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Operations Management

JIT and Lean Operationssource: (Heizer & Render 2008) and (Gardiner 2008)

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Learning Objectives

1. Explain the principles of the Toyota Production System 2. Define just-in-time, TPS, and lean operations3. Define the seven wastes and the 5 Ss4. Explain JIT partnerships5. Define kanban

Toyota Toyota Group Discussion, slides 3,4,5 and podcast on NUMMI

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Toyota JITToyota JIT• Toyota received their inspiration for the system, not from the American automotive

industry (at that time the world's largest by far), but from visiting a supermarket. This occurred when a delegation from Toyota (led by Ohno) visited the United States in the 1950s. The delegation first visited several Ford Motor Company automotive plants in Michigan but, despite Ford being the industry leader at that time, found many of the methods in use to be not very effective. They were mainly appalled by the large amounts of inventory on site, by how the amount of work being performed in various departments within the factory was uneven on most days, and the large amount of rework at the end of the process.[3]

• However, on a subsequent visit to a Piggly Wiggly[4], the delegation was inspired by how the supermarket only reordered and restocked goods once they had been bought by customers. Toyota applied the lesson from Piggly Wiggly by reducing the amount of inventory they would hold only to a level that its employees would need for a small period of time, and then subsequently reorder. This would become the precursor of the now-famous Just-in-Time (JIT) inventory system.[3]

Wikipedia

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Not an easy road to followNot an easy road to follow•Effects•Some of the initial results at Toyota were horrible but even so, a huge amount of cash seemed to appear from nowhere as in-process inventory was built and sold. This generated tremendous enthusiasm in upper management.

•Another surprising effect was that factory response time fell to about a day. This improved customer satisfaction by providing vehicles within a day or two of the minimum economic shipping delay.

•Also, the factory began building many vehicles to order, eliminating the risk they would not be sold. This dramatically improved the company's return on equity by eliminating a major risk source.

•Since assemblers no longer had a choice of which part to use, every part had to fit perfectly. This caused a quality assurance crisis, which led to a dramatic improvement in product quality.

•Eventually, Toyota redesigned every part of its vehicles to widen tolerances, while simultaneously implementing careful statistical controls for quality control. Toyota had to test and train parts suppliers to assure quality and delivery. In some cases, the company eliminated multiple suppliers.

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Not an easy road to followNot an easy road to followLine Stops:

•No inventory meant a line could not operate from in-process inventory while a production problem was fixed.

•Many people in Toyota confidently predicted that the initiative would be abandoned for this reason. In the first week, line stops occurred almost hourly. But by the end of the first month, the rate had fallen to a few line stops per day.

•After six months, line stops had so little economic effect that Toyota installed an overhead pull-line, similar to a bus bell-pull, that let any worker on the line order a line stop for a process or quality problem. Even with this, line stops fell to a few per week.

•The result was a factory that eventually became the envy of the industrialized world. It has been widely emulated, but not always with the expected results, as many firms fail to adopt the full system[4].

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

• JIT is a philosophy of continuous and forced problem

solving via a focus on throughput and reduced

inventory

• TPS emphasizes continuous improvement, respect for

people, and standard work practices

• Lean production supplies the customer with their

exact wants when the customer wants it without waste

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

Three common goals of Operations Managers:

#1 Eliminate Waste

#2 Remove Variability (Problems)

#3 Improve Throughput

In groups 1 area each.

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#1 Eliminate Waste#1 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

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Ohno’s Seven WastesOhno’s Seven Wastes• Overproduction• Queues• Transportation• Inventory• Motion• Over processing• Defective products

List out reasons for the above: i.e. overproduction ↓ set up costs or early production

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Housekeeping RulesHousekeeping RulesLean Production 5SLean Production 5S

• Sort/segregate – when in doubt, throw it out

• Simplify/straighten – methods analysis tools

• Shine/sweep – clean daily

• Standardise – remove variations from

processes

• Sustain/self-discipline – review work and

recognize progress

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#2 Remove Variability (Problems)#2 Remove Variability (Problems)

• 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

Goal is a perfect product every time

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Sources of Variability (Problems)Sources of Variability (Problems)

1. Incomplete or inaccurate drawings or specifications

2. Poor production processes that allow employees or suppliers to product incorrect quantities, or late or non-conforming units

3. Unknown customer demands

JIT and Inventory Reduction work well

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#3 Improve Throughput#3 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

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Improve ThroughputImprove Throughput

• Time to move an order from receipt to delivery• 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

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In Depth Look at JITIn Depth Look at JIT•Forces improvements in operations

•Materials arrive where they are needed when they are needed

•Forced problem solving leads to reduced costs, less variability and improved throughput

•Depends upon buyer-supplier relationship

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In Depth Look at JITIn Depth Look at JIT

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In Depth Look at JITIn Depth Look at JIT

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JITJIT

#1 JIT Partnerships Group A

#2 JIT Layout, Group B

#3 JIT Inventory Group C

#4 Kanban Group D

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#1 JIT Partnerships#1 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

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JIT PartnershipsJIT Partnerships

Figure 16.2Figure 16.2

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Concerns of SuppliersConcerns 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

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#2 JIT Layout#2 JIT Layout

Table 16.1Table 16.1

Reduce waste due to movement

JIT Layout TacticsBuild work cells for families of productsInclude a large number operations in a small areaMinimize distanceDesign little space for inventoryImprove employee communicationUse poka-yoke devicesBuild flexible or movable equipmentCross-train workers to add flexibility

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#3 JIT Inventory#3 JIT Inventory

Inventory is at the minimum level necessary to keep operations running

JIT Inventory TacticsUse a pull system to move inventoryReduce lot sizesDevelop just-in-time delivery systems with suppliersDeliver directly to point of usePerform to scheduleReduce setup timeUse group technology

Table 16.2Table 16.2

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Inv:Reduce VariabilityInv:Reduce Variability

Inventory levelInventory level

Process downtimeScrap

Setup time

Late deliveries

Quality problems

Figure 16.3Figure 16.3

What happens if we reduce the water level but do not fix the problems?

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Inv: Reduce Lot SizesInv: Reduce Lot Sizes• Ideal situation is to have lot sizes of

one pulled from one process to the next

• Often not feasible• Two key changes necessary

• Improve material handling• Reduce setup time

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# 4 Kanban# 4 Kanban

• Kanban is the Japanese word for card• The card is an authorization for the next container

of material to be produced• A sequence of kanbans pulls material through the

process• Many different sorts of signals are used, but the

system is still called a kanban

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KanbanKanban

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

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

Part numbers Part numbers mark locationmark location

Signal marker Signal marker on boxeson boxes

Figure 16.8Figure 16.8

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Advantages of KanbanAdvantages of Kanban

• Allow only limited amount of faulty or delayed material

• Problems are immediately evident• Puts downward pressure on bad aspects of

inventory• Standardized containers reduce weight,

disposal costs, wasted space, and labor

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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

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References• Heizer, J., & Render, B. (2008). Operations management (9th

ed.). Saddle River, New Jersey: Pearson Prentice Hall.

• Gardiner, D.,(2008). Operations Management for Business Excellence (2nd ed.). Rosedale, North Shore: Pearson Education New Zealand.