ch12 jit lean manufacturing
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1¥¥ 2002 South-Western/Thomson Learning2002 South-Western/Thomson Learning TMTM
Slides preparedSlides prepared
by John Loucksby John Loucks
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Chapter 12Chapter 12
JustJust--InIn--Time and Lean ManufacturingTime and Lean Manufacturing
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OverviewOverview
The JustThe Just--inin--Time Manufacturing PhilosophyTime Manufacturing Philosophy
Prerequisites for JIT ManufacturingPrerequisites for JIT Manufacturing
Elements of JIT ManufacturingElements of JIT Manufacturing
Benefits of JIT ManufacturingBenefits of JIT Manufacturing Success and JIT ManufacturingSuccess and JIT Manufacturing
JIT in ServicesJIT in Services
WrapWrap--Up: What WorldUp: What World--Class Companies DoClass Companies Do
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APICS Definition of JITAPICS Definition of JITAPICS Definition of JITAPICS Definition of JIT
³A philosophy of manufacturing based on planned ³A philosophy of manufacturing based on planned
elimination of waste and continuous improvement of elimination of waste and continuous improvement of productivity ««´ productivity ««´
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APICS Definition of JITAPICS Definition of JITAPICS Definition of JITAPICS Definition of JIT
³The primary elements of Just³The primary elements of Just--inin--Time are:Time are:
to have only the required inventory when needed;to have only the required inventory when needed;
to improve quality to zero defects;to improve quality to zero defects;
to reduce lead times by reducing setup times,to reduce lead times by reducing setup times,queue lengths, and lot sizes;queue lengths, and lot sizes;
to incrementally revise the operations themselves;to incrementally revise the operations themselves;
and to accomplish these things at minimum cost´.and to accomplish these things at minimum cost´.
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JIT SynonymsJIT SynonymsJIT SynonymsJIT Synonyms
IBMIBM -- Continuous Flow ManufacturingContinuous Flow Manufacturing
HPHP -- Stockless ProductionStockless Production
-- Repetitive Manufacturing SystemRepetitive Manufacturing System
GEGE -- Management by SightManagement by Sight MotorolaMotorola -- Short Cycle ManufacturingShort Cycle Manufacturing
JapaneseJapanese -- The Toyota SystemThe Toyota System
BoeingBoeing -- Lean ManufacturingLean Manufacturing
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APICS Definition of Lean ManufacturingAPICS Definition of Lean ManufacturingAPICS Definition of Lean ManufacturingAPICS Definition of Lean Manufacturing
³A philosophy of production that emphasizes the minimization³A philosophy of production that emphasizes the minimization
of the amount of all the resources (including time) used in theof the amount of all the resources (including time) used in the
various activities of the enterprise. It involves:various activities of the enterprise. It involves:
« identifying and eliminating non« identifying and eliminating non--valuevalue--adding activities,adding activities,
« employing teams of multi« employing teams of multi--skilled workers, skilled workers,
« using highly flexible, automated machines´« using highly flexible, automated machines´
American Production and Inventory Control Society (American Production and Inventory Control Society (APICSAPICS))is an organization for professionals working in the field of is an organization for professionals working in the field of
Operations ManagementOperations Management
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Traditional View of ManufacturingTraditional View of ManufacturingTraditional View of ManufacturingTraditional View of Manufacturing
K ey objective was to fully utilize capacity so thatK ey objective was to fully utilize capacity so thatmore products were produced by fewer workers andmore products were produced by fewer workers andmachinesmachines
How? With large queues of inHow? With large queues of in--process inventory process inventory
