Post on 02-Jan-2016
description
Chapter 6Chapter 6
Just-in-time and lean Just-in-time and lean thinkingthinking
Content
Just-in-time
Lean thinking
Vendor-managed inventory (VMI)
Quick response
Just-in-time
1111What are the implications of Just-in-time for logistics?
2222How can just-in-time principles be applied to other forms of material control such as reorder point and material requirements planning?
Key issuesKey issues
Just-in-time
Just-in-time: A definitionJust-in-time: A definitionUses a systems approach to develop and Uses a systems approach to develop and
operate a manufacturing systemoperate a manufacturing systemOrganizes the production process so that Organizes the production process so that
parts are available when they are neededparts are available when they are neededA method for optimizing processes that A method for optimizing processes that
involves continual reduction of wasteinvolves continual reduction of waste
Just-in-time
Little JITLittle JITthe application of JIT to logisticsthe application of JIT to logistics
Central themes surrounding Just-in-timeCentral themes surrounding Just-in-timeSimplicitySimplicityQualityQualityElimination of wasteElimination of waste
Just-in-time
Pull schedulingPull schedulingA system of controlling
materials whereby the use signals to the maker or provider that more material is needed.
Push schedulingPush schedulingA system of controlling
materials whereby makers and providers make or send material in response to a pre-set schedule, regardless of whether the next process needs them at the time.
supplier
buyer
Push: traditional way
Pull: Just-in-time
Just-in-time
Computer Book/CD
Grocery
Dem
and uncertainty
Scale economics
ActivityActivityPull Push/Pull
Push
Just-in-time
Just-in-time systemJust-in-time system
JIT Pyramid of key factorsJIT Pyramid of key factors
Just-in-time
Minimum delay
Minimum inventory
2
1
Minimum defects
3
Simplicity and visibility
Minimum downtime
54
6
Level 1
Level 2
Level 3
Just-in-time
Just-in-time systemJust-in-time systemFactor 1Factor 1
– The top of the pyramid is full capability for JIT The top of the pyramid is full capability for JIT supply supported by Level 2 and Level 3 operation.supply supported by Level 2 and Level 3 operation.
Factor 2Factor 2– ‘‘Delay’ and ‘inventory’ interact positively with each Delay’ and ‘inventory’ interact positively with each
otherother
– The concept of KanbanThe concept of Kanban
Factor 3Factor 3– Defect Defect → → delay delay → inventory→ inventory
Just-in-time systemJust-in-time systemFactor 3Factor 3
– Defect Defect → → delay delay → inventory→ inventory
Bad design
Machine downtime
Unreliable supplier
Poor quality
Inefficient layout
InventoryInventory hides hides
problemsproblems
Just-in-time
Just-in-time systemJust-in-time systemFactor 4Factor 4
Breakdowns
Planned maintenance
Changeover
Machine downtime
Safety stocks
Preventive maintenance
Flexible production
Just-in-time
Just-in-time systemJust-in-time systemFactor 5Factor 5
– Simply and visible process help to reduce Simply and visible process help to reduce inventory and could be better maintained.inventory and could be better maintained.
Factor 6Factor 6– It’s more difficult to see the flow of a process It’s more difficult to see the flow of a process
with increased inventory.with increased inventory.
Just-in-time
The supply chain ‘game plan’The supply chain ‘game plan’
Forecasts Orders
Master schedule
Material plan
Purchase orders Work orders
Source Make Deliver
Bill of materials
Demand management
Logistics planning
Logistics execution
Material Material Requirements Requirements
PlanningPlanning
Independent demand
Dependent demand
Just-in-time
The supply chain ‘game plan’The supply chain ‘game plan’Independent demandIndependent demand
– Demand for a product that is ordered directly by Demand for a product that is ordered directly by customers.customers.
– items are those items that we sell to customersitems are those items that we sell to customers
Dependent demandDependent demand– Demand for parts or subassemblies that make up Demand for parts or subassemblies that make up
independent demand products.independent demand products.
