27

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Layout
JIT objective: Reduce movement of people and
material

Movement is waste!

JIT requires

Work cells for product families

Moveable or changeable machines
Short distances
Little space for inventory
Delivery directly to work areas

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16-28

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Work Cell versus

Process Layout
Process Layout
Lathe
Lathe
5

Saw

Saw

2
Heat
Treat
3

Press
Press

Work Cell

Saw

Press

Lathe

Lathe

Grinder
1

Grinder
Grinder

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16-29

Heat
Treat
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Inventory Hides Problems Just as

Water in a Lake Hides Rocks
Inventory level
Inventory level

Scrap
Setup
time

Process
downtime

Scrap
Setup
time

Quality
problems

Quality
problems

Late
deliveries

Late
deliveries
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Process
downtime

16-30

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Lowering Inventory
Reduces Waste

Work in process inventory level

(hides problems)
Unreliable
Vendors
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Capacity
Imbalances

Scrap
16-31

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Lowering Inventory
Reduces Waste
Reducing inventory reveals
problems so they can be solved.

Unreliable
Vendors
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WIP
Scrap
16-32

Capacity
Imbalances

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Lowering Inventory
Reduces Waste
Reducing inventory reveals
problems so they can be solved.

Unreliable
Vendors
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WIP

Scrap
16-33

Capacity
Imbalances

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Reducing Lot Sizes Increases the

Number of Lots
Customer
orders 10

Lot size = 5
Lot 2
Lot 1

Lot 1

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Lot size = 2
Lot 2 Lot 3 Lot 4

16-34

Lot 5

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Unless Setup Costs are Reduced

Cost

To

t
s
o
C
t al

in
d
l
o
H

t
s
o
gC

Setup Cost
New optimal
lot size

Original
optimal
lot size

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Lot Size
16-35

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Steps to Reduce Setup Time

90 min

Initial Setup Time

Step 1

Separate setup into preparation, and actual setup,

doing as much as possible while the machine/process
is running (save 30 minutes)
Step 2

Move material closer and improve

material handling (save 20 minutes)

Standardize and
improve tooling (save
Step 3
15 minutes)
Use one-touch system to
Training operators and Step 4
eliminate adjustments (save
standardizing work
10 minutes)
Step 5
procedures (save 2

60 min
45 min
25 min
15 min
13 min

minutes)
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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Small versus Large Lots

JIT produces same amount in
same time if setup times are
lowered

JIT Small Lots

A

Time
Small lots also increase flexibility to meet
customer demands

Large-Lot Approach
A

Time
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16-37

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Kanban
Japanese word for card

Pronounced kahn-bahn (not can-ban)

Authorizes production from downstream operations

Pulls material through plant

May be a card, flag, verbal signal etc.

Used often with fixed-size containers

Add or remove containers to change production rate

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Diagram of Outbound Stockpoint

with Warning-Signal Marker

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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Kanban Signals Pull Material

Through the Process

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16-40

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

JIT in Services
All the techniques
used in
manufacturing are
used in services
Suppliers
Layouts
Inventory
Scheduling
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16-41

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Attributes of Lean Producers - They

use JIT to eliminate virtually all inventory
build systems to help employees product a perfect part every
time
reduce space requirements
develop close relationships with suppliers
educate suppliers
eliminate all but value-added activities
develop the workforce
make jobs more challenging
reduce the number of job classes and build worker flexibility

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16-42

2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458