waiting at work centerswaiting at work centers Workers and machines never had to wait for productWorkers and machines never had to wait for product
to work on, so capacity utilization was high andto work on, so capacity utilization was high and production costs were low production costs were low
Result: Products spent most of their time inResult: Products spent most of their time inmanufacturing just waiting, an arrangement that ismanufacturing just waiting, an arrangement that isunacceptable in today¶s timeunacceptable in today¶s time--based competition based competition
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JIT PhilosophyJIT PhilosophyJIT PhilosophyJIT Philosophy
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TimeTime--Based CompetitionBased CompetitionTimeTime--Based CompetitionBased Competition
It is not enough for firms to be highIt is not enough for firms to be high--quality and lowquality and low--
cost producerscost producers
Today, they must also be first in getting products andToday, they must also be first in getting products and
services to the customer fastservices to the customer fast To compete in this new environment, theTo compete in this new environment, the order order--toto--
delivery cycledelivery cycle must be drastically reducedmust be drastically reduced
JIT is the weapon of choice today to reduce theJIT is the weapon of choice today to reduce the
elapsed time of this cycleelapsed time of this cycle
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OrderOrder--toto--Delivery CycleDelivery CycleOrderOrder--toto--Delivery CycleDelivery Cycle
DistriDistri--
bution and bution and
Customer Customer
ServiceService
CustoCusto--
mer mer
PlacesPlaces
Order Order
Order Order
EntryEntry
EngiEngi--neeringneering
DesignDesign
SchedSched--
ulinguling
ManufacturingManufacturing
Lead TimesLead Times
PurchasingPurchasing
Lead TimesLead Times
ManufacturingManufacturing
Cumulative Lead TimeCumulative Lead Time
Order Order--toto--Delivery CycleDelivery Cycle
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Customers Final Assy
Sub
Sub
Fab
Fab
Fab
Fab
Vendor
Vendor
Vendor
Vendor
JIT LogicJIT LogicJIT LogicJIT Logic
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JIT Manufacturing PhilosophyJIT Manufacturing PhilosophyJIT Manufacturing PhilosophyJIT Manufacturing Philosophy
The main objective of JIT manufacturing is to reduceThe main objective of JIT manufacturing is to reduce
manufacturing lead timesmanufacturing lead times
This is primarily achieved by drastic reductions inThis is primarily achieved by drastic reductions in
work work--inin--process (WIP) process (WIP) The result is a smooth, uninterrupted flow of smallThe result is a smooth, uninterrupted flow of small
lots of products throughout productionlots of products throughout production
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Management philosophy
Pull system though the plant
WHAT IT IS
Employee participation
Industrial engineering/basics
Continuing improvement
Total quality control
Small lot sizes
WHAT IT REQUIRES
Attacks waste
Exposes problems and bottlenecks
Achieves streamlined production
WHAT IT DOES
Stable environment
WHAT ITASSUMES
JIT ProductionJIT ProductionJIT ProductionJIT Production
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Successful JIT ApplicationsSuccessful JIT ApplicationsSuccessful JIT ApplicationsSuccessful JIT Applications
Most successful JIT applications have been inMost successful JIT applications have been in
repetitive manufacturingrepetitive manufacturing, where batches of standard, where batches of standard
products are produced at high speeds and in high products are produced at high speeds and in high
volumes.volumes.
Successful use of JIT is rare in large, highly complexSuccessful use of JIT is rare in large, highly complex
job shops where production planning and control is job shops where production planning and control is
extremely complicated.extremely complicated.
Smaller, less complex job shops have used JIT, butSmaller, less complex job shops have used JIT, butoperations have been changed so that they behaveoperations have been changed so that they behave
somewhat like repetitive manufacturing.somewhat like repetitive manufacturing.
