JUST-IN-TIME AND KANBAN

1. MGMT 360 - Ops Management 1 JUST-IN-TIME AND KANBAN Inventory Is Evil Push, MRPII, and Pull (JIT) Kanban Mechanics JIT Prerequisites Economically Reducing Lot Sizes Total Quality Control And Jidoka

2. MGMT 360 - Ops Management 2 JIT

3. MGMT 360 - Ops Management 3 INVENTORY IS EVIL Toyota developed an alternative to MRPII Has design, planning, and control implications Where applicable, it can simplify the above tasks Underlying principle: eliminate inventory � and all other waste -- throughout the facility

4. MGMT 360 - Ops Management 4 INVENTORY IS EVIL Inventory is like water flowing in a stream Deep waters run still, so lots of inventory slows down throughput Inventory covers up problems, like water covers up big rocks

5. MGMT 360 - Ops Management 5 INVENTORY IS EVIL To remove the rocks (problems) you must first expose them

6. MGMT 360 - Ops Management 6 INVENTORY IS EVIL To remove the rocks (problems) you must first expose them This disrupts the flow (throughput), but once removed the stream flows faster

7. MGMT 360 - Ops Management 7 INVENTORY IS EVIL To remove the rocks (problems) you must first expose them This disrupts the flow (throughput), but once removed the stream flows faster

8. MGMT 360 - Ops Management 8 INVENTORY IS EVIL To remove the rocks (problems) you must first expose them This disrupts the flow (throughput), but once removed the stream flows faster Inventory is evil because it covers up problems!

9. MGMT 360 - Ops Management 9 PUSH, MRP II, AND PULL (JIT) How does JIT work compared to other systems? Consider classic pre-MRP �Push� system Management determines MPS Parts for a BIG batch are kitted up and pushed out onto floor Kit is pushed from workcenter to workcenter -- via central inventory -- until it is finished

10. MGMT 360 - Ops Management 10 PUSH, MRP II, AND PULL (JIT) Consider MRPII system Management determines MPS MPS drives material & capacity plans Workorders, picklists sent out to workcenters and inventory Workcenters try to stick to plans Workorders sent to central inventory when done

11. MGMT 360 - Ops Management 11 PUSH, MRP II, AND PULL (JIT) Consider JIT system No separate area for inventory (point of use storage) Management determines MPS MPS given to last stage manufacturing SMALL Batches pulled through from previous workcenter as needed

12. MGMT 360 - Ops Management 12 RUNNING JIT: THE KANBAN SYSTEM How does a using workcenter signal a producing workcenter? Need some form of production activity control Kanban -- Japanese for card/signal� Toyota developed the classic two-card kanban system Provides signals and limits inventory � Production kanban -- signal from using to producing workcenter to make another batch of parts Conveyance kanban -- signal from using workcenter to retrieve more parts from producing workcenter

13. MGMT 360 - Ops Management 13 THE KANBAN SYSTEM Consider Workcenters W2 (producing workcenter) and W3 (using workcenter)

14. MGMT 360 - Ops Management 14 THE KANBAN SYSTEM Consider Workcenters W2 (producing workcenter) and W3 (using workcenter)

15. MGMT 360 - Ops Management 15 THE KANBAN SYSTEM W3 goes to the Production Kanban collection box to see what to make next

16. MGMT 360 - Ops Management 16 THE KANBAN SYSTEM W3 then looks for the necessary components in its inbound inventory area

17. MGMT 360 - Ops Management 17 THE KANBAN SYSTEM The Conveyance Kanban card on the component parts is placed in the Conveyance Kanban collection box, and the parts are moved into production

18. MGMT 360 - Ops Management 18 THE KANBAN SYSTEM A materials handler checks the Conveyance Kanban collection box, and uses the card as authorization to retrieve another batch of parts from W2

19. MGMT 360 - Ops Management 19 THE KANBAN SYSTEM The Production Kanban card on the full container of component parts is placed back in W2�s Production Kanban collection box; the Conveyance Kanban authorizing movement is placed on the container

20. MGMT 360 - Ops Management 20 THE KANBAN SYSTEM The full container of component parts is brought back to W3

21. MGMT 360 - Ops Management 21 THE KANBAN SYSTEM This �pull� works throughout the facility

22. MGMT 360 - Ops Management 22 RUNNING JIT: THE KANBAN SYSTEM Basic rules limit inventory: There must be a free production kanban and an empty container to make a new batch of parts � There must be a free conveyance kanban and an empty container to retrieve a batch of parts All full containers must have the appropriate kanban attached

23. MGMT 360 - Ops Management 23 HOW MANY KANBAN? Number of kanban sets for a part depends on the demand rate implied by the mps C -- size of standard container for part (50) LT -- lead time to make a batch of parts (2 Hours) D -- demand rate for parts (MPS-driven) (800 / Day) SF -- safety factor (0) K -- number of kanban sets

24. MGMT 360 - Ops Management 24 JIT PREREQUISITES JIT won't work in all operations To lower inventory, we must Lower lot sizes Implement Total Quality Control If we can't do all the above, implementing JIT could be a disaster

25. MGMT 360 - Ops Management 25 ECONOMICALLY REDUCING LOT SIZES How can we justify an EOQ = 1? It's "easy" Remember the EOQ formula:

26. MGMT 360 - Ops Management 26 TQC AND JIDOKA Less inventory also means less room for error Inventory exists not only to absorb large setup costs, but also to buffer against uncertainty WIP buffers a workcenter against the mistakes of upstream workcenters Reducing WIP requires 100% quality Jidoka says any worker can stop the line to prevent bad quality Red and yellow andon lights signal management and engineers