Lean Thinking and Just-in-Time Operations

1. Lean Thinking and Just-in-Time Operations

2. Lean Production • Lean production refers to approaches initially developed by the Toyota Motor Corporation that focus on the elimination of waste in all forms, including defects requiring rework, unnecessary processing steps, unnecessary movement of materials or people, waiting time, excess inventory, and overproduction. • This involves identifying and eliminating non-value-added activities throughout the entire value chain to achieve faster customer response, reduced inventories, higher quality, and better human resources.

3. Lean Production • Some of the benefits claimed by proponents of lean production are 60% reduction in cycle times, 40% improvement in space utilization, 25% greater throughput, 50% reduction in work-in-process and finished goods inventories, 50% improvement in quality, and 20% improvements in working capital and worker productivity. • The elimination of all forms of waste is the principal driver for lean production. The term waste is used in its broadest sense to mean any activity, material, or operation that does not add value. Muda in Japanese means “waste,” specifically any human activity that absorbs resources but creates no value.

4. Lean Production • It includes mistakes that require rectification, inventory piled up by overproduction, unnecessary processing steps, purposeless movement of employees and material handling, people in a downstream activity remaining idle due to the failure of an upstream activity to deliver on time, and goods and services that do not meet customers’ needs. • There are two basic types of muda: those that create no value but are required by the product development process (Type I Muda) an those that create no value and can be eliminated immediately (Type II Muda).

5. Lean Production • Lean production is facilitated by a focus on measurement and continuous improvement, cross-trained workers, efficient machine layout, rapid setup and changeover, realistic work standards, worker empowerment to perform inspections and take corrective action, supplier partnerships, and preventive maintenance. • Lean production is also facilitated by JIT as well as constraint management techniques.

6. Toyota classified waste into: • Overproduction • Overproduction ties up production facilities, and excess inventory simply sits idle. • Waiting Time • Allowing queues to build up between operations, resulting in longer lead-times and higher WIP. • Transportation • The time and effort spent in moving products around the factory as a result of poor layout. • Processing • The traditional notion of waste, as exemplified by scrap that often results from poor product or process design.

7. Toyota classified waste into: • Inventory • Waste associated with the expense of idle stock and the extra storage and handling requirements needed to maintain it. • Motion • As a result of inefficient workplace design and location of tools and materials. • Production Defects • The result of not performing work correctly the first time.

8. Lean Production in the Manufacturing Industry By 1992, Porsche, the maker of high-end German sports cars, found sales falling to 25% of their 1986 peak. When Wendelin Wiedeking took over as head of the company, he pushed workers to adopt Japanese-style lean production methods. He hired two Japanese efficiency experts and personally sawed off the top half of a row of shelves with a circular saw to reduce inventories. Along with more flexible, negotiated work rules, Porsche revamped its assembly process so that production of 1997’s 911 model took only 60 hours, compared to 120 hours for its predecessor. The time to develop a new model was cut from 7 years to 3. Porsche now uses 300 parts suppliers, down from nearly 1,000 and a quality control program has helped reduce the number of defective parts by a factor of 10.

9. Lean Production • Lean production can easily be applied to nonmanufacturing environments. Pure service firms such as banks, hospitals, and restaurants have benefited from lean principles. In these contexts, lean production is often called lean enterprise. • Lean production has evolved into lean thinking – a philosophy of applying lean concepts to all business operations. In the words of the authors who started the revolution, lean thinking focuses on creating value for both the customer and the organization through seamless operations within the value chain – through order, design, processing, and deliver.

10. Tools for Lean Production • The 5 S’s • Seiri - Sort • Ensuring that each item in a workplace is in its proper place or identified as unnecessary and removed. • Seiton - Set in Order • Arranging materials and equipment so that they are easy to find and use. • Seiso - Shine • Refers to a clean work area. Not only is this important for safety, but as the work area is cleaned, maintenance problems can be identified before they cause problems. • Seiketsu - Standardize • Formalizing procedures and practices to create consistency and ensure that all steps are performed correctly. • Shitsuke - Sustain • Keeping the process going through training, communication, and organizational structures.

