LEAN OPERATiONS

Presented By:Group 7

Pearson Education, Inc. publishing as Prentice Hall © 2011

Based on the textbook by Heizer and RenderMost of the figures from the book:

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.

Looking Back

• JIT originated in Japan, post WWII• Driven by a need survive after the

devastation caused by the war• JIT gained worldwide prominence in

the 1970s• Toyota Motor Co. developed JIT

Toyota Motor Corp.

• Largest vehicle manufacturer • Techniques of JIT, TPS and Lean

Operation• Introduced by Taiichi Ohno

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Main assembly complex Supplier buildings surround

main assembly complex

Implementation of JIT and TPS at Toyota plant

Just-In-Time, TPS, andLean Operations

• JIT - continuous and forced problem solving via a focus on throughput and reduced inventory

• TPS -continuous improvement, respect for people, and standard work practices

• Lean production - supplies the customer with exact wants when the customer wants it without waste

Just In Time

Good production systems require that managers address three issues that are

pervasive and fundamental to operations management: eliminate waste, remove

variability, and improve throughput

Three Elements of JIT

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

Shigeo Shingo

The most dangerous kind of waste is the waste we do not recognize

Ohno’s Seven Wastes

• Overproduction• Queues• Transportation• Inventory• Motion• Over processing• Defective

products

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

Eliminate Waste

• Efficient, sustainable production minimizes inputs, reduces waste

• Traditional “housekeeping” has been expanded to the 5 Ss

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

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Two additional Ss

• Safety- build in good practices

• Support Maintenance- reduce variability and unplanned downtime

Reducing Waste: Push Vs Pull

• Material Flow

• Information Flow

• Customer• Raw

• Material• Supplier

• Final• Assembly

• PUSH

CustomerRaw

MaterialSupplier

FinalAssembly

PULL

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

Inventory is Evil

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

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

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

JIT and Competitive Advantage

JIT and Competitive Advantage

© 2011 Pearson Education, Inc. publishing as Prentice Hall

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

JIT Partnerships

JIT Layout•Reduces another kind of waste -“Movement” •Places material directly where needed•Eg. Toyota

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 (fail safe) devices•Build flexible or movable equipment•Cross-train workers to add flexibility

Concerns of Suppliers

• Diversification – ties to only one customer increases risk

• Scheduling – don’t 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

JIT Inventory•Why does extra inventory exist?•“Just In Case” •cover problems•Just-in-time Inventory•Minimum inventory to keep a perfect system running

JIT Inventory•JIT Inventory Tactics•Four tactics

• Reduce Setup Costs

•Reduce Variability

• Reduce Inventory

• Reduce Lot Size

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•Inventory hides variability & problems•Analogy with the lake full of rocks

Inventory level

Process downtimeScrap

Setup time

Late deliveries

Quality problems

Water:Inventory Flow

Rocks:Problems

•Uncovering of the “rocks”•Reveals problems, variability•Management clears the lakeInventory

level

Process downtimeScrap

Setup time

Late deliveries

Quality problems Problems

revealed

No problems No inventory

Inventory level

Process downtime removed

No scrap

Setup time

reducedLate

deliveries

Quality problems removed

•Key to JIT:“Good product in small lot sizes”•Reduces Inventory Costs

Q2 When average order size = 100average inventory is 50

200 –

100 –

Inve

ntor

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Time

Q1 When average order size = 200average inventory is 100

Lowering the order size Increases the Order size Decreases Inventory

•Ideal Situation•Lot Sizes of ONE pulled from ONE process to the next•But, unrealistic•Small lot sizes possible but Single lot size not feasible

•Two necessary changes:•Improve Material Handling•Reduce Setup time

•EOQ for Desired Setup time

Lot Size Example: Crate Furniture Inc.D = Annual demand = 400,000 unitsd = Daily demand = 400,000/250 = 1,600 per dayp = Daily production rate = 4,000 unitsQ = EOQ desired = 400H = Holding cost = $20 per unitS = Setup cost (to be determined)

Q = 2DSH(1 - d/p)

Q2 = 2DSH(1 - d/p)

S = = = $2.40(Q2)(H)(1 - d/p)

2D(3,200,000)(0.6)

