Chapter 6 Just-in-time and lean thinking

1. Chapter 6Just-in-time and lean thinking

2. Just-in-time Lean thinking Vendor-managed inventory (VMI) Quick response Content

4. What are the implications of Just-in-time for logistics? 1 How can just-in-time principles be applied to other forms of material control such as reorder point and material requirements planning? 2 Just-in-time • Key issues

5. Just-in-time • Just-in-time: A definition • Uses a systems approach to develop and operate a manufacturing system • Organizes the production process so that parts are available when they are needed • A method for optimizing processes that involves continual reduction of waste

6. Just-in-time • Little JIT • the application of JIT to logistics • Central themes surrounding Just-in-time • Simplicity • Quality • Elimination of waste

7. Just-in-time • Pull scheduling • A system of controlling materials whereby the use signals to the maker or provider that more material is needed. • Push scheduling • A system of controlling materials whereby makers and providers make or send material in response to a pre-set schedule, regardless of whether the next process needs them at the time. buyer Pull: Just-in-time Push: traditional way supplier

8. Demand uncertainty Computer Book/CD Grocery Scale economics Just-in-time • Activity Push/Pull Pull Push

9. Level 1 Just-in-time 1 Level 2 Minimum inventory Minimum delay 2 6 3 4 Level 3 5 Minimum defects Minimum downtime Simplicity and visibility Just-in-time • Just-in-time system JIT Pyramid of key factors

10. Just-in-time • Just-in-time system • Factor 1 • The top of the pyramid is full capability for JIT supply supported by Level 2 and Level 3 operation. • Factor 2 • ‘Delay’ and ‘inventory’ interact positively with each other • The concept of Kanban • Factor 3 • Defect → delay → inventory

11. Poor quality Machine downtime Bad design Inefficient layout Unreliable supplier • Just-in-time system • Factor 3 • Defect → delay → inventory Inventory hides problems

12. Breakdowns Machine downtime Safety stocks Planned maintenance Changeover Just-in-time • Just-in-time system • Factor 4 Preventive maintenance Flexible production

13. Just-in-time • Just-in-time system • Factor 5 • Simply and visible process help to reduce inventory and could be better maintained. • Factor 6 • It’s more difficult to see the flow of a process with increased inventory.

14. Demand management Forecasts Orders Master schedule Logistics planning Material plan Bill of materials Logistics execution Purchase orders Work orders Source Make Deliver Just-in-time • The supply chain ‘game plan’ Material Requirements Planning Independent demand Dependent demand

15. Just-in-time • The supply chain ‘game plan’ • Independent demand • Demand for a product that is ordered directly by customers. • items are those items that we sell to customers • Dependent demand • Demand for parts or subassemblies that make up independent demand products. • items are those items whose demand is determined by other items

16. Just-in-time • Case: Automobile • Case: Cake

17. Recorder quantity Usage rate Stock Reorder point Buffer stock Time Lead time Just-in-time • Demand characteristics and planning approaches • Economic order quantities (EOQ)

18. Just-in-time • Assumptions in Economic Order Quantity Model • Demand is deterministic.There is no uncertainty about the quantity or timing of demand. • Demand is constant over time. In fact, it can be represented as a straight line, so that if annual demand is 365 units this translates into a daily demand of one unit. • A production run incurs a constant setup cost. Regardless of the size of the lot or the status of the factory, the setup cost is the same. • Products can be analyzed singly.There is only a single product.

19. Notation • D= Demand rate (in units per year). • c = Unit production cost, not counting setup or inventory costs (in dollars per unit). • A = Constant setup (ordering) cost to produce (purchase) a lot (in dollars). • h = Holding cost (in dollars per unit per year) • Q = Lot size (in units); this is the decision variable

20. Just-in-time • EOQ model • Average inventory level • The holding cost per unit • The setup costper unit • The production cost per unit

21. Just-in-time • EOQ model

22. Just-in-time • Practice • Pam runs a mail-order business for gym equipment. Annual demand for the TricoFlexers is 16,000. The annual holding cost per unit is $2.50 and the cost to place an order is $50. What is the economic order quantity?

23. Just-in-time • Demand characteristics and planning approaches • Periodic order quantity (POQ) and target stock levels How much to order? Economic order quantity When to order? Periodic order quantity

24. Just-in-time Economic order quantity with uncertain demand

25. Just-in-time Periodic order quantity (POQ) with uncertain demand

26. constant Just-in-time • Target stock level (TSL) • Periodic order quantity = Target stock level – Stock on hand – Stock on order • TSL = cycle stock + safety stock

27. supplier Distribution center 采购 存货低于标准 配 送 进 货 储 存 拣 货 分拣 装车 搬运 搬运 搬运 搬运 流 通 加 工 盘 点 订单处理 retailer Just-in-time

28. Just-in-time • JIT and material requirements planning (MRP) • Material requirements planning (MRP) - A methodology for defining the raw material requirements for a specific item, component, or sub-assembly ordered by a customer, or required by a business process. • MRP systems will usually define what is needed, when it is needed, and by having access to current inventories and pre-existing commitment of that inventory to other orders to other customers, will indicate what additional items need to be ordered to fulfill this order.