11. Tools for Lean Production (cont’d) • Visual Controls • These are indicators for tools, parts, and production activities that are placed in plain sight of all workers so that everyone can understand the status of the system at a glance. Thus, if a machine goes down, or a part is defective or delayed, immediate action can be taken. • Efficient Layout and Standardized Work • The layout of equipment and processes is designed according to the best operational sequence, by physically linking and arranging machines and process steps most efficiently, often in a cellular arrangement. Standardizing the individual tasks by clearly specifying the proper method reduces wasted human movement and energy.

12. Tools for Lean Production (cont’d) • Pull Production • This is a system (also described as a kanbansystem or JIT) in which upstream suppliers do not produce until the downstream customer signals a need for parts. • Single-Minute Exchange of Dies • SMED refers to rapid changeover of tooling and fixtures in machine shops so that multiple products in smaller batches can be run on the same equipment. Reducing setup time adds value to the operation and facilitates smoother production flow. • Total Productive Maintenance • Total productive maintenance is designed to ensure that equipment is operational and available when needed.

13. Tools for Lean Production (cont’d) • Source Inspection • Inspection and control by process operators ensures that the product passed on to the next production stage conforms to specifications. • Continuous Improvement • Continuous improvement provides the link to quality and Six Sigma. To make lean production work, one must get to the root cause of problems and permanently remove them.

14. Operation of a JIT System • Just-in-time (JIT) was introduced at Toyota during the 1950s and 1960s by Kiichiro Toyoda to address the challenge of coordinating successive production activities. • Most factories use a system of push production in which they make parts and then send them to subsequent operations or to storage. Of course, a breakdown of some process or demand fluctuations will create an imbalance of inventory between processes. • Toyoda created a pull production system with one key principle: to produce the needed quantity of the required parts each day.

15. How does pull production system Works? • Employees at a given operation go to the source of the required parts, such as machining or subassembly, and withdraw the units as they need them. Then just enough new parts are manufactured or procured to replace those withdrawn. Thus, if inventories are needed at all, they are minimized. As the process from which parts were withdrawn replenishes the items it transferred out, it draws on the output of its preceding process and so on. Slips, called kanban cards, are circulated indicating the number of parts that had to be made that day at each operation. • A kanban is a flag or a piece of paper that contains all relevant information for an order: part number, description, process area used, time of delivery, quantity available, quantity delivered, production quantity, and so on. The type and number of units required by a process are written on kanbans and used to initiate withdrawal and production of times through the production-ordering kanbans operate.

16. JIT Philosophy • Shigeo Shingo defined JIT as “producing what is necessary, when it is necessary, in the amount necessary.” • In the JIT philosophy, ASAP stands for Accuracy, Speed, Anxiety, and Postponement • Inventory accuracy is essential to good production control, particularly when minimal inventories are kept. • Speed signifies fast cycle times • Companies should create a sense of anxiety, or urgency, in all activities. This will ensure that problems are quickly resolved. • Postponement is the process of delaying commitment of the items in a customer order until the last possible moment.

17. Underlying principles of JIT philosophy: • Exposing fundamental problems and correcting them with permanent, not temporary, solutions. • Striving for simplicity, because simple processes have fewer opportunities for error and are faster to accomplish. • Reducing manufacturing throughput times, effectively replacing traditional batch production with continuous processing through the use of small lot sizes, cell manufacturing, and setup reduction. • Improving supplier performance to eliminate the need for rework or returns. • Improving quality and implementing continuous improvement, because poor quality disrupts the flow and coordination required. • Improving labor flexibility through cross-training and increasing empowerment for making decisions on the production line.