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Elements of JIT ManufacturingElements of JIT ManufacturingElements of JIT ManufacturingElements of JIT Manufacturing
Eliminating wasteEliminating waste Enforced problem solving and continuousEnforced problem solving and continuous
improvementimprovement
People make JIT work People make JIT work
Total Quality Management (TQM)Total Quality Management (TQM)
Parallel processingParallel processing
K anban production controlK anban production control
JIT purchasingJIT purchasing Reducing inventoriesReducing inventories
Working toward repetitive manufacturingWorking toward repetitive manufacturing
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(1) Waste from overproduction(1) Waste from overproduction
(2) Waste of waiting time(2) Waste of waiting time
(3) Transportation waste(3) Transportation waste
(4) Inventory waste(4) Inventory waste
(5) Processing waste(5) Processing waste
(6) Waste of motion(6) Waste of motion
(7) Waste from product defects(7) Waste from product defects
WasteWaste----OperationsOperationsWasteWaste----OperationsOperations
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JIT: A Pull SystemJIT: A Pull SystemJIT: A Pull SystemJIT: A Pull System
In aIn a push system push system, such as an MRP system, we look at, such as an MRP system, we look atthe schedule to determine what to produce nextthe schedule to determine what to produce next
In aIn a pull system pull system, such as JIT, we look only at the next, such as JIT, we look only at the next
stage of production and determine what is neededstage of production and determine what is neededthere, and then we produce only thatthere, and then we produce only that
As Robert Hall states, ³You don¶t never makeAs Robert Hall states, ³You don¶t never make
nothing and send it no place. Somebody has got tonothing and send it no place. Somebody has got to
come and get it´come and get it´
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Changes Required for JITChanges Required for JITChanges Required for JITChanges Required for JIT
JIT requires certain changes to the factory and theJIT requires certain changes to the factory and theway it is managed:way it is managed:
Stabilize production schedulesStabilize production schedules
Make the factories more focusedMake the factories more focused Increase work center capacitiesIncrease work center capacities
Improve product qualityImprove product quality
CrossCross--train workerstrain workers
Reduce equipment breakdownsReduce equipment breakdowns
Develop longDevelop long--term supplier relationsterm supplier relations
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Capacity UtilizationCapacity UtilizationCapacity UtilizationCapacity Utilization
1010 2020 3030 40 5040 50 60 70 8060 70 80 90 10090 100
3030
1010
2020
% Capacity% Capacity
UtilizationUtilization
6060Production Lead Times (days)Production Lead Times (days)
4040
5050TraditionalTraditional
ManufacturingManufacturing
JITJIT
ManufacturingManufacturing
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Increasing Production CapacityIncreasing Production Capacity
Reduces Manufacturing Lead TimesReduces Manufacturing Lead Times
Increasing Production CapacityIncreasing Production Capacity
Reduces Manufacturing Lead TimesReduces Manufacturing Lead Times
Only slight increases in production capacities canOnly slight increases in production capacities canlead to:lead to:
Significant reduction of manufacturing lead timesSignificant reduction of manufacturing lead times
Significant reduction of work Significant reduction of work--inin--process inventory process inventory Queuing theory can be used to analyze waitingQueuing theory can be used to analyze waiting--lineline
production problems production problems
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We know from queuing theory (Chapter 9) that theWe know from queuing theory (Chapter 9) that theaverage time in the system (manufacturing lead time)average time in the system (manufacturing lead time)
is:is:
If we have an average lead time in mind, we canIf we have an average lead time in mind, we can
solve for the required production rate:solve for the required production rate:
Necessary Production CapacityNecessary Production CapacityNecessary Production CapacityNecessary Production Capacity
1
( )st Q P!
1
st
Q P!
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Work Work--inin--Process InventoryProcess InventoryWork Work--inin--Process InventoryProcess Inventory
We also know from queuing theory that the averageWe also know from queuing theory that the averagenumber of jobs in the system (work number of jobs in the system (work--inin--process process
inventory) is:inventory) is:
( )s
n PQ P
!
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Example: Necessary Production CapacityExample: Necessary Production CapacityExample: Necessary Production CapacityExample: Necessary Production Capacity
A production manager believes reducing theA production manager believes reducing thefirm¶s manufacturing lead time will give the firm afirm¶s manufacturing lead time will give the firm a
significant competitive advantage. Two days is thesignificant competitive advantage. Two days is the
lead time goal.lead time goal.
Currently, jobs are arriving at the rate of 6 per Currently, jobs are arriving at the rate of 6 per
day and the operation can process an average of 6.125 day and the operation can process an average of 6.125
jobs per day. jobs per day.
What is the current average lead time for a job?What is the current average lead time for a job?What is the necessary production rate to achieve theWhat is the necessary production rate to achieve the
twotwo--day lead time goal?day lead time goal?
