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Just-In-Time and Lean Production


Chapter 15 Just-In-Time and Lean Production JIT In Services What is JIT ? Lean Operations: Best Implementation is Toyota Production System TPS is a production ... – PowerPoint PPT presentation

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Title: Just-In-Time and Lean Production

Chapter 15
  • Just-In-Time and Lean Production

JIT In Services
  • Competition on speed quality
  • Multifunctional department store workers
  • Work cells at fast-food restaurants
  • Just-in-time publishing for textbooks - on demand
    publishing a growing industry
  • Construction firms receiving material just as

What is JIT ?
  • Producing only what is needed, when it is needed
  • A philosophy
  • An integrated management system
  • JITs mandate Eliminate all waste

Lean Operations Best Implementation is Toyota
Production System
  • TPS is a production management system that aims
    for the ideal through continuous improvement
  • Includes, but goes way beyond JIT. Pillars
  • Synchronization
  • Reduce transfer batch sizes
  • Level load production
  • Pull production control systems (vs. push)
  • Quality at source
  • Layout Cellular operations
  • Continuous Improvement (Kaizen) through
    visibility empowerment

Basic Elements of JIT
  1. Flexible resources
  2. Cellular layouts
  3. Pull production system
  4. Kanban production control
  5. Small-lot production
  6. Quick setups
  7. Uniform production levels
  8. Quality at the source
  9. Total productive maintenance
  10. Supplier networks

Toyotas waste elimination in Operations
  • 1. Overproduction
  • 2. Waiting
  • 3. Inessential handling
  • 4. Non-value adding processing
  • 5. Inventory in excess of immediate needs
  • 6. Inessential motion
  • 7. Correction necessitated by defects

Other Important Points
  • Only make what you need
  • only buy what you need,when you need it
  • SMED single minute exchange of dies
  • continuous process improvement
  • as the level of the water lowers, new problems or
    inefficiencies are identified

Reducing waste Increase Problem
Visibility Lower the Water to Expose the Rocks
Waste in Operations
Waste in Operations
Waste in Operations
Flexible Resources
  • Multifunctional workers
  • General purpose machines
  • Study operators improve operations

The Push System
  • Pre-planned issues of supplies/merchandise
    regardless of customer demand criteria
  • Creates excess and shortages
  • not efficient over the long run

The Pull System
  • Material is pulled through the system when needed
  • Reversal of traditional push system where
    material is pushed according to a schedule
  • Forces cooperation
  • Prevent over and underproduction

Kanban Production Control System
  • Kanban card indicates standard quantity of
  • Derived from two-bin inventory system
  • Kanban maintains discipline of pull production
  • Production kanban authorizes production
  • Withdrawal kanban authorizes movement of goods

A Sample Kanban
The Origin of Kanban
Types of Kanbans
Types of Kanbans
Types of Kanbans
  • Bin Kanban - when bin is empty replenish
  • Kanban Square
  • Marked area designed to hold items
  • Signal Kanban
  • Triangular kanban used to signal production at
    the previous workstation
  • Material Kanban
  • Used to order material in advance of a process
  • Supplier Kanbans
  • Rotate between the factory and suppliers

Determining Number of Kanbans
where N number of kanbans or containers d
average demand over some time period L
lead time to replenish an order S safety
stock C container size
Determining the Number of Kanbans
d 150 bottles per hour L 30 minutes 0.5
hours S 0.10(150 x 0.5) 7.5 C 25 bottles
3.3 kanbans or containers
Round up to 4 (to allow some slack) or down to 3
(to force improvement)
Small-Lot Production
In theory
  • Requires less space capital investment
  • Moves processes closer together
  • Makes quality problems easier to detect
  • Makes processes more dependent on each other

Components of Lead Time
  • Processing time
  • Reduce number of items or improve efficiency
  • Move time
  • Reduce distances, simplify movements, standardize
  • Waiting time
  • Better scheduling, sufficient capacity
  • Setup time
  • Generally the biggest bottleneck

SMED Principles
  1. Separate internal setup from external setup
  2. Convert internal setup to external setup
  3. Streamline all aspects of setup
  4. Perform setup activities in parallel or eliminate
    them entirely

Common Techniques for Reducing Setup Time
  • Preset Buttons/settings
  • Quick fasteners
  • Reduce tool requirements
  • Locator pins
  • Guides to prevent misalignment
  • Standardization
  • Easier movement

Uniform Production
  • Results from smoothing production requirements
  • Kanban systems can handle /- 10 demand changes
  • Smooths demand across planning horizon
  • Mixed-model assembly steadies component production

Quality at the Source
  • Jidoka is authority to stop production line
  • Andon lights signal quality problems
  • Undercapacity scheduling allows for planning,
    problem solving maintenance
  • Visual control makes problems visible
  • Poka-yoke prevents defects (mistake proof the

