Operations

Management
Chapter 16
JIT and Lean
Operations
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
2008 Prentice Hall, Inc. 16 1
 Outline
Global Company Profile:
Toyota Motor Corporation
Just-in-Time, the Toyota
Production System, and Lean
Operations
Eliminate Waste
Remove Variability
Improve Throughput

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 Outline Continued
Just-in-Time
JIT Partnerships
Concerns of Suppliers
JIT Layout
Distance Reduction
Increased Flexibility
Impact on Employees
Reduced Space and Inventory
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 Outline Continued
JIT Inventory
Reduce Variability
Reduce Inventory
Reduce Lot Sizes
Reduce Setup Costs
JIT Scheduling
Level Schedules
Kanban
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 Outline Continued
JIT Quality
Toyota Production System
Continuous Improvement
Respect for People
Standard Work Practices
Lean Operations
Building a Lean Organization
Lean Operations in Services
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 Learning Objectives
When you complete this chapter you
should be able to:

1. Define just-in-time, TPS, and lean

operations
2. Define the seven wastes and the
5 Ss
3. Explain JIT partnerships
4. Determine optimal setup time

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 Learning Objectives
When you complete this chapter you
should be able to:

5. Define kanban
6. Compute the required number of
kanbans
7. Explain the principles of the Toyota
Production System

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 Toyota Motor Corporation
Largest vehicle manufacturer in the
world with annual sales of over 9
million vehicles
Success due to two techniques, JIT
and TPS
Continual problem solving is central
to JIT
Eliminating excess inventory makes
problems immediately evident

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 Toyota Motor Corporation
Central to TPS is a continuing effort
to produce products under ideal
conditions
Respect for people is fundamental
Small building but high levels of
production
Subassemblies are transferred to the
assembly line on a JIT basis
High quality and low assembly time
per vehicle
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 Just-In-Time, TPS, and
Lean Operations
JIT is a philosophy of continuous and
forced problem solving via a focus on
throughput and reduced inventory
TPS emphasizes continuous
improvement, respect for people, and
standard work practices
Lean production supplies the
customer with their exact wants when
the customer wants it without waste

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 Just-In-Time, TPS, and
Lean Operations
JIT emphasizes forced problem
solving
TPS emphasizes employee
learning and empowerment in an
assembly-line environment
Lean operations emphasize
understanding the customer

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 Eliminate Waste
Waste is anything that does not
add value from the customer point
of view
Storage, inspection, delay, waiting
in queues, and defective products
do not add value and are 100%
waste

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 Ohnos Seven Wastes
Overproduction
Queues
Transportation
Inventory
Motion
Overprocessing
Defective products
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 Eliminate Waste
Other resources such as energy,
water, and air are often wasted
Efficient, ethical, and socially
responsible production minimizes
inputs, reduces waste
Traditional housekeeping has
been expanded to the 5 Ss

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 The 5 Ss
Sort/segregate when in doubt,
throw it out
Simplify/straighten methods
analysis tools
Shine/sweep clean daily
Standardize remove variations
from processes
Sustain/self-discipline review work
and recognize progress

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 The 5 Ss
Sort/segregate when in doubt,
throw it out
Simplify/straighten methods
analysis tools Ss
Two additional
Shine/sweep clean
Safety build daily practices
in good
Standardize remove variations
Support/maintenance reduce
from processes
variability and unplanned
Sustain/self-discipline
downtime review work
and recognize progress

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 Remove Variability
JIT systems require managers to
reduce variability caused by both
internal and external factors
Variability is any deviation from the
optimum process
Inventory hides variability
Less variability results in less
waste

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 Sources of Variability
1. Incomplete or inaccurate drawings
or specifications
2. Poor production processes
resulting in incorrect quantities,
late, or non-conforming units
3. Unknown customer demands

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 Sources of Variability
1. Incomplete or inaccurate drawings
or specifications
2. Poor production processes
resulting in incorrect quantities,
late, or non-conforming units
3. Unknown customer demands

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 Improve Throughput

The time it takes to move an

order from receipt to delivery
The time between the arrival of
raw materials and the shipping of
the finished order is called
manufacturing cycle time
A pull system increases
throughput

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 Improve Throughput

By pulling material in small lots,

inventory cushions are removed,
exposing problems and emphasizing
continual improvement
Manufacturing cycle time is reduced
Push systems dump orders on the
downstream stations regardless of
the need

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 Just-In-Time (JIT)
Powerful strategy for improving operations
Materials arrive where they
are needed when they are
needed
Identifying problems and
driving out waste reduces
costs and variability and
improves throughput
Requires a meaningful
buyer-supplier relationship

