Just-In-Time and Lean Production

1. Just-In-Time and Lean Production

2. JIT In Services • Competition on speed & quality • Multifunctional department store workers • Work cells at fast-food restaurants • Just-in-time publishing for textbooks - on demand publishing a growing industry • Construction firms receiving material just as needed

3. What is JIT ? • Producing only what is needed, when it is needed • A philosophy • An integrated management system • JIT’s mandate: Eliminate all waste

4. Lean Operations: Best Implementation is Toyota Production System • TPS is a production management system that aims for the “ideal” through continuous improvement • Includes, but goes way beyond JIT. Pillars: • Synchronization • Reduce transfer batch sizes • Level load production • Pull production control systems (vs. push): Kanban • Quality at source • Layout: Cellular operations • Continuous Improvement (Kaizen): through visibility & empowerment ....

5. Basic Elements of JIT Flexible resources Cellular layouts Pull production system Kanban production control Small-lot production Quick setups Uniform production levels Quality at the source Total productive maintenance Supplier networks

6. Toyota’s waste elimination in Operations 1. Overproduction 2. Waiting 3. Inessential handling 4. Non-value adding processing 5. Inventory in excess of immediate needs 6. Inessential motion 7. Correction necessitated by defects

7. Other Important Points • Only make what you need • only buy what you need, when you need it • continuous process improvement • as the level of the water lowers, new problems or inefficiencies are identified

8. Waste in Operations

9. Waste in Operations

10. Waste in Operations

11. Flexible Resources • Multifunctional workers • General purpose machines • Study operators & improve operations

12. Kanban Production Control System • Kanban card indicates standard quantity of production • Derived from two-bin inventory system • Kanban maintains discipline of pull production • Production kanban authorizes production • Withdrawal kanban authorizes movement of goods

13. A Sample Kanban

14. Types of Kanbans • Bin Kanban - when bin is empty replenish • Kanban Square • Marked area designed to hold items • Signal Kanban • Triangular kanban used to signal production at the previous workstation • Material Kanban • Used to order material in advance of a process • Supplier Kanbans • Rotate between the factory and suppliers

15. average demand during lead time + safety stock container size No. of Kanbans = dL + S C N = Determining Number of Kanbans where N = number of kanbans or containers d = average demand over some time period L = lead time to replenish an order S = safety stock C = container size

16. 75 + 7.5 25 dL + S C (150 x 0.5) + 7.5 25 Determining the Number of Kanbans d = 150 bottles per hour L = 30 minutes = 0.5 hours S = 0.10(150 x 0.5) = 7.5 C = 25 bottles N = = = = 3.3 kanbans or containers Round up to 4 (to allow some slack) or down to 3 (to force improvement)

17. Components of Lead Time • Processing time • Reduce number of items or improve efficiency • Move time • Reduce distances, simplify movements, standardizeroutings • Waiting time • Better scheduling, sufficient capacity • Setup time • Generally the biggest bottleneck

18. Common Techniques for Reducing Setup Time • Preset Buttons/settings • Quick fasteners • Reduce tool requirements • Locator pins • Guides to prevent misalignment • Standardization • Easier movement

19. Quality at the Source • Jidoka is authority to stop production line • Andon lights signal quality problems • Undercapacity scheduling allows for planning, problem solving & maintenance • Visual control makes problems visible • Poka-yoke prevents defects (mistake proof the system)

20. Visual Control In use at Harley-Davidson and at Opal Plant - Russelsheim

21. Visual Control

22. Kaizen • Continuous improvement • Requires total employment involvement • Essence of JIT is willingness of workers to • Spot quality problems • Halt production when necessary • Generate ideas for improvement • Analyze problems • Perform different functions

23. Total Productive Maintenance (TPM) Commercial industry answer to PMCS • Breakdown maintenance • Repairs to make failed machine operational • Preventive maintenance • System of periodic inspection & maintenance to keep machines operating • TPM combines preventive maintenance & total quality concepts

24. TPM Requires Management to: • Design products that can be easily produced on existing machines • Design machines for easier operation, changeover, maintenance • Train & retrain workers to operate machines • Purchase machines that maximize productive potential • Design preventive maintenance plan spanning life of machine

25. Goals of JIT Reduced inventory - where? Improved quality Lower costs Reduced space requirements Shorter lead time Increased productivity Greater flexibility Better relations with suppliers Simplified scheduling and control activities Increased capacity Better use of human resources More product variety Continuous Process Improvement

26. JIT Implementation • Use JIT to finely tune an operating system • Somewhat different in USA than Japan • JIT is still evolving • JIT as an inventory reduction program isn’t for everyone - JIT as a CPI program is! • Some systems need Just-in-Case inventory