Visual Control
Visual Control
In use at Harley-Davidson and at Opal Plant -
Visual Control
  • Continuous improvement
  • Requires total employment involvement
  • Essence of JIT is willingness of workers to
  • Spot quality problems
  • Halt production when necessary
  • Generate ideas for improvement
  • Analyze problems
  • Perform different functions

Total Productive Maintenance (TPM)
Commercial industry answer to PMCS
  • Breakdown maintenance
  • Repairs to make failed machine operational
  • Preventive maintenance
  • System of periodic inspection maintenance to
    keep machines operating
  • TPM combines preventive maintenance total
    quality concepts

TPM Requires Management to
  • Design products that can be easily produced on
    existing machines
  • Design machines for easier operation, changeover,
  • Train retrain workers to operate machines
  • Purchase machines that maximize productive
  • Design preventive maintenance plan spanning life
    of machine

Supplier Policies
  1. Locate near to the customer
  2. Use small, side loaded trucks and ship mixed
  3. Consider establishing small warehouses near to
    the customer or consolidating warehouses with
    other suppliers
  4. Use standardized containers and make deliveries
    according to a precise delivery schedule
    (preferably reusable, standard size containers)
  5. Become a certified supplier and accept payment at
    regular intervals rather than upon delivery

Goals of JIT
  1. Reduced inventory - where?
  2. Improved quality
  3. Lower costs
  4. Reduced space requirements
  5. Shorter lead time
  6. Increased productivity
  7. Greater flexibility
  1. Better relations with suppliers
  2. Simplified scheduling and control activities
  3. Increased capacity
  4. Better use of human resources
  5. More product variety
  6. Continuous Process Improvement

JIT Implementation
  • Use JIT to finely tune an operating system
  • Somewhat different in USA than Japan
  • JIT is still evolving
  • JIT as an inventory reduction program isnt for
    everyone - JIT as a CPI program is!
  • Some systems need Just-in-Case inventory

JIT In Services
  • Competition on speed quality
  • Multifunctional department store workers
  • Work cells at fast-food restaurants
  • Just-in-time publishing for textbooks - on demand
    publishing a growing industry
  • Construction firms receiving material just as

Reverse Logistics Important or Irritant?
Estimated 100 billion industry in 2006
In an ideal world, reverse logistics would not
Jim Whalen, In Through the Out
Door, Warehousing Management, March 2001
Now, more than ever, reverse logistics is seen
as being important.
Dale Rogers, Going Backwards, 1999
Reverse Logistics - What is it?The Armys
  • The return of serviceable supplies that are
    surplus to the needs of the unit or are
    unserviceable and in need of rebuild or
    remanufacturing to return the item to a
    serviceable status

Reverse Logistics - What is it?The Commercial
  • Reverse Logistics is the process of moving
    products from their typical final destination to
    another point, for the purpose of capturing value
    otherwise unavailable, or for the proper disposal
    of the products.

Typical Reverse Logistics Activities
  • Processing returned merchandise - damaged,
    seasonal, restock, salvage, recall, or excess
  • Recycling packaging materials/containers
  • Reconditioning, refurbishing, remanufacturing
  • Disposition of obsolete stuff
  • Hazmat recovery

Why Reverse Logistics?
  • Competitive advantage
  • Customer service
  • - Very Important 57
  • - Important 18
  • - Somewhat/unimportant23
  • Bottom line profits

Reverse Logistics - New Problem?
  • Sherman
  • Montgomery Wards - 1894
  • Recycling/remanufacturing in 1940s
  • World War II - 77,000,000 square feet of storage
    across Europe with over 6.3 billion in excess
  • Salvage and reuse of clothing and shoes in the
    Pacific Theater World War II

Key Dates in Reverse Logistics
  • World War II the advent of refurbished
    automobile parts due to shortages
  • 1984 - Tylenol Scare - Johnson and Johnson
  • 1991 - German ordinance that put teeth in
    environmental reverse pipeline
  • Summer 1996 UK Packaging and Packaging Waste
  • 1998 - first real study of reverse logistics in
    the US - University of Nevada, Reno
  • 2001 EU goal of 50-65 recovering or recycling
    of packaging waste

Reverse Logistics
  • A US Army Perspective

Operation Iraqi Freedom
  • The US Army moved the equivalent of 150
    Wal-Mart Supercenters to Kuwait in a matter of a
    few months

Military Operations and Excess
  • In battle, troops get temperamental and ask
    for things which they really do not need.
    However, where humanly possible, their requests,
    no matter how unreasonable, should be answered.
    George S. Patton, Jr.