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 JIT and Competitive
Advantage

Figure 16.1
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 JIT and Competitive
Advantage

Figure 16.1
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 JIT Partnerships
JIT partnerships exist when a
supplier and purchaser work
together to remove waste and drive
down costs
Four goals of JIT partnerships are:
Removal of unnecessary activities
Removal of in-plant inventory
Removal of in-transit inventory
Improved quality and reliability
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 JIT Partnerships

Figure 16.2
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 Concerns of Suppliers
Diversification ties to only one customer
increases risk
Scheduling dont believe customers can
create a smooth schedule
Changes short lead times mean
engineering or specification changes can
create problems
Quality limited by capital budgets,
processes, or technology
Lot sizes small lot sizes may transfer
costs to suppliers
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 JIT Layout
Reduce waste due to movement
JIT Layout Tactics
Build work cells for families of products
Include a large number operations in a small area
Minimize distance
Design little space for inventory
Improve employee communication
Use poka-yoke devices
Build flexible or movable equipment
Cross-train workers to add flexibility
Table 16.1

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 Distance Reduction
Large lots and long production
lines with single-purpose
machinery are being replaced by
smaller flexible cells
Often U-shaped for shorter paths
and improved communication
Often using group technology
concepts

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 Increased Flexibility

Cells designed to be rearranged

as volume or designs change
Applicable in office environments
as well as production settings
Facilitates both product and
process improvement

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 Impact on Employees
Employees are cross trained
for flexibility and efficiency
Improved communications
facilitate the passing on of
important information about the
process
With little or no inventory
buffer, getting it right the first
time is critical
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 Reduced Space and
Inventory

With reduced space, inventory

must be in very small lots
Units are always moving because
there is no storage

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 Inventory
Inventory is at the minimum level
necessary to keep operations running
JIT Inventory Tactics
Use a pull system to move inventory
Reduce lot sizes
Develop just-in-time delivery systems with suppliers
Deliver directly to point of use
Perform to schedule
Reduce setup time
Use group technology
Table 16.2
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 Reduce Variability

Inventory level

Process
Scrap downtime

Setup Quality
time problems

Late deliveries
Figure 16.3

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 Reduce Variability

Inventory
level

Process
Scrap downtime

Setup Quality
time problems

Late deliveries
Figure 16.3

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 Reduce Lot Sizes
Q1 When average order size = 200
average inventory is 100
200
Inventory

Q2 When average order size = 100

average inventory is 50
100

Time

Figure 16.4
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 Reduce Lot Sizes
Ideal situation is to have lot sizes
of one pulled from one process to
the next
Often not feasible
Can use EOQ analysis to calculate
desired setup time
Two key changes necessary
Improve material handling
Reduce setup time
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 Lot Size Example
D= Annual demand = 400,000 units
d= Daily demand = 400,000/250 = 1,600 per day
p= Daily production rate = 4,000 units
Q= EOQ desired = 400
H= Holding cost = $20 per unit
S= Setup cost (to be determined)

2DS 2DS
Q= Q2 =
H(1 - d/p) H(1 - d/p)

(Q2)(H)(1 - d/p) (3,200,000)(0.6)

S= 2D = 800,000 = $2.40

Setup time = $2.40/($30/hour) = 0.08 hr = 4.8 minutes

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 Reduce Setup Costs

High setup costs encourage large

lot sizes
Reducing setup costs reduces lot
size and reduces average
inventory
Setup time can be reduced through
preparation prior to shutdown and
changeover

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 Lower Setup Costs

Holding cost
Sum of ordering
and holding costs
Cost

T1
Setup cost curves (S1, S2)
T2
S1
S2

Lot size
Figure 16.5

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 Reduce Setup Times
Initial Setup Time 90 min

Separate setup into preparation and actual

setup, doing as much as possible while the
Step 1 machine/process is operating
(save 30 minutes)

60 min
Move material closer and
Step 2 improve material handling
(save 20 minutes)
45 min
Standardize and
Step 3 improve tooling
(save 15 minutes)
25 min
Use one-touch system to eliminate
Step 4
adjustments (save 10 minutes)
15 min
Training operators and standardizing 13 min
Step 5 work procedures (save 2 minutes)
Figure 16.6 Step 6 Repeat cycle until subminute
setup is achieved
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 JIT Scheduling
Schedules must be communicated
inside and outside the organization
Level schedules
Process frequent small batches
Freezing the schedule helps
stability
Kanban
Signals used in a pull system