800,000

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

• High setup costs encourage large lot sizes

Ultimate Solution: Reducing setup costs

Reduces lot size & average inventory

Reduces Optimum order size

Holding cost

T2

S2

Setup cost curves (S1, S2)T1

S1

Cost

Lot size

Sum of ordering and holding costs

• Setup time can be reduced through preparation prior to shutdown and changeover

• Reduced Setup times=A major JIT Component

• Setup Costs highly correlated with Setup time

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Reduce Setup Times

Figure 16.6

Use one-touch system to eliminate adjustments (save 10 minutes)Step 4

Step 5Training operators and standardizing work procedures (save 2 minutes)

Step 2Move material closer and

improve material handling (save 20 minutes)

Step 1

Separate setup into preparation and actual setup, doing as much as possible while the machine/process

is operating (save 30 minutes)

Step 3Standardize and

improve tooling (save 15 minutes)

Initial Setup Time 90 min —

60 min —

45 min —

25 min —

15 min —13 min —

—Repeat cycle until subminute setup is achievedStep 6

JIT Scheduling• Better Scheduling

OrganizationSuppliers

Effective Scheduling1 •Supports JIT

2 •Improves ability to meet customer orders

3 •Drives down inventory

4 •Allows smaller lot sizes

5 •Reduces work-in-process

JIT Scheduling: Example Ford Motor CompanyFord

communicates its schedules to bumper Polycon

Industries

Schedule describes: Style and color of the bumper for each

vehicle

It transmits the information to

Polycon Warehouse personnel

PW Personnel load the

bumpers onto conveyors

leading to the loading dock

Bumpers are then trucked to

ford plant

JIT Scheduling: Two major tools

Level Schedules

Kanban

1. Level Schedules: Jelly Bean Scheduling• Technique processes frequent small batches• Many “always changing” small lots

A B CA AAB B B B B C

JIT Level Material-Use Approach

A CA AA B B B B B C CB B B BA A

Large-Lot Approach

Time

Freezing

• Not allowing changes • Improves the performance• The portion closest to the due dates• Allows

– Production system to function– Schedule to be met

2. Kanban: Only when ready

• “Kanban”-Japanese word for “card”• Technique that uses “pull” system• Match or nearly match the processing time• Card=an authorization for the next

container of material to be produced• Empty containers• Lights• Flag or rag• Colored golf balls

Signaling devices to control the

flow of material

© 2011 Pearson Education, Inc. publishing as Prentice Hall

Kanban

1. User removes a standard sized container

2. Signal is seen by the producing department as authorization to replenish

Part numbers mark location

Signal marker on boxes

Figure 16.8

Work cell

Raw Material Supplier

Kanban

Purchased Parts

Supplier

Sub-assembly

Ship

Kanban

Kanban

Kanban

Kanban

Finished goods

Customer order

Final assembly

Kanban

Kanban

Number of Kanban Cards or Containers

• 1st – Set the size of each container– Need to know the lead time needed to produce a

container of parts– Need to know the amount of Safety Stock needed

• 2nd – Calculate no of Kanbans

Example: No of Kanban: Hobbs Bakery

• Daily Demand =500 cakes• Production Lead Time =2 days• Safety Stock =0.5 days• Container size =250 cakes• Now, Demand during lead time =2 days x 500

cakes = 1,000

Quality

JIT cuts the cost of obtaining good quality

JIT improves

quality

Better quality means fewer

buffers=Easier-to use JIT

system

•Strong Relationship between JIT & Quality

© 2011 Pearson Education, Inc. publishing as Prentice Hall

JIT Quality Tactics

Use statistical process controlEmpower employeesBuild fail-safe methods (poka-yoke, checklists, etc.)Expose poor quality with small lot JITProvide immediate feedback

Table 16.4

• Continuous improvement• Build an organizational culture and value system

that stresses improvement of all processes• Part of everyone’s job

• Respect for people• People are treated as

knowledge workers• Engage mental and

physical capabilities• Empower employees

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

Toyota Production System

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 customer’s perspective

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

Building a Lean Organization

• Develop partnerships with suppliers

• Educate suppliers• Eliminate all but value-added

activities• Develop employees• Make jobs challenging• Build worker flexibility

JIT in Services

The JIT techniques used in manufacturing are used in services

• Suppliers• Layouts• Inventory• Scheduling

Group 7

THANK YOUANY QUESTIONS?