– items are those items whose demand is items are those items whose demand is determined by other itemsdetermined by other items
Just-in-time
Case: Automobile
Case: Cake
Just-in-time
Demand characteristics and planning Demand characteristics and planning approachesapproachesEconomic order quantities (EOQ)Economic order quantities (EOQ)
Buffer stock
Reorder point
Usage rateRecorder quantityStock
Lead time Time
Just-in-time
Assumptions in Economic Order Quantity ModelAssumptions in Economic Order Quantity ModelDemand is deterministic. There is no uncertainty about the
quantity or timing of demand.Demand is constant over time. In fact, it can be represented as a
straight line, so that if annual demand is 365 units this translates into a daily demand of one unit.
A production run incurs a constant setup cost. Regardless of the size of the lot or the status of the factory, the setup cost is the same.
Products can be analyzed singly. There is only a single product.
NotationNotation
D = Demand rate (in units per year).
c = Unit production cost, not counting setup or
inventory costs (in dollars per unit).
A = Constant setup (ordering) cost to produce
(purchase) a lot (in dollars).
h = Holding cost (in dollars per unit per year)
Q = Lot size (in units); this is the decision variable
Just-in-time
EOQ modelEOQ modelAverage inventory level
The holding cost per unit
The setup cost per unit
The production cost per unit
2
Q
D
hQ
D
hQ
22
Q
A
c
Just-in-time
EOQ modelEOQ model
)quantityorder economic(2
02
)(
)unitpertcostotal(2
)(
*
2
h
ADQ
Q
A
D
h
dQ
QdY
cQ
A
D
hQQY
Just-in-time
PracticePracticePam runs a mail-order business for gym Pam runs a mail-order business for gym
equipment. Annual demand for the equipment. Annual demand for the TricoFlexers is 16,000. The annual holding TricoFlexers is 16,000. The annual holding cost per unit is $2.50 and the cost to place an cost per unit is $2.50 and the cost to place an order is $50. What is the economic order order is $50. What is the economic order quantity?quantity?
orderper units8005.2
50160002*
Q
Just-in-time
Demand characteristics and planning Demand characteristics and planning approachesapproachesPeriodic order quantity (POQ) and target stock Periodic order quantity (POQ) and target stock
levelslevels
Economic order quantityHow much to order?
When to order? Periodic order quantity
Just-in-time
Economic order quantity with uncertain demandEconomic order quantity with uncertain demandWeek No. Demand Order
quantityInventory
endInventory
startInventory holding
1 100 1,000 900 1,000 950
2 100 0 800 900 850
3 200 0 600 800 700
4 400 0 200 600 400
5 800 1,000 400 200 300
6 1,000 1,000 400 400 400
7 800 1,000 600 400 500
8 400 0 200 600 400
9 100 0 100 200 150
10 200 1,000 900 100 500
Sum 4,100 5,000 5,100 5,200 5,150
Average 410 500 510 520 515
Just-in-time
Week No. Demand Order quantity
Inventory end
Inventory start
Inventory holding
1 100 200 100 200 150
2 100 0 0 100 50
3 200 600 400 600 500
4 400 0 0 400 200
5 800 1,800 1,000 1,800 1,400
6 1,000 0 0 1,000 500
7 800 1,200 400 1,200 800
8 400 0 0 400 200
9 100 300 200 300 250
10 200 0 0 200 100
Sum 4,100 4,100 2,100 6,200 4,150
Average 410 410 210 620 415
Periodic order quantity (POQ) with uncertain demandPeriodic order quantity (POQ) with uncertain demand
Just-in-time
Target stock level (TSL)Target stock level (TSL)
Periodic order quantity = Target stock level – Stock on hand – Stock on order
TSL = cycle stock + safety stock
constant
Just-in-time
进货
储存
盘点
拣货
分拣装车
配送
订单处理
采购
supplier
retailer
Distribution center存货低于标准
搬运 搬运 搬运 搬运
流通加工
Just-in-time
JIT and material requirements planning JIT and material requirements planning (MRP)(MRP)Material requirements planning (MRP) - Material requirements planning (MRP) - A A
methodology for defining the raw material methodology for defining the raw material requirements for a specific item, component, or requirements for a specific item, component, or sub-assembly ordered by a customer, or required sub-assembly ordered by a customer, or required by a business process. by a business process.
