jit and lean

16 – 1

Departament d’Economia de l’Empresa / Department of Business Economics & Administration

Operations ManagementOperations Management

Session 7 – Session 7 – JIT and Lean JIT and Lean OperationsOperations

16 – 2Departament d’Economia de l’Empresa /

Department of Business Economics & Administration

OutlineOutline

Global Company Profile: Global Company Profile: Toyota Motor CorporationToyota Motor Corporation

Just-in-Time, the Toyota Just-in-Time, the Toyota Production System, and Lean Production System, and Lean OperationsOperations Eliminate WasteEliminate Waste

Remove VariabilityRemove Variability

Improve ThroughputImprove Throughput



Outline – ContinuedOutline – Continued

Just-in-TimeJust-in-Time JIT PartnershipsJIT Partnerships

Concerns of SuppliersConcerns of Suppliers

JIT LayoutJIT Layout Distance ReductionDistance Reduction

Increased FlexibilityIncreased Flexibility

Impact on EmployeesImpact on Employees

Reduced Space and InventoryReduced Space and Inventory




JIT InventoryJIT Inventory Reduce VariabilityReduce Variability

Reduce InventoryReduce Inventory

Reduce Lot SizesReduce Lot Sizes

Reduce Setup CostsReduce Setup Costs

JIT SchedulingJIT Scheduling Level SchedulesLevel Schedules

KanbanKanban




JIT QualityJIT Quality

Toyota Production SystemToyota Production System Continuous ImprovementContinuous Improvement

Respect for PeopleRespect for People

Standard Work PracticesStandard Work Practices

Lean OperationsLean Operations Building a Lean OrganizationBuilding a Lean Organization

Lean Operations in ServicesLean Operations in Services



Learning ObjectivesLearning Objectives

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

1.1. Define just-in-time, TPS, and lean Define just-in-time, TPS, and lean operationsoperations

2.2. Define the seven wastes and the Define the seven wastes and the 5 Ss5 Ss

3.3. Explain JIT partnershipsExplain JIT partnerships

4.4. Define optimal setup timeDefine optimal setup time



Learning ObjectivesLearning Objectives

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

5.5. Define kanbanDefine kanban

6.6. Explain the principles of the Toyota Explain the principles of the Toyota Production SystemProduction System



Toyota Motor CorporationToyota Motor Corporation

Largest vehicle manufacturer in the Largest vehicle manufacturer in the world with annual sales of over 9 world with annual sales of over 9 million vehiclesmillion vehicles

Success due to two techniques, JIT Success due to two techniques, JIT and TPSand TPS

Continual problem solving is central Continual problem solving is central to JITto JIT

Eliminating excess inventory makes Eliminating excess inventory makes problems immediately evidentproblems immediately evident



Toyota Motor CorporationToyota Motor Corporation

Central to TPS is a continuing effort Central to TPS is a continuing effort to produce products under ideal to produce products under ideal conditionsconditions

Respect for people is fundamentalRespect for people is fundamental

Small building but high levels of Small building but high levels of productionproduction

Subassemblies are transferred to the Subassemblies are transferred to the assembly line on a JIT basisassembly line on a JIT basis

High quality and low assembly time High quality and low assembly time per vehicleper vehicle



Just-In-Time, TPS, and Just-In-Time, TPS, and Lean OperationsLean Operations

JIT is a philosophy of continuous and JIT is a philosophy of continuous and forced problem solving via a focus on forced problem solving via a focus on throughput and reduced inventorythroughput and reduced inventory

TPS emphasizes continuous TPS emphasizes continuous improvement, respect for people, and improvement, respect for people, and standard work practicesstandard work practices

Lean production supplies the Lean production supplies the customer with their exact wants when customer with their exact wants when the customer wants it without wastethe customer wants it without waste



Just-In-Time, TPS, and Just-In-Time, TPS, and Lean OperationsLean Operations

JIT emphasizes forced problem JIT emphasizes forced problem solvingsolving

TPS emphasizes employee TPS emphasizes employee learning and empowerment in an learning and empowerment in an assembly-line environmentassembly-line environment

Lean operations emphasize Lean operations emphasize understanding the customerunderstanding the customer



Eliminate WasteEliminate Waste

Waste is anything that does not Waste is anything that does not add value from the customer point add value from the customer point of viewof view