Janes Defence Weekly
Recent report (Aug 2003) There is a 40 hectare
(100 acres) area in Kuwait with items waiting
to be retrograded back to the US.
Does this create a problem?
From GAO Audit Report
From GAO Audit Report
Reverse Logistics
  • The Commercial Perspective

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Reverse Logistics
  • Rate of returns?
  • Cost to process a return?
  • Time to get the item back on the shelf if

Costs - above the cost of the item
  • Merchandise credits to the customers.
  • The transportation costs of moving the items from
    the retail stores to the central returns
    distribution center.
  • The repackaging of the serviceable items for
  • The cost of warehousing the items awaiting
  • The cost of disposing of items that are
    unserviceable, damaged, or obsolete.

  • Process inbound shipment at a major distribution
    center 1.1 days
  • Process inbound return shipment 8.5 days
  • Cost of lost sales
  • Wal-Mart Christmas 2003 - returns 4 Days of
    Supply for all of Wal-Mart 2000 Containers
  • PalmOne - 25 return rate on PDAs

More Costs
  • Hoover - 40 Million per year
  • Cost of processing 85 per item
  • Unnamed Distribution Company - 700K items on
    reverse auction
  • 2001 - over 60 billion in returns 52 billion
    excess to systems 40 billion to process

Is it a problem?
  • Estimate of 2004 holiday returns 13.2 billion
  • of estimated 2004/2005 holiday returns 25
  • Wal-Mart 6 Billion in annual returns 17,000
    truck loads (gt46 trucks a day)
  • Electronics 10 Billion annually in returns
  • Personal Computers 1.5 Billion annually
    approximately 95 per PC sold
  • 79 of returned PCs have no defects
  • Home Depot 10 million in returns in the stores
  • Local Wal-Mart 1 million a month in returns

Is it a Problem?
  • European influence spread to US - Green Laws
  • Estee Lauder - 60 million a year into land fills
  • FORTUNE 500 Company - 200 million over their
    300 million budget for returns
  • Same Provider - 40,000 products returned per
    month 55 no faults noted
  • K-Mart - 980 million in returns 1999
  • Warranty vice paid repairs

More consequences
  • Increased Customer Wait Times
  • Loss of Confidence in the Supply System
  • Multiple orders for the same items
  • Excess supplies in the forward pipeline
  • Increase in stuff in the reverse pipeline
  • Constipated supply chain

  • Every resaleable item that is in the reverse
    supply chain results in a potential stock out or
    zero balance at the next level of supply.
  • Creates a stockout do-loop

  • This potential for a stock out results in
    additional parts on the shelves at each location
    to prevent a stock out from occurring.
  • More stocks larger logistics footprint the
    need for larger distribution centers and returns

Dawes Six Symptoms of a Problem
Dr. Richard Dawes, University of San Francisco
  • 1. Returned merchandise or supplies arrive
    faster than they are processed or disposed of.
  • 2. There are large amounts of returned inventory
    held in the distribution center or warehouse.
  • 3. There are unidentified or unauthorized
  • 4. There is a lengthy processing cycle time for
    returned goods.

Six Symptoms (Continued)
  • 5. The total cost of the returns process is
  • 6. Customers lose confidence in the repair

Reverse Logistics
reverse logistics is The process of planning,
implementing, and controlling the efficient,
cost effective flow of raw materials, in-process
inventory, finished goods and related
information from the point of consumption to the
point of origin for the purpose of recapturing
value or proper disposal. More precisely,
reverse logistics is the process of moving goods
from their typical final destination for the
purpose of capturing value, or proper disposal.
Remanufacturing and refurbishing activities also
may be included in the definition of reverse
logistics. Reverse logistics is more than
reusing containers and recycling packaging
materials. It includes redesigning packaging to
use less material, or reducing the energy and
pollution from transportation are important
Reverse Logistics
  • For "industrial equipment" the return rate is
    over 8 and the total revenue impacted by returns
    is 105.6 billion in 2005, in just the U.S.
  • For computers and network equipment, the return
    rate reaches as high as 20, for a 2005 total of
    65.8 billion, up from 61.4 billion in 2004.

Reverse Logistics
  • According to the Reverse Logistics Executive
    Council, the percent increase in costs for
    processing a return, as compared to a forward
    sale, is an astounding 200-300.
  • In the U.S. alone, the cost is an annual 100
    billion. Forbes, March 2005
  • Typically, as many as 8-12 more steps per item in
    the reverse pipeline than items in the forward

The truth is, for one reason or another,
materials do come back and it is up to those
involved in the warehouse to effectively recover
as much of the cost for these items as possible.
- Whalen, In Through the Out Door
RFID and Returns
  • Visibility Tracking
  • Component tracking
  • Data Warehouse on what, why, when
  • Altered products
  • Not for every product

Impacts of Reverse Logistics
  • Forecasting
  • Carrying costs
  • Processing costs
  • Warehousing
  • Distribution
  • Transportation
  • Personnel
  • Marketing

Next Week
  • Reverse Logistics, Chapter 14, 16, 3
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