18. The Core Elements of JIT are Classified Into Seven Categories • Production-Floor Management • JIT system focuses on reducing setup times, using small lot sizes, and employing preventive maintenance. • Scheduling • To operate smoothly, a JIT system must minimize fluctuation in production demand. • Repetitive manufacturing keeps inventories and lead-times lower than batch or job-shop production, thus leading to increased productivity and lower cost. • Process and Production Design • For a JIT system to function effectively, traditional product and process design activities usually have to be modified. • Poor process design and equipment layout are two of the major causes of inefficiency in operations.

19. The Core Elements of JIT are Classified Into Seven Categories (cont’d) • Quality Management • JIT cannot function properly if production has a high rate of defective items. Thus, it requires painstakingly careful attention to quality, both in purchasing and in production. • Workforce Management • People are a critical aspect of total quality control in a JIT environment, in which all employees are regarded as valuable resources; they provide many solutions to problems and ideas for improving performance. • Supplier Management • Suppliers must be able to deliver small lot sizes on a continuous basis and with high quality. • Accounting and Information Systems • In JIT environments, lead-times are much shorter than in traditional manufacturing systems. Hence, there is little incentive to allocate costs to inventory at any level other than that of finished products.

20. JIT in Service Organizations • JIT has had its biggest impact in manufacturing, but service organizations are increasingly finding applications for it. The JIT philosophy supports the reduction of cycle time, which many organizations now regard as a key element of their corporate strategy.. From this viewpoint, JIT may even have a greater potential impact in services than in manufacturing. • Baxter International is another service company that has experienced the benefits of a JIT system. St. Luke’s Episcopal Hospital in Houston has applied JIT to its dispensing of hospital supply products. Most hospitals maintain a large inventory of supplies in a central storeroom and replenish the supplies needed in the various areas of the hospital on a regular basis. St. Luke’s adopted a radical strategy; it closed its warehouse and sold its inventory to Baxter International, a major hospital supplier. Baxter has become a partner with the hospital in managing, ordering, and delivering supplies. Baxter fills orders in exact, sometimes small, quantities and delivers them directly to the hospital departments, including operating rooms and nursing floors. The hospital is now saving $350,000 annually due to staff reductions and $162,500 from eliminating its inventory. Its storeroom has been converted to patient care and other productive uses.

21. CONWIP • The idea CONWIP(Constant Work-In-Process) is that a new job is introduced to a production line whenever a job is completed. This approach maintains a constant amount of WIP in the line, providing benefits similar to those of a kanban approach, namely reduced cost and shortened lead-times. Unlike kanban, CONWIP does not deal with specific part numbers, as long as a common measure of WIP exists. • CONWIP begins with a simple observation about the behavior of operating systems – output levels of any system increase with WIP inventory up to a point. Beyond a critical level of WIP, the output of a system does not increase. Therefore, identifying and maintaining this critical level of WIP is the best approach to managing workflow and schedules.

22. Constraint Management • The Principal objective of the Theory of Constraints is to establish a process of continuous improvement based on the premise that constraints determine the performance of any system. • A constraint is any resource lack that prevents a system from achieving continuously higher levels of performance. Limited capacity at work centers, inflexible work rules, inadequate labor skills, and an ineffective management philosophy are all forms of constraints.

23. Drum-Buffer-Rope • The DBR approach is a finite scheduling mechanism that balances the flow in the system. • DBR plans the flow of materials through the plant by recognizing resource constraints explicitly and is based on the following: • The drum is a system constraint or other critical resource that sets the pace or “beat” that drives the rest of the schedule. The key idea is to pace all production activities by the production of the drum. • The ropes are schedules or other signaling methods that tie the release of raw materials and customer promise dates to the production at the drum. • Buffers are WIP inventories that are maintained just in front of the resource. Although very little WIP inventory is maintained, the buffer inventories help to compensate for unavoidable variations in flow time.

24. Drum-Buffer-Rope • DBR scheduling is based on five steps: • Identify the system constraints • Sequence jobs on the system constraints • Decide on the size of the constraint buffers • Decide on the size of the shipping buffers • If, in the previous steps, a constraint has been broken, go back to step 1, but do not allow inertia to create a new constraint.