MRP systems will usually define what is needed, MRP systems will usually define what is needed, when it is needed, and by having access to current when it is needed, and by having access to current inventories and pre-existing commitment of that inventories and pre-existing commitment of that inventory to other orders to other customers, will inventory to other orders to other customers, will indicate what additional items need to be ordered indicate what additional items need to be ordered to fulfill this order.to fulfill this order.
Just-in-time
Feature of MRPFeature of MRPMRP is based MRP is based
on JIT Pull on JIT Pull scheduling logicscheduling logic
MRP is good at MRP is good at planning, but planning, but weak at controlweak at control
JIT is good at JIT is good at control, but control, but weak at weak at planningplanning
TPS Vs. FPSTPS Vs. FPS
Just-in-time
Takt time: The maximum time allowed to produce a product in order to meet demand.Jidoka: Autonomation (人工智能的自动控制 )Heijunka: A system of production smoothing designed to achieve a more even and consistent flow of work.(平准化 )Kaizen: Improvement
Heijunka box
Content
Just-in-time
Lean thinking
Vendor-managed inventory (VMI)
Quick response
Lean thinking
1111What are the principles of lean thinking?
2222How can the principles of lean thinking be applied to cutting waste out of supply chains?
Key issuesKey issues
Lean thinking
Fordism: Henry Ford 1863-1947 The father of mass production
Taylorism: Frederick Taylor 1856-1915 The father of scientific management
Toyota: Taiichi Ohno The
father of Toyota Production System
Lean thinking
Lean thinkingLean thinking refers to the elimination of refers to the elimination of waste in all aspects of a business and waste in all aspects of a business and thereby enriching value from the thereby enriching value from the customer perspective.customer perspective.
2. Identify value stream5. Perfection
3. Create product flow
1. Specify value
4. Let customer pull
muda
muda
muda
muda
Muda means waste, specifically any human activity which absorbs resources but creates no value.”
Lean thinking
Nine wastesNine wastes1.1. Watching a Watching a
machine runmachine run2.2. Waiting for partsWaiting for parts3.3. Counting partsCounting parts4.4. OverproductionOverproduction5.5. Moving parts over Moving parts over
long distancelong distance6.6. Storing inventoryStoring inventory7.7. Looking for toolsLooking for tools8.8. Machine Machine
breakdownsbreakdowns9.9. ReworkRework
ConsistentConsistentProcessProcess
DesiredDesiredResultsResults
InconsistentInconsistentProcessProcess
InconsistentInconsistentResultsResults
Traditional = People doing whatever they can to get results
Lean = People using standard process to get results
Lean thinking
Lean thinking
Role of lean practicesRole of lean practicesSmall-batch productionSmall-batch production
– Reduce total cost across a supply chain, such as Reduce total cost across a supply chain, such as removing the waste of overproduction.removing the waste of overproduction.
Rapid changeoverRapid changeover– Rely on developments in machinery and product Rely on developments in machinery and product
designdesign
– Provide the flexibility to make possible small-Provide the flexibility to make possible small-batch production that responds to customer batch production that responds to customer needsneeds
Lean thinking
Design strategyDesign strategyLean product designLean product design
– A reduction in the number of parts they contain and the materials from which they are made
– Features that aid assembly, such as asymmetrical parts that can be assembled in only one way
– Redundant features on common, core parts that allow variety to be achieved without complexity with the addition of peripheral parts
– Modular designs that allow parts to be upgraded over the product life
Lean facility designLean facility design
Lean thinking
Design strategyDesign strategyLean product designLean product designLean facility designLean facility design
– Modular design of equipment to allow prompt repair and maintenance
– Modular design of layout to allow teams to be brought together with all the facilities they need
– Small machines which can be moved to match the demand for them
– Open systems architectures that allow equipment to fit together and work when it is moved and connected to other items
Case study
Barriers to knowledge transfers within Barriers to knowledge transfers within suppliers’ plants (Dyer and Hatch, 2006)suppliers’ plants (Dyer and Hatch, 2006)Network constraintsNetwork constraints
– Customer policies or constraints imposed by customers
– Example: One supplier was required by GM to use large (4’×5’) reusable containers. When filled with components, these containers weighed 200~300 pounds. By comparison, Toyota had the supplier use small (2’×3’) reusable containers weighing 40 pounds when filled.
