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2008 Prentice Hall, Inc. 16 1

Operations

Management

Operations

ManagementChapter 16Chapter 16 JITJITand Leanand LeanOperationsOperations

PowerPoint presentation to accompanyPowerPoint presentation to accompany

Heizer/RenderHeizer/Render

Principles of Operations Management, 7ePrinciples of Operations Management, 7e

Operations Management, 9eOperations Management, 9e

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OutlineOutline

Global Company Profile:Global Company Profile:

Toyota Motor CorporationToyota Motor Corporation JustJust--inin--Time and Lean OperationsTime and Lean Operations

Eliminate WasteEliminate Waste

Remove VariabilityRemove Variability JIT LayoutJIT Layout

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OutlineOutline ContinuedContinued JIT InventoryJIT Inventory

Reduce VariabilityReduce Variability Reduce InventoryReduce Inventory

Reduce Lot SizesReduce Lot Sizes

Reduce Setup CostsReduce Setup Costs JIT SchedulingJIT Scheduling

Level SchedulesLevel Schedules

KanbanKanban

Toyota Production SystemToyota Production System

Lean OperationsLean Operations

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Learning ObjectivesLearning ObjectivesWhen you complete this chapter youWhen you complete this chapter you

should be able to:should be able to:1.1. Define justDefine just--inin--time and lean operationstime and lean operations

2.2. Define the seven wastes and the 5 SsDefine the seven wastes and the 5 Ss

3.3. Determine optimal setup timeDetermine optimal setup time

4.4. DefineDefine kanbankanban

5.5.

Compute the required number ofCompute the required number of

kanbanskanbans

6.6. Explain the principles of the ToyotaExplain the principles of the ToyotaProduction SystemProduction System

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Toyota Motor CorporationToyota Motor Corporation

Largest vehicle manufacturer in theLargest vehicle manufacturer in theworld with annual sales of over 9world with annual sales of over 9million vehiclesmillion vehicles

Success due to two techniques, JITSuccess due to two techniques, JITand TPSand TPS

Continual problem solving is centralContinual problem solving is centralto JITto JIT

Eliminating excess inventory makesEliminating excess inventory makesproblems immediately evidentproblems immediately evident

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Toyota Motor CorporationToyota Motor Corporation

Central to TPS is a continuing effortCentral to TPS is a continuing effortto produce products under idealto produce products under idealconditionsconditions

Respect for people is fundamentalRespect for people is fundamental

Small building but high levels ofSmall building but high levels ofproductionproduction

Subassemblies are transferred to theSubassemblies are transferred to theassembly line on a JIT basisassembly line on a JIT basis

High quality and low assembly timeHigh quality and low assembly time

per vehicleper vehicle

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JustJust--InIn--Time andTime andLean OperationsLean Operations

JIT is a philosophy of continuous andJIT is a philosophy of continuous andforced problem solving via a focus onforced problem solving via a focus onthroughput and reduced inventorythroughput and reduced inventory

Lean production supplies theLean production supplies thecustomer with their exact wants whencustomer with their exact wants whenthe customer wants it without wastethe customer wants it without waste

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JustJust--InIn--Time andTime andLean OperationsLean Operations

JIT emphasizes forced problemJIT emphasizes forced problemsolvingsolving

Lean operations emphasizeLean operations emphasizeunderstanding the customerunderstanding the customer

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Waste is anything that does notWaste is anything that does notadd value from the customer pointadd value from the customer pointof viewof view

Storage, inspection, delay, waitingStorage, inspection, delay, waitingin queues, and defective productsin queues, and defective productsdo not add value and are 100%do not add value and are 100%

wastewaste

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OhnoOhnos Seven Wastess Seven Wastes

OverproductionOverproduction

QueuesQueues

TransportationTransportation

InventoryInventory

MotionMotion

OverprocessingOverprocessing

Defective productsDefective products

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Other resources such as energy,Other resources such as energy,water, and air are often wastedwater, and air are often wasted

Efficient, ethical, and sociallyEfficient, ethical, and socially

responsible production minimizesresponsible production minimizesinputs, reduces wasteinputs, reduces waste

EExpanded to the 5 Ssxpanded to the 5 Ss

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The 5 SsThe 5 Ss

SortSortwhen in doubt, throw it outwhen in doubt, throw it out

SimplifySimplifymethods analysis toolsmethods analysis tools

ShineShineclean dailyclean daily

StandardizeStandardizeremove variationsremove variationsfrom processesfrom processes