Storage, inspection, delay, waiting Storage, inspection, delay, waiting in queues, and defective products in queues, and defective products do not add value and are 100% do not add value and are 100% wastewaste



Ohno’s Seven WastesOhno’s Seven Wastes

OverproductionOverproduction

QueuesQueues

TransportationTransportation

InventoryInventory

MotionMotion

OverprocessingOverprocessing

Defective productsDefective products



Eliminate WasteEliminate Waste

Other resources such as energy, Other resources such as energy, water, and air are often wastedwater, and air are often wasted

Efficient, ethical, and socially Efficient, ethical, and socially responsible production minimizes responsible production minimizes inputs, reduces wasteinputs, reduces waste

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



The 5 SsThe 5 Ss

Sort/segregateSort/segregate – when in doubt, – when in doubt, throw it outthrow it out

Simplify/straightenSimplify/straighten – methods – methods analysis toolsanalysis tools

Shine/sweepShine/sweep – clean daily – clean daily StandardizeStandardize – remove variations – remove variations

from processesfrom processes Sustain/self-disciplineSustain/self-discipline – review work – review work

and recognize progressand recognize progress



The 5 SsThe 5 Ss

Sort/segregateSort/segregate – when in doubt, – when in doubt, throw it outthrow it out

Simplify/straightenSimplify/straighten – methods – methods analysis toolsanalysis tools

Shine/sweepShine/sweep – clean daily – clean daily StandardizeStandardize – remove variations – remove variations

from processesfrom processes Sustain/self-disciplineSustain/self-discipline – review work – review work

and recognize progressand recognize progress

Two additional Ss

Safety – build in good practices

Support/maintenance – reduce variability and unplanned downtime



Remove VariabilityRemove Variability

JIT systems require managers to JIT systems require managers to reduce variability caused by both reduce variability caused by both internal and external factorsinternal and external factors

Variability is any deviation from the Variability is any deviation from the optimum processoptimum process

Inventory hides variabilityInventory hides variability

Less variability results in less Less variability results in less wastewaste



Sources of VariabilitySources of Variability

1.1. Incomplete or inaccurate drawings Incomplete or inaccurate drawings or specificationsor specifications

2.2. Poor production processes Poor production processes resulting in incorrect quantities, resulting in incorrect quantities, late, or non-conforming unitslate, or non-conforming units

3.3. Unknown customer demandsUnknown customer demands



Sources of VariabilitySources of Variability

1.1. Incomplete or inaccurate drawings Incomplete or inaccurate drawings or specificationsor specifications

2.2. Poor production processes Poor production processes resulting in incorrect quantities, resulting in incorrect quantities, late, or non-conforming unitslate, or non-conforming units

3.3. Unknown customer demandsUnknown customer demandsBoth JIT and inventory

reduction are effective tools

in identifying causes of

variability




The time it takes to move an The time it takes to move an order from receipt to deliveryorder from receipt to delivery

The time between the arrival of The time between the arrival of raw materials and the shipping of raw materials and the shipping of the finished order is called the finished order is called manufacturing cycle timemanufacturing cycle time

A pull system increases A pull system increases throughputthroughput




By pulling material in small lots, By pulling material in small lots, inventory cushions are removed, inventory cushions are removed, exposing problems and emphasizing exposing problems and emphasizing continual improvementcontinual improvement

Manufacturing cycle time is reducedManufacturing cycle time is reduced

Push systems dump orders on the Push systems dump orders on the downstream stations regardless of downstream stations regardless of the needthe need



Just-In-Time (JIT)Just-In-Time (JIT)

• Powerful strategy for improving operationsPowerful strategy for improving operations

• Materials arrive where they Materials arrive where they are needed when they are are needed when they are neededneeded

• Identifying problems and Identifying problems and driving out waste reduces driving out waste reduces costs and variability and costs and variability and improves throughputimproves throughput

• Requires a meaningful Requires a meaningful buyer-supplier relationshipbuyer-supplier relationship



JIT and Competitive JIT and Competitive AdvantageAdvantage

Figure 16.1Figure 16.1



JIT and Competitive JIT and Competitive AdvantageAdvantage




JIT PartnershipsJIT Partnerships

JIT partnerships exist when a JIT partnerships exist when a supplier and purchaser work supplier and purchaser work together to remove waste and drive together to remove waste and drive down costsdown costs