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Example: Necessary Production CapacityExample: Necessary Production CapacityExample: Necessary Production CapacityExample: Necessary Production Capacity
Current Lead TimeCurrent Lead Time
Necessary Production Rate Necessary Production Rate
ConclusionConclusion
A 6% increase in the production rate (from 6.125 A 6% increase in the production rate (from 6.125 to 6.5) results in a 75% reduction in manufacturingto 6.5) results in a 75% reduction in manufacturinglead time (from 8 to 2).lead time (from 8 to 2).
1 1 18 days
( ) (6.125 6.0) 0.125st
Q P! ! ! !
1 16.0 6.5 jobs per day
2st
Q P! ! !
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Example: Reduction in WIPExample: Reduction in WIPExample: Reduction in WIPExample: Reduction in WIP
In the preceding example, the production rate wasIn the preceding example, the production rate wasincreased from 6.125 jobs per day to 6.5. This 6%increased from 6.125 jobs per day to 6.5. This 6%
increase in the production rate yielded a 75%increase in the production rate yielded a 75%
reduction in manufacturing lead time!reduction in manufacturing lead time!
How much of a reduction in WIP will result fromHow much of a reduction in WIP will result from
the 6 % production rate increase?the 6 % production rate increase?
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Example: Reduction in WIPExample: Reduction in WIPExample: Reduction in WIPExample: Reduction in WIP
WIPWIP before before production rate increase production rate increase
WIPWIP after after production rate increase production rate increase
ConclusionConclusionA 6% increase in the production rate (from 6.125 A 6% increase in the production rate (from 6.125
to 6.5) results in a 75% reduction in work to 6.5) results in a 75% reduction in work--inin--process process(from 48 to 12).(from 48 to 12).
6old 48 jobs
( ) (6.125 6)s
nP
Q P! ! !
6new 12 jobs
( ) (6.500 6)s
nP
Q P! ! !
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Problem Solving and Continuous ImprovementProblem Solving and Continuous ImprovementProblem Solving and Continuous ImprovementProblem Solving and Continuous Improvement
JIT is a system of enforced problem solving.JIT is a system of enforced problem solving.
One approach is to lower inventory gradually toOne approach is to lower inventory gradually to
expose problems and force their solution.expose problems and force their solution.
With no buffer inventories to rely on in times of With no buffer inventories to rely on in times of production interruptions, problems are highly visible production interruptions, problems are highly visible
and cannot be ignored.and cannot be ignored.
The job of eliminating production problems is never The job of eliminating production problems is never
finished.finished. Continuous improvementContinuous improvement -- a practice the Japanesea practice the Japanese
callcall kaizenkaizen -- is central to the philosophy of JIT.is central to the philosophy of JIT.
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Uncovering Production ProblemsUncovering Production ProblemsUncovering Production ProblemsUncovering Production Problems
QualityQuality
ProblemsProblems
MaterialMaterial
ShortagesShortages
MachineMachine
BreakdownsBreakdowns
WorkloadWorkload
ImbalancesImbalances
Worker Worker
A bsenteeismA bsenteeism
OutOut--of of--SpecSpec
MaterialsMaterials
QualityQuality
ProblemsProblems
InIn--ProcessProcess
InventoryInventory
We must lower the water level!We must lower the water level! Visible ProductionVisible ProductionProblems are OnlyProblems are Only
5% of the Total!5% of the Total!
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People Make JIT Work People Make JIT Work People Make JIT Work People Make JIT Work
JIT has a strong element of training and involvementJIT has a strong element of training and involvementof workers.of workers.
A culture of mutual trust and teamwork must beA culture of mutual trust and teamwork must be
developed.developed.
An attitude of loyalty to the team and self An attitude of loyalty to the team and self--disciplinediscipline
must be developed.must be developed.
Another crucial element of JIT isAnother crucial element of JIT is empowerment of empowerment of
workersworkers, giving them the authority to solve, giving them the authority to solve production problems. production problems.