SelfSelf--disciplinedisciplinereview work andreview work andrecognize progressrecognize progress

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The 5 SsThe 5 Ss

SortSortwhen in doubt, throw it outwhen in doubt, throw it out

SimplifySimplifymethods analysis toolsmethods analysis tools

ShineShineclean dailyclean daily

StandardizeStandardizeremove variationsremove variationsfrom processesfrom processes

SelfSelf--disciplinedisciplinereview work andreview work andrecognize progressrecognize progress

Two additional Ss

Safety build in good practices

Support/maintenance reduce

variability and unplanneddowntime

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Remove VariabilityRemove Variability

JIT systems require managers toJIT systems require managers toreduce variability caused by bothreduce variability caused by bothinternal and external factorsinternal and external factors

Variability is any deviation from theVariability is any deviation from theoptimum processoptimum process

Inventory hides variabilityInventory hides variability

Less variability results in lessLess variability results in lesswastewaste

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Sources of VariabilitySources of Variability

1.1. Incomplete or inaccurate drawingsIncomplete or inaccurate drawingsor specificationsor specifications

2.2. Poor production processesPoor production processes

resulting in incorrect quantities,resulting in incorrect quantities,late, or nonlate, or non--conforming unitsconforming units

3.3. Unknown customer demandsUnknown customer demands

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Sources of VariabilitySources of Variability

1.1. Incomplete or inaccurate drawingsIncomplete or inaccurate drawingsor specificationsor specifications

2.2. Poor production processesPoor production processes

resulting in incorrect quantities,resulting in incorrect quantities,late, or nonlate, or non--conforming unitsconforming units

3.3. Unknown customer demandsUnknown customer demandsBothJITan

dinventory

reductionareeffe

ctivetools

inidentifyingcausesof

variability

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JustJust--InIn--Time (JIT)Time (JIT)

Powerful strategy for improvingPowerful strategy for improvingoperationsoperations

Materials arrive where theyMaterials arrive where theyare needed when they areare needed when they are

neededneeded Identifying problems andIdentifying problems and

driving out waste reducesdriving out waste reducescosts and variabilitycosts and variability

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JIT and CompetitiveJIT and CompetitiveAdvantageAdvantage

Figure 16.1Figure 16.1

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JIT and CompetitiveJIT and CompetitiveAdvantageAdvantage


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JIT LayoutJIT Layout

Table 16.1Table 16.1

Reduce waste due to movementReduce waste due to movement

JIT Layout TacticsJIT Layout Tactics

Build work cells for families of productsBuild work cells for families of products

Include a large number operations in a small areaInclude a large number operations in a small area

Minimize distanceMinimize distance

Design little space for inventoryDesign little space for inventory

Improve employee communicationImprove employee communication

Build flexible or movable equipmentBuild flexible or movable equipmentCrossCross--train workers to add flexibilitytrain workers to add flexibility

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Distance ReductionDistance Reduction

Large lots and long productionLarge lots and long productionlines with singlelines with single--purposepurposemachinery are being replaced bymachinery are being replaced bysmaller flexible cellssmaller flexible cells

Often UOften U--shaped for shorter pathsshaped for shorter pathsand improved communicationand improved communication

Often using group technologyOften using group technologyconceptsconcepts

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Increased FlexibilityIncreased Flexibility

Cells designed to be rearrangedCells designed to be rearrangedas volume or designs changeas volume or designs change

Applicable in office environmentsApplicable in office environmentsas well as production settingsas well as production settings

Facilitates both product andFacilitates both product and

process improvementprocess improvement

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Impact on EmployeesImpact on Employees

Employees are cross trainedEmployees are cross trainedfor flexibility and efficiencyfor flexibility and efficiency

Improved communicationsImproved communications

facilitate the passing on offacilitate the passing on ofimportant information about theimportant information about theprocessprocess

With little or no inventoryWith little or no inventorybuffer, getting it right the firstbuffer, getting it right the firsttime is criticaltime is critical

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Reduced Space andReduced Space andInventoryInventory

With reduced space, inventoryWith reduced space, inventorymust be in very small lotsmust be in very small lots

Units are always moving becauseUnits are always moving becausethere is no storagethere is no storage