Four goals of JIT partnerships are:Four goals of JIT partnerships are: Removal of unnecessary activitiesRemoval of unnecessary activities

Removal of in-plant inventoryRemoval of in-plant inventory

Removal of in-transit inventoryRemoval of in-transit inventory

Improved quality and reliabilityImproved quality and reliability



JIT PartnershipsJIT Partnerships




Concerns of SuppliersConcerns of Suppliers

DiversificationDiversification – ties to only one customer – ties to only one customer increases riskincreases risk

SchedulingScheduling – don’t believe customers can – don’t believe customers can create a smooth schedulecreate a smooth schedule

ChangesChanges – short lead times mean – short lead times mean engineering or specification changes can engineering or specification changes can create problemscreate problems

QualityQuality – limited by capital budgets, – limited by capital budgets, processes, or technologyprocesses, or technology

Lot sizesLot sizes – small lot sizes may transfer – small lot sizes may transfer costs to supplierscosts to suppliers



JIT LayoutJIT Layout

Table 16.1Table 16.1

Reduce waste due to movementReduce waste due to movement

JIT Layout TacticsJIT Layout Tactics

Build work cells for families of productsBuild work cells for families of productsInclude a large number operations in a small areaInclude a large number operations in a small areaMinimize distanceMinimize distanceDesign little space for inventoryDesign little space for inventoryImprove employee communicationImprove employee communicationUse poka-yoke devicesUse poka-yoke devicesBuild flexible or movable equipmentBuild flexible or movable equipmentCross-train workers to add flexibilityCross-train workers to add flexibility



Distance ReductionDistance Reduction

Large lots and long production Large lots and long production lines with single-purpose lines with single-purpose machinery are being replaced by machinery are being replaced by smaller flexible cellssmaller flexible cells

Often U-shaped for shorter paths Often U-shaped for shorter paths and improved communicationand improved communication

Often using group technology Often using group technology concepts concepts



Increased FlexibilityIncreased Flexibility

Cells designed to be rearranged Cells designed to be rearranged as volume or designs changeas volume or designs change

Applicable in office environments Applicable in office environments as well as production settingsas well as production settings

Facilitates both product and Facilitates both product and process improvementprocess improvement



Impact on EmployeesImpact on Employees

Employees are cross trained Employees are cross trained for flexibility and efficiencyfor flexibility and efficiency

Improved communications Improved communications facilitate the passing on of facilitate the passing on of important information about important information about the processthe process

With little or no inventory With little or no inventory buffer, getting it right the first buffer, getting it right the first time is criticaltime is critical



Reduced Space and Reduced Space and InventoryInventory

With reduced space, inventory With reduced space, inventory must be in very small lotsmust be in very small lots

Units are always moving because Units are always moving because there is no storagethere is no storage



InventoryInventory

Inventory is at the minimum level Inventory is at the minimum level necessary to keep operations runningnecessary to keep operations running

JIT Inventory TacticsJIT Inventory Tactics

Use a pull system to move inventoryUse a pull system to move inventoryReduce lot sizesReduce lot sizesDevelop just-in-time delivery systems with suppliersDevelop just-in-time delivery systems with suppliersDeliver directly to point of useDeliver directly to point of usePerform to schedulePerform to scheduleReduce setup timeReduce setup timeUse group technologyUse group technology




Reduce VariabilityReduce Variability

Inventory levelInventory level

Process downtimeScrap

Setup time

Late deliveries

Quality problems




Inventory Inventory levellevel

Reduce VariabilityReduce Variability

Scrap

Setup time

Late deliveries

Quality problems

Process downtime




Reduce Lot SizesReduce Lot Sizes


200 200 –

100 100 –

Inve

nto

ryIn

ven

tory

TimeTime

QQ22 When average order size When average order size = 100= 100average inventory is average inventory is 5050

QQ11 When average order size When average order size = 200= 200average inventory is average inventory is 100100



Reduce Lot SizesReduce Lot Sizes Ideal situation is to have lot sizes Ideal situation is to have lot sizes

of one pulled from one process to of one pulled from one process to the nextthe next

Often not feasibleOften not feasible

Can use EOQ analysis to calculate Can use EOQ analysis to calculate desired setup timedesired setup time

Two key changes necessaryTwo key changes necessary Improve material handlingImprove material handling

