LEAN/ JUST-IN-TIME SYSTEMS

1. LEAN/ JUST-IN-TIME SYSTEMS

2. Module Objectives • Describe the philosophy and history of lean systems • Understand how the lean system approach improves value • Explain the 5 steps required to implement lean systems • Identify opportunities for applying the lean approach across functions in the firm

3. What to Change to? • Lean production or Just-in-time • A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with the customers. Lean production employs teams of multiskilled workers at all levels of the organization and uses highly flexible, increasingly automated machines to produce volumes of products in potentially enormous variety. (APICS Dictionary, 1998, 9th edition)

4. The Value Concept ( Quality , Timeliness ) = f Value Cost

5. J/J J/NA NA/NA All Europe PERFORMANCEProductivity (hrs/veh) 16.8 21.2 25.1 36.2Quality (defects/100 veh.) 60.0 65.0 82.3 97.0 LAYOUTSpace (ft2/veh/yr) 5.7 9.1 7.8 7.8 Size Repair Areas 4.1 4.9 12.9 14.4 Inventories (days) 0.2 1.6 2.9 2.0 WORK FORCE % work force in teams 69.3 71.3 17.3 0.6 Job rotation (0=none; 4=freq) 3.0 2.7 0.9 1.9 Suggestions/Employee 61.6 1.4 0.4 0.4 Number of job classes 11.9 8.7 67.1 14.8 Training of new workers (hrs) 380.3 370.0 46.4 173.3 Absenteeism 5.0 4.8 11.7 12.1 AUTOMATION Welding (% of direct steps) 86.2 85.0 76.2 76.6 Painting (% of direct steps) 54.6 40.7 33.6 38.2 Assembly (% of direct steps) 1.7 1.1 1.2 3.1 Mass Production versus Lean Production(Womack, Jones and Roos, 1990, The Machine That Changed the World, p. 92, Simon& Schuster, in Melnyk & Denzler, 1996)

6. Theory of Lean Systems • Little’s Law • VUT Equation

7. Little’s Law I = TH * F I – Inventory in the system F – Flow time TH – Throughput rate

8. æ ö + 2 2 æ ö CV CV r ç ÷ a p ç ÷ = Queue Time t ç ÷ ç ÷ p - r 2 1 è ø è ø VUT Equation

9. Implementing Lean Systems • Precisely specify value for each specific product • Identify the value stream for each product • Make value flow without interruptions • Let the customer pull value from the product • Pursue perfection

10. 7 Basic Types of Waste

11. Operations Management INVENTORY overproduction process waste transportation Waiting Inventory waste time waste Waste of motion Product defects Inventory Hides Operating Problems

12. Employee Empowerment • Highly specified work • Direct connections • Simple direct pathways • Scientific method

13. Performance Measurements • System reacts to any solution • System controls the behavior of those individuals who operate within it

14. Loading Time Availability (Loading time – Downtime) Downtime 1. Breakdown losses Loading Time Loss es 2. Setup & adjustment losses Net Operation Time Performance Rate (output * ideal cycle time) Speed 3. Idling & minor stoppages net operation time Losses 4. Speed losses Valuable Operation Time Quality Rate 6. Start - (% of defect free product Quality 5. Quality defects first time through) Losses up & yield losses Six Equipment Losses

15. Ford’s Performance Measures

16. $ Contribution Margin under Lean Production Contribution Margin Prior to Lean Production Fixed Costs prior to Lean Production Fixed Costs Under Lean Production Reduction in break-even Q2 Quantity (Q) Q1 break-even break-even under prior to Lean Lean Production Production Benefits of Lean Systems