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InventoryInventory

Inventory is at the minimum levelInventory is at the minimum level

necessary to keep operations runningnecessary to keep operations running

JIT Inventory TacticsJIT Inventory Tactics

Use a pull system to move inventoryUse a pull system to move inventoryReduce lot sizesReduce lot sizes

Develop justDevelop just--inin--time delivery systems with supplierstime delivery systems with suppliers

Deliver directly to point of useDeliver directly to point of use

Perform to schedulePerform to schedule

Reduce setup timeReduce setup time


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Reduce VariabilityReduce Variability

Inventory levelInventory level

Processdowntime

Scrap

Setuptime

Late deliveries

Qualityproblems


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InventoryInventorylevellevel

Reduce VariabilityReduce Variability

Scrap

Setuptime

Late deliveries

Qualityproblems

Processdowntime


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200200

100100 Inventory

Inventory

TimeTime

QQ22 When average order sizeWhen average order size = 100= 100average inventory isaverage inventory is 5050

QQ11

When average order sizeWhen average order size = 200= 200average inventory isaverage inventory is 100100

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Ideal situation is to have lot sizesIdeal situation is to have lot sizes

of one pulled from one process toof one pulled from one process tothe nextthe next

Can use EOQ analysis to calculateCan use EOQ analysis to calculatedesired setup timedesired setup time

Two key changes necessaryTwo key changes necessary

Improve material handlingImprove material handling

Reduce setup timeReduce setup time

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Lot Size ExampleLot Size ExampleDD== Annual demandAnnual demand = 400,000= 400,000 unitsunits

dd == Daily demandDaily demand = 400,000/250 = 1,600= 400,000/250 = 1,600 per dayper day

pp == Daily production rateDaily production rate = 4,000= 4,000 unitsunitsQQ== EOQ desiredEOQ desired = 400= 400

HH== Holding costHolding cost = $20= $20 per unitper unit

SS== Setup cost (to be determined)Setup cost (to be determined)

Q =Q =2DS2DS

HH(1(1 -- d/pd/p))QQ22 ==

2DS2DS

HH(1(1 -- d/pd/p))

SS = = = $= = = $2.402.40((QQ22)()(HH)(1)(1 -- d/pd/p))

22DD

(3,200,000)(0.6)(3,200,000)(0.6)

800,000800,000

Setup timeSetup time = $2.40/($30/= $2.40/($30/hourhour) = 0.08) = 0.08 hrhr= 4.8= 4.8 minutesminutes

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Reduce Setup CostsReduce Setup Costs

High setup costs encourage largeHigh setup costs encourage largelot sizeslot sizes

Reducing setup costs reduces lotReducing setup costs reduces lot

size and reduces averagesize and reduces averageinventoryinventory

Setup time can be reduced throughSetup time can be reduced through

preparation prior to shutdown andpreparation prior to shutdown andchangeoverchangeover

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Lower Setup CostsLower Setup Costs


Sum of orderingSum of orderingand holding costsand holding costs

Holding costHolding cost

Setup cost curvesSetup cost curves ((SS11, S, S22))TT11

SS11

TT22

SS22

C

ost

C

ost

Lot sizeLot size

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Reduce Setup TimesReduce Setup Times


Use oneUse one--touch system to eliminatetouch system to eliminateadjustments (save 10 minutes)adjustments (save 10 minutes)

Step 4Step 4

Step 5Step 5Training operators and standardizingTraining operators and standardizingwork procedures (save 2 minutes)work procedures (save 2 minutes)

Initial Setup Time

Step 2Step 2

Move material closer and

improve material handling(save 20 minutes)

Step 1Step 1

Separate setup into preparation and actualsetup, doing as much as possible while the

machine/process is operating(save 30 minutes)

Step 3Step 3

Standardize andimprove tooling

(save 15 minutes)

90 min90 min

60 min60 min

45 min45 min

25 min25 min

15 min15 min 13 min13 min

Repeat cycle until subminuteRepeat cycle until subminute

setup is achievedsetup is achievedStep 6Step 6

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Better scheduling improves performanceBetter scheduling improves performance

JIT Scheduling TacticsJIT Scheduling Tactics

Communicate schedules to suppliersCommunicate schedules to suppliers

Make level schedulesMake level schedules

Freeze part of the scheduleFreeze part of the schedulePerform to schedulePerform to schedule