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TQM and JITTQM and JITTQM and JITTQM and JIT
LongLong--term relationships with suppliersterm relationships with suppliers
Certified suppliers eliminate incoming inspectionCertified suppliers eliminate incoming inspection
Share design process for new productsShare design process for new products
Simplify design/processesSimplify design/processes PokaPoka--yokeyoke
Process capable of meeting tolerancesProcess capable of meeting tolerances
Operators responsible for quality of own work Operators responsible for quality of own work
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Operations performed in series:Operations performed in series:
Op 1Op 1 Op 2Op 2 Op 3Op 3 Op 4Op 4 Op 5Op 5 Op 6Op 6 Op 7Op 7 Op 8Op 8
Operations performed in parallel:Operations performed in parallel:
Cycle Time for Each Operation = 1 HourCycle Time for Each Operation = 1 Hour
Total Product Cycle Time = 1 x 5 =Total Product Cycle Time = 1 x 5 = 5 Hours5 Hours
Operations 2 and 4 start theOperations 2 and 4 start the
same time as Operation 1same time as Operation 1
Parallel ProcessingParallel ProcessingParallel ProcessingParallel Processing
Cycle Time for Each Operation = 1 HourCycle Time for Each Operation = 1 Hour
Total Product Cycle Time = 1 x 8 =Total Product Cycle Time = 1 x 8 = 8 Hours8 Hours
Op 1Op 1Op 2Op 2Op 3Op 3
Op 4Op 4
Op 5Op 5
Op 6Op 6 Op 7Op 7 Op 8Op 8
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Group Technology & JITGroup Technology & JITGroup Technology & JITGroup Technology & JIT
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K anban Production ControlK anban Production ControlK anban Production ControlK anban Production Control
At the core of JIT manufacturing at Toyota isAt the core of JIT manufacturing at Toyota isK anbanK anban, an amazingly simple system of planning and, an amazingly simple system of planning and
controlling productioncontrolling production
K anbanK anban, in Japanese, means card or marquee, in Japanese, means card or marquee
K anbanK anban is the means of signaling to the upstreamis the means of signaling to the upstream
workstation that the downstream workstation is readyworkstation that the downstream workstation is ready
for the upstream workstation to produce another for the upstream workstation to produce another
batch of parts batch of parts
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K anbans and Other SignalsK anbans and Other SignalsK anbans and Other SignalsK anbans and Other Signals
There are two types of K anban cards:There are two types of K anban cards:
a conveyance card (Ca conveyance card (C--K anban)K anban)
a production card (Pa production card (P--K anban)K anban)
Signals come in many forms other than cards,Signals come in many forms other than cards,including:including:
an empty cratean empty crate
an empty designated location on the floor an empty designated location on the floor
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How K anban OperatesHow K anban OperatesHow K anban OperatesHow K anban Operates
When a worker at downstream Work Center #2 needs aWhen a worker at downstream Work Center #2 needs acontainer of parts, she does the following:container of parts, she does the following:
She takes the CShe takes the C--K anban from the container she justK anban from the container she justemptiedemptied
She finds a full container of the needed part inShe finds a full container of the needed part instoragestorage
She places the CShe places the C--K anban in the full container andK anban in the full container andremoves the Premoves the P--K anban from the full container andK anban from the full container and
places it on a post at Work Center #1 places it on a post at Work Center #1
She takes the full container of parts with its CShe takes the full container of parts with its C--K anban back to Work Center #2K anban back to Work Center #2
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K anban CardsK anban CardsK anban CardsK anban Cards
Conveyance K anban CardConveyance K anban Card
Part number to produce:Part number to produce: M471M471--3636 Part description:Part description: Valve HousingValve Housing
Lot size needed:Lot size needed: 4040 Container type:Container type: R ED CrateR ED Crate
Card number:Card number: 2 of 52 of 5 Retrieval storage location:Retrieval storage location: NW53DNW53D
From work center:From work center: 2222 To work center:To work center: 3535
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K anban CardsK anban CardsK anban CardsK anban Cards
Production K anban CardProduction K anban Card
Part number to produce:Part number to produce: M471M471--3636 Part description:Part description: Valve HousingValve Housing
Lot size needed:Lot size needed: 4040 Container type:Container type: R ED crateR ED crate
Card number:Card number: 4 of 54 of 5 Completed storage location:Completed storage location: NW53DNW53D
From work center:From work center: 2222 To work center:To work center: 3535
Materials required:Materials required:Material no.Material no. 744B744B Storage location:Storage location: NW48CNW48C
Part no.Part no. B238B238--55 Storage location:Storage location: NW47BNW47B
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How K anban OperatesHow K anban OperatesHow K anban OperatesHow K anban Operates
When a worker at downstream Work Center #2 needs aWhen a worker at downstream Work Center #2 needs a
container of parts, he does the following:container of parts, he does the following:
He takes the CHe takes the C--K anban from the container he justK anban from the container he just
emptied.emptied. He finds a full container of the needed part in storage.He finds a full container of the needed part in storage.