27. Reverse Logistics: Important or Irritant? Estimated $100 billion industry in 2006

28. “In an ideal world, reverse logistics would not exist.” Jim Whalen, “In Through the Out Door,” Warehousing Management, March 2001

29. “Now, more than ever, reverse logistics is seen as being important.” Dale Rogers, Going Backwards, 1999

30. Reverse Logistics - What is it?The Army’s Definition The return of serviceable supplies that are surplus to the needs of the unit or are unserviceable and in need of rebuild or remanufacturing to return the item to a serviceable status

31. Reverse Logistics - What is it?The Commercial Perspective • Reverse Logistics is the process of moving products from their typical final destination to another point, for the purpose of capturing value otherwise unavailable, or for the proper disposal of the products.

32. Typical Reverse Logistics Activities • Processing returned merchandise - damaged, seasonal, restock, salvage, recall, or excess inventory • Recycling packaging materials/containers • Reconditioning, refurbishing, remanufacturing • Disposition of obsolete stuff • Hazmat recovery

33. Why Reverse Logistics? • Competitive advantage • Customer service - Very Important: 57% - Important: 18% - Somewhat/unimportant:23% • Bottom line profits

34. Reverse Logistics - New Problem? • Sherman • Montgomery Ward’s - 1894 • Recycling/remanufacturing in 1940s • World War II - 77,000,000 square feet of storage across Europe with over $6.3 billion in excess stuff • Salvage and reuse of clothing and shoes in the Pacific Theater World War II

35. Key Dates in Reverse Logistics • World War II – the advent of refurbished automobile parts due to shortages • 1984 - Tylenol Scare - Johnson and Johnson • 1991 - German ordinance that put teeth in environmental reverse pipeline • Summer 1996 – UK Packaging and Packaging Waste Legislation • 1998 - first real study of reverse logistics in the US - University of Nevada, Reno • 2001 – EU goal of 50-65% recovering or recycling of packaging waste

36. Reverse Logistics A US Army Perspective

37. Operation Iraqi Freedom The US Army moved the equivalent of 150 Wal-Mart Supercenters to Kuwait in a matter of a few months

38. Military Operations and Excess “In battle, troops get temperamental and ask for things which they really do not need. However, where humanly possible, their requests, no matter how unreasonable, should be answered.” George S. Patton, Jr.

39. Jane’s Defence Weekly “Recent report (Aug 2003): There is a 40 hectare (~100 acres) area in Kuwait with items waiting to be retrograded back to the US.”

40. Does this create a problem? From GAO Audit Report

41. From GAO Audit Report

42. Reverse Logistics The Commercial Perspective

44. Commercial Definition • Anytime money is taken from a company reserves to support a product that has already shipped is a reverse logistics operation. - Reverse Logistics Association • Apparel and Catalog sales - ~35 % • Nokia call center operations - $1.3 bn

45. Recalls and Reverse Logistics • Brand Damage – Toyota resale value • 4+ million vehicles recalled by Toyota • Mattel recall • PCA recall

46. Reverse Logistics • Rate of returns? • Cost to process a return? • Time to get the item back on the shelf if resaleable?

47. Costs - above the cost of the item • Merchandise credits to the customers. • The transportation costs of moving the items from the retail stores to the central returns distribution center. • The repackaging of the serviceable items for resale. • The cost of warehousing the items awaiting disposition. • The cost of disposing of items that are unserviceable, damaged, or obsolete.

48. Costs • Process inbound shipment at a major distribution center = 1.1 days • Process inbound return shipment = 8.5 days • Cost of lost sales • Wal-Mart: Christmas 2003 - returns = 4 Days of Supply for all of Wal-Mart = 2000 Containers • PalmOne - 25% return rate on PDAs

49. More Costs • Hoover - $40 Million per year • Cost of processing $85 per item • Unnamed Distribution Company - $700K items on reverse auction • 2001 - over $60 billion in returns; $52 billion excess to systems; $40 billion to process

50. Is it a problem? • Estimate of 2004 holiday returns: $13.2 billion • % of estimated 2004/2005 holiday returns: 25% • At 25% - returns for 2009 ~ $117 billion • Wal-Mart: $6 Billion in annual returns = 17,000 truck loads (>46 trucks a day) • Electronics: $10 Billion annually in returns • Personal Computers: $1.5 Billion annually = approximately $95 per PC sold • 79% of returned PCs have no defects • Home Depot ~ $10 million in returns in the stores alone • Local Wal-Mart ~ $1 million a month in returns