Seek oneSeek one--piecepiece--make and onemake and one--piece movepiece move

Eliminate wasteEliminate wasteProduce in small lotsProduce in small lots

Use kanbansUse kanbans

Make each operation produce a perfect partMake each operation produce a perfect part

JIT SchedulingJIT Scheduling

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Level SchedulesLevel Schedules

Process frequent small batchesProcess frequent small batchesrather than a few large batchesrather than a few large batches

Make and move small lots so theMake and move small lots so the

level schedule is economicallevel schedule is economical

Freezing the schedule closest to theFreezing the schedule closest to thedue dates can improve performancedue dates can improve performance

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Scheduling Small LotsScheduling Small Lots

AA BB CCAA AAAABB BB BB BB BB CC

JIT Level MaterialJIT Level Material--Use ApproachUse Approach

AA CCAA AAAA BB BB BB BB BB CC CCBB BB BB BBAA AA

LargeLarge--Lot ApproachLot Approach

TimeTimeFigure 16.7Figure 16.7

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KanbanKanban

Kanban is the Japanese word for cardKanban is the Japanese word for card

The card is an authorization for the nextThe card is an authorization for the nextcontainer of material to be producedcontainer of material to be produced

A sequence of kanbansA sequence of kanbanspulls material throughpulls material throughthe processthe process

Many different sorts ofMany different sorts of

signals are used, butsignals are used, butthe system is still calledthe system is still calleda kanbana kanban

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KanbanKanban


WorkWorkcellcell

RawRawMaterialMaterialSupplierSupplier

KanbanKanban

PurchasedPurchased

PartsPartsSupplierSupplier

SubSub--assemblyassembly

ShipShip

KanbanKanban

KanbanKanban

KanbanKanban

KanbanKanban

FinishedFinishedgoodsgoods

CustomerCustomerorderorder

FinalFinalassemblyassembly

KanbanKanban

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More KanbanMore Kanban When the producer and user are not inWhen the producer and user are not in

visual contact, a card can be usedvisual contact, a card can be used When the producer and user are in visualWhen the producer and user are in visual

contact, a light or flag or empty spot oncontact, a light or flag or empty spot on

the floor may be adequatethe floor may be adequate

Since severalSince severalcomponents maycomponents maybe required,be required,several differentseveral differentkanban techniqueskanban techniquesmay be employedmay be employed

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Toyota Production SystemToyota Production System Continuous improvementContinuous improvement

Build an organizational culture and valueBuild an organizational culture and valuesystem that stresses improvement of allsystem that stresses improvement of allprocessesprocesses

Part of everyonePart of everyones jobs job

Respect for peopleRespect for people

People are treated asPeople are treated asknowledge workersknowledge workers

Engage mental andEngage mental andphysical capabilitiesphysical capabilities

Empower employeesEmpower employees

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Toyota Production SystemToyota Production System Standard work practiceStandard work practice

Work shall be completely specified as toWork shall be completely specified as tocontent, sequence, timing, and outcomecontent, sequence, timing, and outcome

Internal and external customerInternal and external customer--suppliersupplier

connection are directconnection are direct Product and service flows must be simpleProduct and service flows must be simple

and directand direct

Any improvement must be made inAny improvement must be made in

accordance with the scientific method at theaccordance with the scientific method at thelowest possible level of the organizationlowest possible level of the organization

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Lean OperationsLean Operations

Different from JIT in that it isDifferent from JIT in that it isexternally focused on the customerexternally focused on the customer

Starts with understanding what theStarts with understanding what the

customer wantscustomer wants

Optimize the entire process fromOptimize the entire process fromthe customerthe customers perspectives perspective

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Building a Lean OrganizationBuilding a Lean Organization

Transitioning to a lean system canTransitioning to a lean system canbe difficultbe difficult

Lean systems tend to have theLean systems tend to have the

following attributesfollowing attributesUse JIT techniquesUse JIT techniques

Build systems that help employeesBuild systems that help employees

produce perfect partsproduce perfect partsReduce space requirementsReduce space requirements

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Building a Lean OrganizationBuilding a Lean Organization

Develop partnerships withDevelop partnerships with

supplierssuppliers

Educate suppliersEducate suppliers

EliminateEliminate

nonnon

--valuevalue

--addedadded

activitiesactivities

Develop employeesDevelop employees

Make jobs challengingMake jobs challenging Build worker flexibilityBuild worker flexibility

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