Case study
Case study
Barriers to knowledge transfers within suppliers’ Barriers to knowledge transfers within suppliers’ plants (Dyer and Hatch, 2006)plants (Dyer and Hatch, 2006)Internal process rigiditiesInternal process rigidities
– U.S. customer’s production process involved a high level of U.S. customer’s production process involved a high level of automation or large capital investment in heavy equipment. automation or large capital investment in heavy equipment. The large machines and equipment were bolted or The large machines and equipment were bolted or cemented into the floor, hence increased the costs of change. cemented into the floor, hence increased the costs of change. These process rigidities resulted in plant managers waiting These process rigidities resulted in plant managers waiting until the vehicle model change before implementing a new until the vehicle model change before implementing a new process.process.
– Toyota’s production network is designed as a dynamic Toyota’s production network is designed as a dynamic system, and the flexibility to modify the system is built into system, and the flexibility to modify the system is built into the processes and procedures.the processes and procedures.
Content
Just-in-time
Lean thinking
Vendor-managed inventory (VMI)
Quick response
Vendor-managed inventory
Key issueKey issue
1111How can suppliers help to reduce waste in the customer’s process?
Vendor-managed inventory
Conventional Inventory ManagementConventional Inventory ManagementCustomerCustomer
– monitors inventory levels
– places orders
VendorVendor– manufactures/purchases product
– assembles order
– loads vehicles
– routes vehicles
– makes deliveriesYou call – We haul
Vendor-managed inventory
Problems with Conventional Problems with Conventional Inventory ManagementInventory ManagementLarge variation in demands on Large variation in demands on
production and transportation production and transportation facilitiesfacilities
workload balancingworkload balancing
utilization of resourcesutilization of resources
unnecessary transportation costsunnecessary transportation costs
urgent Vs. non-urgent ordersurgent Vs. non-urgent orders
setting prioritiessetting priorities
Vendor-managed inventoryVendor-managed inventoryVendor-managed inventory
CustomerCustomer– trusts the vendor to manage the trusts the vendor to manage the
inventoryinventory
VendorVendor– monitors customers’ inventorymonitors customers’ inventory
– customers call/fax/e-mail
– remote telemetry units
– set levels to trigger call-in
You rely – We supply
– controls inventory replenishment & decidescontrols inventory replenishment & decides
– when to deliver
– how much to deliver
– how to deliver
Vendor-managed inventory
VMIVMIAn approach to inventory
and order fulfillment in the way that supplier, not the customer, is responsible for managing and replenishing inventory.
Vendor-managed inventory
buyer
seller
VMI data flow•Number of items in stock•Consumption of previous period•Any other specific customer- or item-related parameters
•Number of items as ordered•Number of items in back-order
•Acknowledgement
Vendor-managed inventory
VMI does not stand forVMI does not stand forThe passing of the customer’s consumption history for a
specific item, from the customer over to the supplier, who on the basis hereof, will follow-up the customer’s stock level and at the moment of the stock having reached a specific threshold, generates a purchasing order so as to replenish the stock.
VMI in fact stands forVMI in fact stands forGranting inspection of the sales profile of a specific item
to the supplier, who on the basis hereof, will optimize the replenishment policy and ensure the pre-defined service level towards the end users of his customer.
Vendor-managed inventory
Advantages of VMIAdvantages of VMICustomerCustomer
– The stock as such disappears from the company’s balance sheet and this way clears the way for a higher amount of working capital.