He places the CHe places the C--K anban in the full container andK anban in the full container and
removes the Premoves the P--K anban from the full container andK anban from the full container and
places it on a post at Work Center #1. places it on a post at Work Center #1. He takes the full container of parts with its CHe takes the full container of parts with its C--K anbanK anban
back to Work Center #2. back to Work Center #2.
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Flow of K anban Cards and ContainersFlow of K anban Cards and ContainersFlow of K anban Cards and ContainersFlow of K anban Cards and Containers
UpstreamUpstream
Work Center #1Work Center #1
DownstreamDownstream
Work Center #2Work Center #2
InIn--process process
storagestorage
Parts FlowParts Flow
PP--K anban andK anban andempty container empty container
Full container Full container
and Pand P--K anbanK anban
CC--K anban andK anban andempty container empty container
Full container Full container
and Cand C--K anbanK anban
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Containers in a K anban SystemContainers in a K anban SystemContainers in a K anban SystemContainers in a K anban System
K anban is based on the simple idea of replacement of K anban is based on the simple idea of replacement of containers of parts, one at a time.containers of parts, one at a time.
Containers are reserved for specific parts, areContainers are reserved for specific parts, are
purposely kept small, and always contain the same purposely kept small, and always contain the same
standard number of parts for each part number.standard number of parts for each part number.
At Toyota the containers must not hold more thanAt Toyota the containers must not hold more than
about 10% of a day¶s requirements.about 10% of a day¶s requirements.
There is a minimum of two containers for each partThere is a minimum of two containers for each partnumber, one at the upstream ³ producing´ work center number, one at the upstream ³ producing´ work center
and one at the downstream ³using´ work center.and one at the downstream ³using´ work center.
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N = Total number of containers between 2 stations N = Total number of containers between 2 stationsU = Usage rate of downstream operationU = Usage rate of downstream operation
T =Average elapsed time for container to makeT =Average elapsed time for container to make
entire cycleentire cycle
P = Policy variable indicating efficiency... 0P = Policy variable indicating efficiency... 0 -- 11C = Capacity (number of parts) of standard container C = Capacity (number of parts) of standard container
UT(1+P) N=
C
Calculating the Number of ContainersCalculating the Number of Containers
between Work Centersbetween Work Centers
Calculating the Number of ContainersCalculating the Number of Containers
between Work Centersbetween Work Centers
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Example: Number of ContainersExample: Number of ContainersExample: Number of ContainersExample: Number of Containers
There are two adjacent work centers, one of There are two adjacent work centers, one of which is fed parts from the other. The productionwhich is fed parts from the other. The production
rate of the using work center is 165 parts per hour.rate of the using work center is 165 parts per hour.
Each standard K anban container holds 24 parts.Each standard K anban container holds 24 parts.
It takes an average of 0.6 hour for a container toIt takes an average of 0.6 hour for a container to
make the entire cycle from the time it leaves themake the entire cycle from the time it leaves the
upstream center until it is returned, filled withupstream center until it is returned, filled with
production, and leaves again. The efficiency of the production, and leaves again. The efficiency of the
system is observed to be 0.2.system is observed to be 0.2.
How many containers are needed?How many containers are needed?
