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Lean, Just-in-time,and Toyota Production System

DSC 335

Zhibin Yang

Assistant Professor, Decision Sciences

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Toyota: The Auto Giant

Source: Market cap data from Reuters.com (as of 4/18/06)

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Toyota: Growing Market Share

2007 January Toyota Motor Sales (TMS) reported

best-ever January sales of 175,850 vehicles, an increase of 5.1% over January 2006.

GM reported deliveries of 247,464 vehicles in January, down 19.7% from January 2006.

Ford’s January sales totaled 166,835, down 19% compared with a year ago.

Chrysler Group reported sales for January 2007 of 156,308 units; an increase of 1% compared January 2006, based on Solid Retail Sales

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Toyota Production System – Key to Success

A production system that is steeped in the philosophy of the complete elimination of all wastes and what imbues all aspects of production with this philosophy in pursuit of the most efficient production method.

From www.toyota.co.jp/en

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Eight Types of Waste

Waste Definition

1. Overproduction Manufacturing an item before it is needed.

2. Inappropriate Processing

Using expensive high precision equipment when simpler machines would suffice.

3. Waiting Wasteful time incurred when product is not being moved or processed.

4. Transportation Excessive movement and material handling of product between processes.

5. Motion Unnecessary effort related to the ergonomics of bending, stretching, reaching, lifting, and walking.

6. Inventory Excess inventory hides problems on the shop floor, consumes space, increases lead times, and inhibits communication.

7. Defects Quality defects result in rework and scrap, and add wasteful costs to the system in the form of lost capacity, rescheduling effort, increased inspection, and loss of customer good will.

8. Underutilization of Employees

Failure of the firm to learn from and capitalize on its employees’ knowledge and creativity impedes long term efforts to eliminate waste.

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House of Toyota

Highest quality, lowest cost, shortest lead time by eliminating

wasted time and activity

Just in Time (JIT)

Takt time

One-piece flow

Pull system

Culture of Continuous

Improvement

Jidoka

Manual or automatic line stop

Separate operator and machine activities

Error-proofing

Visual control

Operational Stability

Heijunka Standard Work TPM Supply Chain

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Just-in-time (JIT): Pull vs. Push System

In a push system, such as an Material Requirements Planning (MRP) system, we look at the schedule to determine what to produce next Driven by pre-determined production schedule

In a pull system, such as JIT, we look only at the next stage of production and determine what is needed there, and then we produce only that Driven by demand

JIT uses Kanban system to implement a pull system

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Kanban System

What is Kanban? “card” or “visible record”

How to use it? A Kanban is attached a container, when the container is filled

with items produced When the container is free up, the Kanban is removed from the

container and put back to the receiving post

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(cont’d)

Kanbans are used to control flow of production A free kanban at the receiving post signals need for production Production stop, if all kanbans are used Kanbans are recycled when a container is unloaded at the next