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 JIT Scheduling
Better scheduling improves performance
JIT Scheduling Tactics Table 16.3

Communicate schedules to suppliers

Make level schedules
Freeze part of the schedule
Perform to schedule
Seek one-piece-make and one-piece move
Eliminate waste
Produce in small lots
Use kanbans
Make each operation produce a perfect part
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 Level Schedules

Process frequent small batches

rather than a few large batches
Make and move small lots so the
level schedule is economical
Jelly bean scheduling
Freezing the schedule closest to the
due dates can improve performance

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 Scheduling Small Lots
JIT Level Material-Use Approach
A A B B B C A A B B B C

Large-Lot Approach
A A A A A A B B B B B B B B B C C C

Time
Figure 16.7
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 Kanban
Kanban is the Japanese word for card
The card is an authorization for the next
container of material to be produced
A sequence of kanbans
pulls material through
the process
Many different sorts of
signals are used, but
the system is still called
a kanban
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 Kanban
1. User removes a
standard sized
container
2. Signal is seen by
the producing
department as
authorization to
replenish
Signal marker
on boxes

Figure 16.8 Part numbers

mark location
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 Kanban

Kanban Finished Customer

goods order
Work
cell
Ship

Raw Kanban Final Kanban

Material assembly
Supplier
Kanban Kanban
Sub-
Purchased assembly
Parts Kanban
Supplier

Figure 16.9

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 More Kanban
When the producer and user are not in
visual contact, a card can be used
When the producer and user are in visual
contact, a light or flag or empty spot on
the floor may be adequate
Since several
components may
be required,
several different
kanban techniques
may be employed
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 More Kanban
Usually each card controls a specific
quantity or parts
Multiple card systems may be used if
there are several components or
different lot sizes
In an MRP system, the schedule can
be thought of as a build authorization
and the kanban a type of pull system
that initiates actual production

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 More Kanban

Kanban cards provide a direct control

and limit on the amount of work-in-
process between cells
If there is an immediate storage area, a
two-card system can be used with one
card circulating between the user and
storage area and the other between the
storage area and the producer

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 The Number of Kanban Cards
or Containers
Need to know the lead time needed to
produce a container of parts
Need to know the amount of safety
stock needed

Demand during Safety

Number of kanbans lead time + stock
(containers) =
Size of container

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 Number of Kanbans Example
Daily demand = 500 cakes
Production lead time = 2 days
(Wait time +
Material handling time +
Processing time)
Safety stock = 1/2 day
Container size = 250 cakes

Demand during lead time = 2 days x 500 cakes = 1,000

1,000 + 250
Number of kanbans = 250 =5

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 Advantages of Kanban

Allow only limited amount of faulty or

delayed material
Problems are immediately evident
Puts downward pressure on bad
aspects of inventory
Standardized containers reduce
weight, disposal costs, wasted space,
and labor

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 Quality
Strong relationship
JIT cuts the cost of obtaining good
quality because JIT exposes poor
quality
Because lead times are shorter,
quality problems are exposed sooner
Better quality means fewer buffers
and allows simpler JIT systems to be
used

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 JIT Quality Tactics

Use statistical process control

Empower employees
Build fail-safe methods (poka-
yoke, checklists, etc.)
Expose poor quality with small
lot JIT
Provide immediate feedback
Table 16.4
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 Toyota Production System
Continuous improvement
Build an organizational culture and value
system that stresses improvement of all
processes
Part of everyones job
Respect for people
People are treated as
knowledge workers
Engage mental and
physical capabilities
Empower employees
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 Toyota Production System
Standard work practice
Work shall be completely specified as to
content, sequence, timing, and outcome
Internal and external customer-supplier
connection are direct
Product and service flows must be simple
and direct
Any improvement must be made in
accordance with the scientific method at the
lowest possible level of the organization

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 Lean Operations

Different from JIT in that it is

externally focused on the customer
Starts with understanding what the
customer wants
Optimize the entire process from
the customers perspective

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 Building a Lean Organization

Transitioning to a lean system can

be difficult
Lean systems tend to have the
following attributes
Use JIT techniques
Build systems that help employees
produce perfect parts
Reduce space requirements

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 Building a Lean Organization

Develop partnerships with

suppliers
Educate suppliers
Eliminate all but value-added
activities
Develop employees
Make jobs challenging
Build worker flexibility

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 JIT in Services
The JIT techniques used in
manufacturing are used in services
Suppliers
Layouts
Inventory
Scheduling

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