29. Just-in-time • Feature of MRP • MRP is based on JIT Pull scheduling logic • MRP is good at planning, but weak at control • JIT is good at control, but weak at planning • TPS Vs. FPS

30. Just-in-time Takt time: The maximum time allowed to produce a product in order to meet demand. Jidoka: Autonomation (人工智能的自动控制) Heijunka: A system of production smoothing designed to achieve a more even and consistent flow of work.(平准化) Kaizen: Improvement

31. Heijunka box

32. Just-in-time Lean thinking Vendor-managed inventory (VMI) Quick response Content

33. What are the principles of lean thinking? 1 How can the principles of lean thinking be applied to cutting waste out of supply chains? 2 Lean thinking • Key issues

34. Lean thinking Taylorism: Frederick Taylor 1856-1915 The father of scientific management Fordism: Henry Ford 1863-1947 The father of mass production Toyota: Taiichi Ohno The father of Toyota Production System

35. 1. Specify value muda muda 4. Let customer pull 5. Perfection 2. Identify value stream muda muda 3. Create product flow Lean thinking • Lean thinkingrefers to the elimination of waste in all aspects of a business and thereby enriching value from the customer perspective. Muda means waste, specifically any human activity which absorbs resources but creates no value.”

36. Lean thinking • Nine wastes • Watching a machine run • Waiting for parts • Counting parts • Overproduction • Moving parts over long distance • Storing inventory • Looking for tools • Machine breakdowns • Rework

37. Lean thinking Inconsistent Process Inconsistent Results Traditional = People doing whatever they can to get results Desired Results Consistent Process Lean = People using standard process to get results

38. Lean thinking • Role of lean practices • Small-batch production • Reduce total cost across a supply chain, such as removing the waste of overproduction. • Rapid changeover • Rely on developments in machinery and product design • Provide the flexibility to make possible small-batch production that responds to customer needs

39. Lean thinking • Design strategy • Lean product design • A reduction in the number of parts they contain and the materials from which they are made • Features that aid assembly, such as asymmetrical parts that can be assembled in only one way • Redundant features on common, core parts that allow variety to be achieved without complexity with the addition of peripheral parts • Modular designs that allow parts to be upgraded over the product life • Lean facility design

40. Lean thinking • Design strategy • Lean product design • Lean facility design • Modular design of equipment to allow prompt repair and maintenance • Modular design of layout to allow teams to be brought together with all the facilities they need • Small machines which can be moved to match the demand for them • Open systems architectures that allow equipment to fit together and work when it is moved and connected to other items

41. Case study • Barriers to knowledge transfers within suppliers’ plants (Dyer and Hatch, 2006) • Network constraints • Customer policies or constraints imposed by customers • Example: One supplier was required by GM to use large (4’×5’) reusable containers. When filled with components, these containers weighed 200~300 pounds. By comparison, Toyota had the supplier use small (2’×3’) reusable containers weighing 40 pounds when filled.

42. Case study

43. Case study • Barriers to knowledge transfers within suppliers’ plants (Dyer and Hatch, 2006) • Internal process rigidities • U.S. customer’s production process involved a high level of automation or large capital investment in heavy equipment. The large machines and equipment were bolted or cemented into the floor, hence increased the costs of change. These process rigidities resulted in plant managers waiting until the vehicle model change before implementing a new process. • Toyota’s production network is designed as a dynamic system, and the flexibility to modify the system is built into the processes and procedures.

44. Just-in-time Lean thinking Vendor-managed inventory (VMI) Quick response Content

45. How can suppliers help to reduce waste in the customer’s process? 1 Vendor-managed inventory • Key issue

46. Conventional Inventory Management Customer monitors inventory levels places orders Vendor manufactures/purchases product assembles order loads vehicles routes vehicles makes deliveries Vendor-managed inventory You call – We haul

47. Problems with Conventional Inventory Management Large variation in demands on production and transportation facilities workload balancing utilization of resources unnecessary transportation costs urgent Vs. non-urgent orders setting priorities Vendor-managed inventory

48. Vendor-managed inventory Customer trusts the vendor to manage the inventory Vendor monitors customers’ inventory customers call/fax/e-mail remote telemetry units set levels to trigger call-in Vendor-managed inventory • controls inventory replenishment & decides • when to deliver • how much to deliver • how to deliver You rely – We supply

49. Vendor-managed inventory • VMI • An approach to inventory and order fulfillment in the way that supplier, not the customer, is responsible for managing and replenishing inventory.

50. Vendor-managed inventory • Number of items as ordered • Number of items in back-order buyer seller • Acknowledgement • Number of items in stock • Consumption of previous period • Any other specific customer- or item-related parameters VMI data flow