BA339 – Chapter 16 - JIT

1. BA339 – Chapter 16 - JIT • Just-In-Time (JIT) • Philosophy • Suppliers • JIT Layout • Inventory • Scheduling • Quality • Employee Empowerment • Lean Production • JIT in Services

2. BA339 – Chapter 16 - JIT • JIT Philosophy • “Continuous and forced problem solving” • Supplies/materials are “pulled” thru a systems to arrive where they are needed, when they are needed (vs. push system – dumps orders on downstream workstation regardless of timeliness or resource availability) • “Problem” is identified when good units to not arrive just as needed • Drives out waste & unwanted variability • No unwanted/excess inventory or time, costs associated with unneeded inventory are eliminated • Support strategies of rapid response and low cost

3. BA339 – Chapter 16 - JIT • JIT Philosophy • Waste reduction • Anything that does not add value is considered waste • Products stored, inspected, delayed, waiting in queues, and defective is considered waste > also, any activity that does not add value from the customer’s perspective is waste as well • Variability reduction • Less variability = less waste • Employees, machines, or suppliers producing units that do not conform to std, are late, or wrong qty. • Inaccurate engineering drawings/specs. • Production personnel producing before engineering drawings or specs. are complete • Unknown customer demands

4. BA339 – Chapter 16 - JIT • JIT Suppliers • Partnerships – see Table S12.2 (page 519 in text) • Exist when supplier and purchaser work together to reduce waste and drive down costs • Suppliers viewed as extension of the organization • Goals of JIT partnerships: • Elimination of unnecessary activities (e.g., incoming inspection) • Elimination of in-plant inventory – materials delivered when and where needed; small lots directly to the department/operation where they are needed • Elimination of in-transit inventory – encourages suppliers to locate near mfg. facilities and ship in small lots • Consignment inventory – supplier owns until it is used • Elimination of poor suppliers – fewer suppliers, higher quality/reliability, improved trust, zero defects

5. BA339 – Chapter 16 - JIT • JIT Suppliers • Supplier concerns • Desire for diversification – avoid long-term contract with one customer • Poor customer scheduling – lack of confidence in purchaser’s ability to smooth/coordinate schedule • Engineering changes – frequency & inadequate lead-times for tooling changes • Quality assurance – zero defects considered unrealistic • Small lot sizes – processes may be designed for large lot sizes > customer uses this to transfer holding costs to supplier • Proximity – depending on customer’s location, frequent delivery of small lot sizes may be economically prohibitive

6. BA339 – Chapter 16 - JIT • JIT Layout • Reduces movement of material (& people) that does not add value > flexibility • Distance reduction • Major contribution for work cells/centers and focused factories • Work cells (u-shaped) contain several multi-function machines > often use group technology codes to group mat’l into families with cells built around them • Produce only materials needed by customer

7. BA339 – Chapter 16 - JIT • JIT Layout • Increased flexibility • Easy re-arrangement of work cells to adapt to changes in volume, product improvements or new designs • Example - modular office equipment, computer connections & telecommunications • Aids changes resulting from process and product improvements

8. BA339 – Chapter 16 - JIT • JIT Layout • Impact on employees • Cross-training provides flexibility and efficiency to each work cell • Facilitates communication among employees to discuss/fix problems • Sequential layouts provide for instantaneous feedback & identification of defect in next subsequent production stage (fixes easier and less costly) • Before JIT, defects were replaced from inventory > no such luxury in JIT – must get it right the first time

9. BA339 – Chapter 16 - JIT • JIT Layout • Reduced space & inventory • Reduced travel distance > reduced space means less space for inventory > small lot movement, improved processing time, reduced salaries, O/H costs with square footage • Inventory – just-in-case…(JIT inventory = minimum inventory needed to keep a perfect system running) • Reduced variability – in production system means less inventory needed • Variability caused by late deliveries, machine breakdowns, poor personnel performance

10. BA339 – Chapter 16 - JIT • Inventory • Reduce inventory – removal results in identification of problems which are systematically fixed until all are gone • Reduce lot sizes • Smaller lot sizes means less inventory and lower costs • Greater number of orders (transaction costs) are offset by inventory reduction savings > also forces firm to cost-effectively process orders

11. BA339 – Chapter 16 - JIT • Inventory • Reduce setup costs • Inventory and holding costs decrease and inventory-reorder qty. and maximum inventory level drops > large orders often purchased to reduce setup costs > reducing setup costs enables lot size reductions and inventory reductions • See figure S12.2(b) on page 524 in text • Small lot sizes hide fewer problems • Tends to drive improvement in ordering process and times • See figure S12.3, Steps to Reduce Setup Times, p. 525

12. BA339 – Chapter 16 - JIT • Scheduling • Ford example – bumper manufacturer provides schedule information (vehicle, date, time, color) to supplier directly > supplier delivers only correct bumpers, in correct order, on time • Level schedules • Process frequent small batches vs. few large • Small batches mfg. & movement is more economical • “Freezing” portion of production schedule closest to due dates allows production system to function and meet schedule • Kanban – “card” • Authorization that next container of material is to be produced • Signal to pull item through the system > ex. take-out orders at fast-food restaurant • Requires tight schedules, small qtys. Produced several times/day, little lead-time variability – limit amt. faulty material

13. BA339 – Chapter 16 - JIT • Quality • JIT cuts cost of obtaining good quality (poor quality hidden in inventory) by exposing bad quality • Tracking of errors is fresh and limits potential sources > early warning system w/ immediate feedback • Fewer buffers needed in production/inventory/supplier system • JIT relies on SPC, empowers employees, builds fail-safe methods, & provides immediate feedback

14. BA339 – Chapter 16 - JIT • Employee Empowerment • Some JIT techniques require policy & strategy decisions, but many rely on employee involvement (less staff > less labor costs > quicker problem identification & resolution • Assumes that employee knows the job better than the employee • Focuses on cross-training, job enrichment, fewer job classifications > improves quality & commitment

15. BA339 – Chapter 16 - JIT • Lean Production • Drive out activities that do not add value • Minimize waste thru continuous learning, creativity & teamwork • Requires full commitment of all employees and suppliers • Lean producer attributes • JIT to eliminate inventory • Build systems to build perfect parts every time • Reduce space requirements • Educate & build close relationships w/suppliers • Strive to eliminate non-value-added activities • Develop the workforce & make jobs more challenging • Reduce the number of job classes

16. BA339 – Chapter 16 - JIT • JIT in Services • JIT suppliers very common – restaurants • Layouts – very efficient > McDonalds kitchen and airline baggage handling • Inventory – stockbroker inventory nearly zero; McDonalds finished goods inventory is 10 mins.; hospitals run low safety stocks using networks and backup systems • Scheduling – customer demand of tickets in airline industry > e-tickets, staff arrives JIT at counter