– Customer only have to supervise the stocks, instead of drawing up a detailed analysis for the placing of orders.
– Reduce the time interval between receiving goods and making them available for consumption or sales.
– Stocks with customer will be reduced, because the uncertainty due to variability in the supplier’s periods of delivery will drop.
Vendor-managed inventory
Advantages of VMIAdvantages of VMIVendorVendor
–more freedom in when & how to manufacture product and make deliveries
–better coordination of inventory levels at different customers
–better coordination of deliveries to decrease transportation cost (reduce the rush-order and related high cost)
Vendor-managed inventory
Potential problems in setting up a VMI systemPotential problems in setting up a VMI systemUnwillingness to share dataUnwillingness to share dataSeasonal productsSeasonal productsInvestment and restructuring costsInvestment and restructuring costsCustomer vulnerabilityCustomer vulnerabilityLack of standard procedures (between different customers)Lack of standard procedures (between different customers)System maintenanceSystem maintenance VMI EssentialsVMI Essentials
TrustTrust•Accurate information provided on a timely basis•Inventory levels that meet demands•Confidential information kept confidential
TechnologyTechnology
•Automated electronic messaging systems to exchange sales and demand data, shipping schedules
Case study
Praxair’s BusinessPraxair’s BusinessPlants worldwidePlants worldwide
– 44 countries
– USA 70 plants
– South America 20 plants
Product classesProduct classes
– packaged products
– bulk products
– lease manufacturing equipment
DistributionDistribution
– 1/3 of total cost attributed to distribution
Case study
Praxair’s Business------Bulk productsPraxair’s Business------Bulk productsDistributionDistribution
– 750 tanker trucks
– 100 rail cars
– 1,100 drivers
– drive 80 million miles per year
CustomersCustomers
– 45,000 deliveries per month to 10,000 customers
VariationVariation
– 4 deliveries per customer per day to 1 delivery per customer per 2
months
Routing varies from day to dayRouting varies from day to day
Case study
VMI Implementation at PraxairVMI Implementation at PraxairConvince management and employees of Convince management and employees of
new methods of doing businessnew methods of doing businessConvince customers to trust vendor to do Convince customers to trust vendor to do
inventory managementinventory managementPressure on vendor to perform - Trust Pressure on vendor to perform - Trust
easily shakeneasily shakenPraxair currently manages 80% of bulk Praxair currently manages 80% of bulk
customers’ inventoriescustomers’ inventories
Case studyVMI Implementation at PraxairVMI Implementation at Praxair
Praxair receives inventory level data viaPraxair receives inventory level data via– telephone calls: 1,000 per day– fax: 500 per day– remote telemetry units: 5,000 per day
Forecast customer demands based onForecast customer demands based on– historical data– customer production schedules– customer exceptional use events
Logistics planners use decision support tools to planLogistics planners use decision support tools to plan– whom to deliver to– when to deliver– how to combine deliveries into routes– how to combine routes into driver schedules
Case study
Benefits of VMI at PraxairBenefits of VMI at PraxairBefore VMI, 96% of stockouts Before VMI, 96% of stockouts
due to customers calling when due to customers calling when tank was already empty or nearly tank was already empty or nearly emptyempty
VMI reduced customer stockoutsVMI reduced customer stockouts
0
5
10
Jan Mar May July Sept Nov
after 2 yrs
before VMI
Case studyWhat’s needed to make VMI workWhat’s needed to make VMI work
Information management is crucial to the success of Information management is crucial to the success of VMIVMI– inventory level data– historical usage data– planned usage schedules– planned and unplanned exceptional usage
Forecast future demandForecast future demandDecision making: need to decide on a regular (daily) Decision making: need to decide on a regular (daily)
basisbasis– whom to deliver to– when to deliver– How much to deliver– how to combine deliveries into routes– how to combine routes into driver schedules
Content
Just-in-time
Lean thinking
Vendor-managed inventory (VMI)
Quick response
Quick response
The application of quick response in apparel industryDevelopment lead time have been compressedProduction lead time are shorter
Zara caseZara case