Operations Management Just-in-Time Systems Supplement 12

1. Operations ManagementJust-in-Time SystemsSupplement 12

2. Outline • Just-In-Time Philosophy. • Role of inventory. • Suppliers. • Layout. • Scheduling. • Quality. • Lean Production.

3. What is Just-in-Time? • Management philosophy of continuous and forced problem solving. • Supplies and components are ‘pulled’ through system to arrive where they are needed when they are needed. • Originated in Japan; developed over 40 years. • Popularized by Toyota; now used globally.

4. Why is Production Difficult? • Demand is uncertain and variable. • Same equipment and people are used to make a variety of products. • Switching products takes time. • Things go wrong: • Materials are defective. • Deliveries are variable (late). • Equipment fails, people make mistakes, etc.

5. 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.

6. “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.

7. Another Solution: Just-In-Time • Use just-in-time to identify and solve problems that create inventory. • Reduce setup costs to switch products. • Eliminate defective materials, late deliveries, equipment failures, mistakes, etc.

8. “Just-in-Time” Production • Produce in small lots to replenish stock actually sold. • Sales PULL product (and parts) through plant. • Small lot sizes mean: • Small work-in-process inventories. • Small final product inventories. • Quick response to changes and defects.

9. 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.

10. 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, specifications, etc. • Achieves streamlined production by reducing inventory. • Reduces delays and increases throughput. • Reduces cost and/or increases profit! • Provides faster response to the customer.

11. Waste Waste is ‘anything other than the minimum amount of equipment, materials, parts, space, and worker’s time, which are absolutely essential to add value to the product.’ — Shoichiro Toyoda President, Toyota

12. Types of Waste • Overproduction. • Waiting. • Transportation. • Inefficient processing. • Inventory. • Unnecessary motion. • Product defects.

13. Just-in-TimeSuccess Factors Suppliers Employee Empowerment Layout JIT Quality Inventory Preventive Maintenance Scheduling

14. Inventory • JIT objective: Eliminate inventory. • JIT requires: • Small lot sizes. • Low setup time. • Just-in-time deliveries. • Deliveries direct to point of use (not stockroom). • JIT inventory: Minimum inventory to keep system running.

15. Work in process inventory level(hides problems) Unreliable Vendors Capacity Imbalances Scrap Lowering Inventory Reduces Waste

16. Reducing inventory revealsproblems so they can be solved. WIP Unreliable Vendors Capacity Imbalances Scrap Lowering Inventory Reduces Waste

17. Inventory Level Average inventory = (Lot size)/2 Lot Size 200 Average inventory = 100 Time Large Lot Sizes = Large Inventory

18. Average inventory = 40 Lot Size 80 To Lower Inventory, Reduce Lot Size Inventory Level Average inventory = (Lot size)/2 Lot Size 200 Time

19. EPQ Minimizes Total Costs Cost Total Cost Holding Cost Setup Cost Lot Size Optimal Lot Size

20. 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

21. 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.

22. 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. • Poor suppliers.

23. Characteristics of JIT Partnerships • Few nearby suppliers. • Frequent deliveries in small-lot quantities. • Deliver small lots several times each day. • Suppliers encouraged to extend JIT to their suppliers. • Steady output rate & long term contracts. • Minimal paperwork.

24. 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. • Often use work cells.

25. 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.

26. Kanban • Japanese word for card. • Pronounced ‘kahn-bahn’ . • 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.

27. Figure S12.5

28. Preventive Maintenance (PM) • JIT objective: Prevent failure. • JIT requires: • Scheduled & daily preventive maintenance. • Operator performs preventive maintenance. • Operator knows machine and is responsible for product quality. • Cleanliness and simplicity are keys.

29. 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.

30. Lean Production • Use JIT to eliminate virtually all inventory. • Build systems to help employees produce a perfect part every time. • Reduce space requirements. • Develop close relationships with suppliers. • Educate suppliers and workers. • Eliminate all but value-added activities. • Enrich jobs.

31. 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.