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Example: Number of ContainersExample: Number of ContainersExample: Number of ContainersExample: Number of Containers
Number of Containers, NNumber of Containers, N
N = UT(1 + P) / C N = UT(1 + P) / C
= 165(0.6)(1 + 0.2) / 24= 165(0.6)(1 + 0.2) / 24
= 99(1.2) / 24= 99(1.2) / 24
= 118.8 / 24= 118.8 / 24
= 4.95 or 5 containers= 4.95 or 5 containers
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Essential Elements of JIT PurchasingEssential Elements of JIT PurchasingEssential Elements of JIT PurchasingEssential Elements of JIT Purchasing
Cooperative and longCooperative and long--term relationship betweenterm relationship betweencustomer and supplier.customer and supplier.
Supplier selection based not only on price, but alsoSupplier selection based not only on price, but also
delivery schedules, product quality, and mutual trust.delivery schedules, product quality, and mutual trust.
Suppliers are usually located near the buyer¶s factory.Suppliers are usually located near the buyer¶s factory.
Shipments are delivered directly to the customer¶sShipments are delivered directly to the customer¶s
production line. production line.
Parts are delivered in small, standardParts are delivered in small, standard--size containerssize containerswith a minimum of paperwork and in exact quantities.with a minimum of paperwork and in exact quantities.
Delivered material is of near Delivered material is of near--perfect quality. perfect quality.
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EE--Commerce and JIT PurchasingCommerce and JIT PurchasingEE--Commerce and JIT PurchasingCommerce and JIT Purchasing
InternetInternet--based information systems allow firms to based information systems allow firms toquickly place orders for materials with their suppliersquickly place orders for materials with their suppliers
This is an efficient and effective purchasing processThis is an efficient and effective purchasing process
Saves the time of paperwork Saves the time of paperwork Avoids errors associated with paperwork Avoids errors associated with paperwork
Reduces procurement lead timeReduces procurement lead time
Reduces labor costsReduces labor costs
« and K anbans can be sent to suppliers« and K anbans can be sent to suppliers
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Reducing InventoriesReducing Inventories
through Setup Time Reductionthrough Setup Time Reduction
Reducing InventoriesReducing Inventories
through Setup Time Reductionthrough Setup Time Reduction
Central to JIT is the reduction of production lot sizesCentral to JIT is the reduction of production lot sizesso that inventory levels are reduced.so that inventory levels are reduced.
Smaller lot sizes result in more machine setupsSmaller lot sizes result in more machine setups
More machine setups, if they are lengthy, result in:More machine setups, if they are lengthy, result in: Increased production costsIncreased production costs
Lost capacity (idle machines during setup)Lost capacity (idle machines during setup)
The answer is: REDUCE MACHINE SETUP TIMESThe answer is: REDUCE MACHINE SETUP TIMES
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Setup Time Required for an EOQSetup Time Required for an EOQSetup Time Required for an EOQSetup Time Required for an EOQ
The economic production lot size (EOQ) modelThe economic production lot size (EOQ) model(detailed in Chapter 14) is:(detailed in Chapter 14) is:
where:where: D = annual demand rateD = annual demand rated = daily demand rated = daily demand rate
p = daily production rate p = daily production rateC = carrying cost per unit per year C = carrying cost per unit per year S = cost per setupS = cost per setup
« more« more
2DS pEOQ =
C p-d
¨ ¸
© ¹ª º
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Setup Time Required for an EOQSetup Time Required for an EOQSetup Time Required for an EOQSetup Time Required for an EOQ
The setupThe setup costcost required for a given lot size can berequired for a given lot size can bederived from the EOQ model as:derived from the EOQ model as:
The setupThe setup timetime can be derived from the setup cost, S:can be derived from the setup cost, S:
2C(EOQ) p-dS =
2D p
¨ ¸
© ¹ª º
SSetup Time =Labor rate
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Example: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time Required
A firm wants to determine what the length of theA firm wants to determine what the length of thesetup time of an operation should be in order to makesetup time of an operation should be in order to make