Reduce setup timeReduce setup time



Lot Size ExampleLot Size ExampleDD == Annual demand Annual demand = 400,000= 400,000 units unitsdd == Daily demand Daily demand = 400,000/250 = 1,600= 400,000/250 = 1,600 per day per daypp == Daily production rate Daily production rate = 4,000= 4,000 units unitsQQ == EOQ desired EOQ desired = 400= 400HH == Holding cost Holding cost = $20= $20 per unit per unitSS == Setup cost (to be determined)Setup cost (to be determined)

Q =Q = 2DS2DSHH(1 -(1 - d/p d/p))

QQ22 = = 2DS2DSHH(1 -(1 - d/p d/p))

S S = = = $2.40= = = $2.40((QQ22)()(HH)(1 -)(1 - d/p d/p))

22DD(3,200,000)(0.6)(3,200,000)(0.6)

800,000800,000

Setup time Setup time = $2.40/($30/= $2.40/($30/hourhour) = 0.08 ) = 0.08 hrhr = 4.8 = 4.8 minutesminutes



Reduce Setup CostsReduce Setup Costs

High setup costs encourage large High setup costs encourage large lot sizeslot sizes

Reducing setup costs reduces lot Reducing setup costs reduces lot size and reduces average size and reduces average inventoryinventory

Setup time can be reduced through Setup time can be reduced through preparation prior to shutdown and preparation prior to shutdown and changeoverchangeover



Lower Setup CostsLower Setup Costs


Sum of ordering Sum of ordering and holding costsand holding costs

Holding costHolding cost

Setup cost curves Setup cost curves ((SS11, S, S22))TT11

SS11

TT22

SS22

Co

stC

ost

Lot sizeLot size



Reduce Setup TimesReduce Setup Times


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

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

Initial Setup Time

Step 2Step 2

Move material closer and improve material handling

(save 20 minutes)

Step 1Step 1

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

machine/process is operating (save 30 minutes)

Step 3Step 3

Standardize and improve tooling

(save 15 minutes)

90 min —90 min —

60 min —60 min —

45 min —45 min —

25 min —25 min —

15 min —15 min —13 min —13 min —

——Repeat cycle until subminute Repeat cycle until subminute setup is achievedsetup is achieved

Step 6Step 6



JIT SchedulingJIT Scheduling

Schedules must be communicated Schedules must be communicated inside and outside the organizationinside and outside the organization

Level schedulesLevel schedules Process frequent small batchesProcess frequent small batches

Freezing the schedule helps Freezing the schedule helps stabilitystability

KanbanKanban Signals used in a pull systemSignals used in a pull system




Better scheduling improves performanceBetter scheduling improves performance

JIT Scheduling TacticsJIT Scheduling Tactics

Communicate schedules to suppliersCommunicate schedules to suppliersMake level schedulesMake level schedulesFreeze part of the scheduleFreeze part of the schedulePerform to schedulePerform to scheduleSeek one-piece-make and one-piece moveSeek one-piece-make and one-piece moveEliminate wasteEliminate wasteProduce in small lotsProduce in small lotsUse kanbansUse kanbansMake each operation produce a perfect partMake each operation produce a perfect part

JIT SchedulingJIT Scheduling



Level SchedulesLevel Schedules

Process frequent small batches Process frequent small batches rather than a few large batchesrather than a few large batches

Make and move small lots so the Make and move small lots so the level schedule is economicallevel schedule is economical

““Jelly bean” schedulingJelly bean” scheduling

Freezing the schedule closest to the Freezing the schedule closest to the due dates can improve performancedue dates can improve performance



Scheduling Small LotsScheduling Small Lots

AA BB CCAA AAAABB BB BB BB BB CC

JIT Level Material-Use ApproachJIT Level Material-Use Approach

AA CCAA AAAA BB BB BB BB BB CC CCBB BB BB BBAA AA

Large-Lot ApproachLarge-Lot Approach

TimeTimeFigure 16.7Figure 16.7



KanbanKanban

Kanban is the Japanese word for cardKanban is the Japanese word for card

The card is an authorization for the next The card is an authorization for the next container of material to be producedcontainer of material to be produced

A sequence of kanbans A sequence of kanbans pulls material through pulls material through the processthe process

Many different sorts of Many different sorts of signals are used, but signals are used, but the system is still called the system is still called a kanbana kanban



