Operations ManagementJust-in-Time and Lean Production SystemsChapter 16
Outline • Just-In-Time and Lean Production. • Role of inventory. • Just-In-Time components. • Suppliers. • Layout. • Scheduling. • Quality. • Lean Production.
Just-in-Time and Lean Production • Just-In-Time • Management philosophy of continuous problem solving. • Internal focus on production scheduling, inventory, layout, quality, suppliers, etc. • Produce “just-in-time”, only to meet actual demand. • Lean Production • Extension of Just-In-Time to eliminate waste (“fat”). • External focus on satisfying the customer. • Originated in Japan; Popularized by Toyota; now used globally.
Why is Production Difficult? • Demand is uncertain and variable. • Same equipment/people are used to make a variety of products, and switching products takes time. • Things go wrong: • Materials are defective. • Deliveries are variable (late). • Equipment fails, people make mistakes, etc. • Production documents are incorrect.
One Solution: Inventory • Use inventory to: • Match supply with varying demand. • Allow production of a variety of products on the same equipment. • Overcome defective materials, late deliveries, equipment failures, mistakes, etc.
“Traditional” Production • Forecast demand. • Produce in large lots (to reduce expensive setups). • PUSH product to customer. • Large lot sizes mean: • Large work-in-process inventories. • Large final product inventories. • Slow response to changes and defects.
“Just-in-Time” Production • Produce in small lots to replenish stock actually sold. • Sales PULL product (and parts) through plant. • Supplies and components are ‘pulled’ through system to arrive where they are needed when they are needed. • Small lot sizes mean: • Small work-in-process inventories. • Small final product inventories. • Quick response to changes and defects.
Push versus Pull • Push system: Material is pushed (according to forecasts) downstream (along assembly line, to warehouses, etc.). • Pull system: Material is pulled (by sales to customers) downstream (along assembly line, to warehouses, etc.) just as it is needed.
Just-In-Time is Not Easy • Just-in-time requires identifying and solving problems that create inventory. • Reduce setup costs to switch products. • Eliminate all waste: Defective materials, late deliveries, equipment failures, mistakes, etc.
Types of Waste • Overproduction. • Waiting. • Transportation. • Inefficient processing. • Inventory. • Unnecessary motion. • Product defects.
What Does Just-in-Time Do? • Reduces waste and improves quality. • Waste = Anything not adding value to the product. • Exposes problems caused by variability. • Variability in demand, deliveries, materials, equipment, etc. • Streamlines production by reducing inventory. • Reduces delays and increases throughput. • Benefits: • Reduced cost and/or increased profit. • Faster response to the customer.
Just-in-TimeSuccess Factors Suppliers Employee Empowerment Layout JIT Quality Inventory Preventive Maintenance Scheduling
Inventory • JIT objective: Eliminate inventory. • Hold minimum inventory to keep system running. • JIT requires: • Small lot sizes. • Low setup times. • Just-in-time deliveries. • Deliveries direct to point of use (not stockroom).
Work in process inventory level(hides problems) Unreliable Vendors Capacity Imbalances Scrap Lowering Inventory Reduces Waste
Reducing inventory revealsproblems so they can be solved. WIP Unreliable Vendors Capacity Imbalances Scrap Lowering Inventory Reduces Waste
Inventory Level Average inventory = (Lot size)/2 Lot Size 200 Average inventory = 100 Time Large Lot Sizes = Large Inventory
Average inventory = 40 Lot Size 80 To Lower Inventory, Reduce Lot Size Inventory Level Average inventory = (Lot size)/2 Lot Size 200 Time
EPQ Minimizes Total Costs Cost Total Cost Holding Cost Setup Cost Lot Size Optimal Lot Size
Setup Cost Reducing Setup Costs Reduces Lot Size and Total Cost! Cost Total Cost Holding Cost Original optimal lot size New optimal lot size Lot Size
Steps to Reduce Setup Time • Separate setup into preparation (while machine is running) and actual setup (while machine is stopped). • Do as much as possible while the machine is running. • Move material closer and improve material handling. • Standardize and improve tooling.
Suppliers • JIT objective: Frequent on-time deliveries of small lots of high quality. • Buyer and supplier form JIT partnerships to eliminate: • Unnecessary activities. • In-plant inventory. • In-transit inventory.
Layout • JIT objective: Reduce movement of people and material. • JIT requires: • Delivery directly to work areas – not to stockroom. • Short distances to ensure on-time deliveries. • Little space for inventory. • Flexibility: Moveable or changeable machines.
Scheduling • JIT objective: Simple system to pull product through plant in small lots. • JIT requires: • Communicating schedules to suppliers. • “Level” schedules: production each day equals demand. • Freezing part of schedule nearest due date. • Small lots. • Kanban techniques.
Kanban • Japanese word for card. • Authorizes production from downstream operations. • ‘Pulls’ material through plant. • May be a card, flag, verbal signal etc. • Used often with fixed-size containers. • Add/remove containers to change production rate.
Preventive Maintenance (PM) • JIT objective: Prevent failure. • Cleanliness and simplicity are keys. • Maintain equipment so it does not break. • JIT requires: • Scheduled & daily preventive maintenance. • Operator performs preventive maintenance. • Operator knows machine and is responsible for product quality.
Quality • JIT exposes quality problems by reducing inventory. • JIT limits number of defects produced with small lots. • JIT requires TQM. • Statistical process control. • Worker involvement & empowerment. • Immediate feedback.
Lean Production • Use JIT to eliminate virtually all inventory. • Eliminate all but value-added activities. • Build systems to help employees produce a perfect part every time. • Reduce space requirements. • Develop partnerships with suppliers. • Educate suppliers and workers. • Enrich jobs.
JIT/Lean Production Partnerships • To achieve frequent deliveries of high quality small-lot quantities: • Use few suppliers, each with a larger share of business and longer-term contracts. • Helps ensure quality and reliability. • Prefer nearby suppliers for reliable scheduling. • Example: 4 deliveries each day, 2 hours apart. • Suppliers encouraged to extend JIT to their suppliers.
Just-In-Time and Japan • Area of Japan = 144,000 square miles. • California = 158,000 square miles • Missouri = 70,000 square miles • Population of Japan is about 1/2 of USA. • Japan is islands (80% mountainous). • Land is expensive. • Facilities are not far apart. • Natural resources are limited. • Minimizing waste is crucial.