an production lot size (EOQ) of 50 economical.an production lot size (EOQ) of 50 economical. AnAn
analyst has made the following estimates:analyst has made the following estimates:
D = 16,800 units (annual demand)D = 16,800 units (annual demand)
d = 84 units (daily demand rate @ 200 days/yr)d = 84 units (daily demand rate @ 200 days/yr)
p = 140 units (daily production rate) p = 140 units (daily production rate)
C = $20 (carrying cost per unit per year)C = $20 (carrying cost per unit per year)Labor rate = $25.00/hour Labor rate = $25.00/hour
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Example: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time Required
Setup Cost Required for EOQ = 50Setup Cost Required for EOQ = 502C(EOQ) p-d
S =2D p
¨ ¸© ¹ª º
2$42(50) 140 84= $1.25
2(16,800) 140
¨ ¸ !© ¹ª º
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Example: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time RequiredExample: Setup Time Required
Setup Time Required for EOQ = 50Setup Time Required for EOQ = 50
.0833 hours = 5.0 minutes.0833 hours = 5.0 minutes
S $1.25Setup Time = = = 0.833 hours
Labor rate $15.00/hr
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Working Toward Repetitive ManufacturingWorking Toward Repetitive ManufacturingWorking Toward Repetitive ManufacturingWorking Toward Repetitive Manufacturing
Reduce setup times and lot sizes to reduce inventoriesReduce setup times and lot sizes to reduce inventories
Change factory layout to allow streamlined flowsChange factory layout to allow streamlined flows
Convert processConvert process--focused layout to cellular focused layout to cellular
manufacturing (CM) centersmanufacturing (CM) centers Install flexible manufacturing systems (FMS)Install flexible manufacturing systems (FMS)
«..more«..more
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Working Toward Repetitive ManufacturingWorking Toward Repetitive ManufacturingWorking Toward Repetitive ManufacturingWorking Toward Repetitive Manufacturing
Standardize parts designsStandardize parts designs
Train workers for several jobsTrain workers for several jobs
Implement preventive maintenance (PM) programsImplement preventive maintenance (PM) programs
Install effective quality control programsInstall effective quality control programs Develop an effective subcontractor network Develop an effective subcontractor network
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Benefits of JITBenefits of JITBenefits of JITBenefits of JIT
Inventory levels are drastically reduced:Inventory levels are drastically reduced:
frees up working capital for other projectsfrees up working capital for other projects
less space is neededless space is needed
customer responsiveness increasescustomer responsiveness increases Total product cycle time dropsTotal product cycle time drops
Product quality is improvedProduct quality is improved
Scrap and rework costs go downScrap and rework costs go down
Forces managers to fix problems and eliminate wasteForces managers to fix problems and eliminate waste
.... or it won¶t work!.... or it won¶t work!
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Organize ProblemOrganize Problem--Solving GroupsSolving Groups
Upgrade HousekeepingUpgrade Housekeeping
Upgrade QualityUpgrade Quality
Clarify Process FlowsClarify Process Flows
Revise Equipment and Process TechnologiesRevise Equipment and Process Technologies
JIT in Services (Examples)JIT in Services (Examples)JIT in Services (Examples)JIT in Services (Examples)
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Level the Facility LoadLevel the Facility Load
Eliminate Unnecessary ActivitiesEliminate Unnecessary Activities
Reorganize Physical ConfigurationReorganize Physical Configuration
Introduce DemandIntroduce Demand--Pull SchedulingPull Scheduling
Develop Supplier NetworksDevelop Supplier Networks
JIT in Services (Examples)JIT in Services (Examples)JIT in Services (Examples)JIT in Services (Examples)
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WrapWrap--Up:WorldUp:World--Class PracticeClass PracticeWrapWrap--Up:WorldUp:World--Class PracticeClass Practice
Focus on timeFocus on time--based competition to capture market based competition to capture marketshareshare
JIT method to reduce order JIT method to reduce order--toto--delivery cycledelivery cycle
Prerequisites must be present to successfullyPrerequisites must be present to successfullyimplement JITimplement JIT
behave like repetitive manufacturing behave like repetitive manufacturing
stable schedulesstable schedules
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End of Chapter 12End of Chapter 12End of Chapter 12End of Chapter 12