KanbanKanban

1.1. User removes a User removes a standard sized standard sized containercontainer

2.2. Signal is seen by Signal is seen by the producing the producing department as department as authorization to authorization to replenishreplenish

Part numbers Part numbers mark locationmark location

Signal marker Signal marker on boxeson boxes




KanbanKanban


Work Work cellcell

Raw Raw Material Material SupplierSupplier

KanbanKanban

Purchased Purchased Parts Parts

SupplierSupplier

Sub-Sub-assemblyassembly

ShipShip

KanbanKanban

KanbanKanban

KanbanKanban

KanbanKanban

Finished Finished goodsgoods

Customer Customer orderorder

Final Final assemblyassembly

KanbanKanban



Advantages of KanbanAdvantages of Kanban

Allow only limited amount of faulty or Allow only limited amount of faulty or delayed materialdelayed material

Problems are immediately evidentProblems are immediately evident

Puts downward pressure on bad Puts downward pressure on bad aspects of inventoryaspects of inventory

Standardized containers reduce Standardized containers reduce weight, disposal costs, wasted space, weight, disposal costs, wasted space, and laborand labor



QualityQuality

Strong relationshipStrong relationship JIT cuts the cost of obtaining good JIT cuts the cost of obtaining good

quality because JIT exposes poor quality because JIT exposes poor qualityquality

Because lead times are shorter, Because lead times are shorter, quality problems are exposed soonerquality problems are exposed sooner

Better quality means fewer buffers Better quality means fewer buffers and allows simpler JIT systems to be and allows simpler JIT systems to be usedused



JIT Quality TacticsJIT Quality Tactics

Use statistical process controlUse statistical process control

Empower employeesEmpower employees

Build fail-safe methods (poka-Build fail-safe methods (poka-yoke, checklists, etc.)yoke, checklists, etc.)

Expose poor quality with small Expose poor quality with small lot JITlot JIT

Provide immediate feedbackProvide immediate feedback




Toyota Production SystemToyota Production System

Continuous improvementContinuous improvement Build an organizational culture and value Build an organizational culture and value

system that stresses improvement of all system that stresses improvement of all processesprocesses

Part of everyone’s jobPart of everyone’s job

Respect for peopleRespect for people People are treated as People are treated as

knowledge workersknowledge workers

Engage mental and Engage mental and physical capabilitiesphysical capabilities

Empower employeesEmpower employees



Toyota Production SystemToyota Production System

Standard work practiceStandard work practice Work shall be completely specified as to Work shall be completely specified as to

content, sequence, timing, and outcomecontent, sequence, timing, and outcome

Internal and external customer-supplier Internal and external customer-supplier connection are directconnection are direct

Product and service flows must be simple Product and service flows must be simple and directand direct

Any improvement must be made in Any improvement must be made in accordance with the scientific method at the accordance with the scientific method at the lowest possible level of the organizationlowest possible level of the organization



Lean OperationsLean Operations

Different from JIT in that it is Different from JIT in that it is externally focused on the customerexternally focused on the customer

Starts with understanding what the Starts with understanding what the customer wantscustomer wants

Optimize the entire process from Optimize the entire process from the customer’s perspectivethe customer’s perspective



Building a Lean OrganizationBuilding a Lean Organization

Transitioning to a lean system can Transitioning to a lean system can be difficultbe difficult

Lean systems tend to have the Lean systems tend to have the following attributesfollowing attributesUse JIT techniquesUse JIT techniques

Build systems that help employees Build systems that help employees produce perfect partsproduce perfect parts

Reduce space requirementsReduce space requirements



Building a Lean OrganizationBuilding a Lean Organization

Develop partnerships with Develop partnerships with supplierssuppliers

Educate suppliersEducate suppliers

Eliminate all but value-added Eliminate all but value-added activitiesactivities

Develop employeesDevelop employees

Make jobs challengingMake jobs challenging

Build worker flexibilityBuild worker flexibility



JIT in ServicesJIT in Services

The JIT techniques used in The JIT techniques used in manufacturing are used in servicesmanufacturing are used in services SuppliersSuppliers

LayoutsLayouts

InventoryInventory

SchedulingScheduling

jit and lean

Education

variability jit systems

continued jit inventory

andlean operations jit

waste waste

goals of jit partnerships

time jit powerful strategy

reduced inventory tps

variability results