step of production More kanban more containers used at the same time

larger WIP

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Pull System – Kanban System

Receiving postKanban card for product 1

Kanban card for product 2

Fabrication cell

O1

O2

O3

O2

Storage area

Empty containers

Full containers

Assembly line 1

Assembly line 2

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The Kanban System

Storage area

Empty containers

Full containers

Receiving postKanban card for product 1

Kanban card for product 2

Fabrication cell

O1

O2

O3

O2

Assembly line 1

Assembly line 2

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The Kanban System

Storage area

Empty containers

Full containers

Receiving postKanban card for product 1

Kanban card for product 2

Fabrication cell

O1

O2

O3

O2

Assembly line 1

Assembly line 2

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The Kanban System

Storage area

Empty containers

Full containers

Receiving postKanban card for product 1

Kanban card for product 2

Fabrication cell

O1

O2

O3

O2

Assembly line 1

Assembly line 2

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The Kanban System

Storage area

Empty containers

Full containers

Receiving postKanban card for product 1

Kanban card for product 2

Fabrication cell

O1

O2

O3

O2

Assembly line 1

Assembly line 2

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The Kanban System

Storage area

Empty containers

Full containers

Receiving postKanban card for product 1

Kanban card for product 2

Fabrication cell

O1

O2

O3

O2

Assembly line 1

Assembly line 2

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The Kanban System

Storage area

Empty containers

Full containers

Receiving postKanban card for product 1

Kanban card for product 2

Fabrication cell

O1

O2

O3

O2

Assembly line 1

Assembly line 2

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The Kanban System

1. Each container must have a card

2. Assembly always withdraws from fabrication (pull system)

3. Containers cannot be moved without a kanban

4. Containers should contain the same number of parts

5. Only good parts are passed along

6. Production should not exceed authorization

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Calculate Number of Containers

Two determinations Number of units to be held by each container

Determines lot size Number of containers

Estimate the average lead time needed to produce a container of parts

Little’s law WIP = (demand rate) (time in system per unit)

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Number of Containers

WIP = (average demand rate) (average time a container spends in the manufacturing process)+ safety stock

WIP = kc

kc = d (w + p )(1 + α)

k = d (w + p )(1 + α)

c

where k =number of containersd =expected daily demand for the partw =average waiting timep =average processing timec =number of units in each containerα =policy variable

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Capacity Utilization and JIT

Utilization of stations in your LT game 2 4-2-2 configuration, 0.5 day delivery promise (contract 3) 60% at station 1 50% at station 2 40% at station 3

Is high utilization always a good thing? Long lead time Large WIP

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Capacity Utilization of JIT

10 20 30 40 50 60 70 80 90 100

30

10

20

% Capacity Utilization

60Production Lead Times (days)

40

50Traditional

Manufacturing

JITManufacturing

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Increasing Production CapacityReduces Manufacturing Lead Times

Only slight increases in production capacities can lead to: Significant reduction of manufacturing lead times Significant reduction of work-in-process inventory

Queuing models can be used to analyze waiting-line production problems

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We know from queuing theory that the average time in the system (manufacturing lead time) is:

If we have an average lead time in mind, we can solve for the required production rate:

Necessary Production Capacity

1W

μ λ=

−

1

Wμ λ= +

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Work-in-Process Inventory

We also know from queuing theory that the average number of jobs in the system (work-in-process inventory) is:

WIP Lλ

μ λ= =

−

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Exercise: Necessary Production Capacity

A production manager believes reducing the firm’s manufacturing lead time will give the firm a significant competitive advantage. Two days is the lead time goal.

Currently, jobs are arriving at the rate of 6 per day and the operation can process an average of 6.125 jobs per day.

What is the current average lead time for a job? What is the necessary production rate to achieve the two-day lead time goal?

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(cont’d)

Current Lead Time

Necessary Production Rate

Conclusion

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Exercise: Reduction in WIP

In the preceding exercise, the production rate was increased from 6.125 jobs per day to 6.5. This 6% increase in the production rate yielded a 75% reduction in manufacturing lead time!

How much of a reduction in WIP will result from the 6 % production rate increase?

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Example: Reduction in WIP

WIP before production rate increase

WIP after production rate increase

Conclusion

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Continuous Improvement

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Managed System “Stressing”

JIT is a system of enforced problem solving.

One approach is to lower inventory gradually to expose problems and force their solution.

With no buffer inventories to rely on, in times of production interruptions, problems are highly visible and cannot be ignored.

The job of eliminating production problems is never finished.

Continuous improvement - a practice the Japanese call kaizen - is central to the philosophy of JIT.

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Stress the System to See Problems

We must lower the water level!

QualityProblems

MaterialShortages

MachineBreakdowns

WorkloadImbalances

WorkerAbsenteeism

Out-of-SpecMaterials

QualityProblems

In-ProcessInventory

Visible ProductionProblems are Only 5% of the Total!