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A Lecture on Japanese Production Management
@VINAKIPDecember 27, 2006
Yoshiki MatsuiYokohama National University
Japanese Production Management
TQM (Total Quality Management)JIT (Just-in-Time Manufacturing)SCM (Supply Chain Management)NPD (New Product Development)
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Changing Quality Assumptions 1 From To
Reactive Inspection AQL(acceptable quality level) Meet the specifications Product-oriented Blame placingQuality vs. operations
ProactivePreventionZD(zero defect) goal
Continuous improvementProcess-orientedProblem solvingQuality and operations
Changing Quality Assumptions 2 From To
Cost or quality Operations only
Predominantly blue-collar causedDefects should be hidden
Cost and qualityMarketing, engineering, and operationsPredominantly white-collar causedDefects should be highlighted
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Changing Quality Assumptions 3 From To
Quality department has quality problems
Subordinated to management team General managers not evaluated on quality
Quality costs moreQuality is technical Schedule first
Purchasing, R&D, marketing, and operations have quality problemsPart of management team
Quality performance part of general management reviewQuality costs lessQuality is managerialQuality first
Just-in-Time Manufacturing:Definition
Just-in-time manufacturingdescribes the idea of producingthe necessary unitsin the necessary quantitiesat the necessary timeand eliminating all sources of waste in production
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Just-in-Time Manufacturing:Objective
JIT system based on a philosophy of eliminating waste and utilizing the full capability of each worker.The objective is to improve return on investment by increasing revenues (through quality, delivery, and flexibility improvements) , reducing costs and investment required.
The Toyota Production System
Based on two philosophies:
1. Elimination of waste
2. Respect for people
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Elimination of Waste
1. Focused factory networks
2. Group technology
3. Quality at the source
4. JIT production
5. Uniform plant loading
6. Kanban production control system
7. Minimized setup times
Minimizing Waste: Focused Factory Networks
CoordinationSystem Integration
These are small specialized plants that limit the range of products produced (sometimes only one type of product for an entire facility)
These are small specialized plants that limit the range of products produced (sometimes only one type of product for an entire facility)
Some plants in Japan have as few as 30 and as many as 1000 employees
Some plants in Japan have as few as 30 and as many as 1000 employees
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Minimizing Waste: Group Technology (Part 1)
Using Departmental Specialization for plant layout can cause a lot of unnecessary material movement
Using Departmental Specialization for plant layout can cause a lot of unnecessary material movement
Saw Saw
Lathe PressPress
Grinder
LatheLathe
Saw
Press
Heat Treat
Grinder
Note how the flow lines are going back and forthNote how the flow lines are going back and forth
Minimizing Waste: Group Technology (Part 2)
Revising by using Group Technology Cells can reduce movement and improve product flow
Revising by using Group Technology Cells can reduce movement and improve product flow
Press
Lathe
Grinder
Grinder
A
2
BSaw
Heat Treat
LatheSaw Lathe
PressLathe
1
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Minimizing Waste: Uniform Plant Loading (heijunka)
Not uniform Jan. Units Feb. Units Mar. Units Total
1,200 3,500 4,300 9,000
Uniform Jan. Units Feb. Units Mar. Units Total
3,000 3,000 3,000 9,000
Suppose we operate a production plant that produces a single product. The schedule of production for this product could be accomplished using either of the two plant loading schedules below.
Suppose we operate a production plant that produces a single product. The schedule of production for this product could be accomplished using either of the two plant loading schedules below.
How does the uniform loading help save labor costs?How does the uniform loading help save labor costs?
or
Minimizing Waste: Inventory Hides Problems
Work inprocess queues(banks)
Changeorders
Engineering designredundancies
Vendordelinquencies
Scrap
Designbacklogs
Machine downtime
Decisionbacklogs
Inspectionbacklogs
Paperworkbacklog
Example: By identifying defective items from a vendor early in the production process the downstream work is saved
Example: By identifying defective work by employees upstream, the downstream work is saved
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Minimizing Waste: Kanban Production Control Systems
Storage Part A
Storage Part AMachine
Center Assembly Line
Material Flow
Card (signal) Flow
Withdrawal kanban
Once the Production kanban is received, the Machine Center produces a unit to replace the one taken by the Assembly Line people in the first place
This puts the system back were it was before the item was pulled
The process begins by the Assembly Line people pulling Part A from Storage
Production kanban
Determining the Number of KanbansNeeded
Setting up a kanban system requires determining the number of kanbans cards (or containers) needed
Each container represents the minimum production lot size
An accurate estimate of the lead time required to produce a container is key to determining how many kanbans are required
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The Number of Kanban Card Sets
CSDL
k
)(1
container theof SizestockSafety timelead during demand Expected
+=
+=
k = Number of kanban card sets (a set is a card)D = Average number of units demanded over some time periodL = lead time to replenish an order (same units of time as demand)S = Safety stock expressed as a percentage of demand during leadtimeC = Container size
Example of Kanban Card Determination: Problem Data
A switch assembly is assembled in batches of 4 units from an “upstream” assembly area and delivered in a special container to a “downstream” control-panel assembly operation
The control-panel assembly area requires 5 switch assemblies per hour
The switch assembly area can produce a container of switch assemblies in 2 hours
Safety stock has been set at 10% of needed inventory
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Example of Kanban Card Determination: Calculations
3or ,75.24
5(2)(1.1))(1
container theof SizestockSafety timelead during demand Expected
==+
=
+=
CSDL
k
Always round up!
Respect for People
Level payrolls
Cooperative employee unions
Subcontractor networks
Bottom-round management style
Quality circles (Small Group Involvement Activities)
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Toyota Production System’s Four Rules
1. All work shall be highly specified as to content, sequence, timing, and outcome
2. Every customer-supplier connection must be direct, and there must be an unambiguous yes-or-no way to send requests and receive responses
3. The pathway for every product and service must be simple and direct
4. Any improvement must be made in accordance with the scientific method, under the guidance of a teacher, at the lowest possible level in the organization
Production smoothing
Reduction of lead time
Production quantity controladaptable to demand changes
Small lot productionSingle-piece production
under balanced line
Setup-time reduction
Improvement activities by small groups
Machinelayout
Multi-functionworker
Toyota System
Standardoperations
KANBAN system
Just-in-time Production
Inventory cutting
Cost reduction by eliminating waste
Profit increase
Quality assurance
Autonomation
Functionalmanagement
Increase of worker’s morale
Respect forhumanity
CWQC
Increase of revenue
Workforce cutting
Flexibility ofworkforce
Changes instandard
operationsroutine
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Elements of Just-in-Time System
Leveled master scheduleSimple parts withdrawal system (Kanban) Small lot size, often 1Setup time reductionMulti-functional workerJIT layout and equipmentPerfect quality and autonomationSupplier relations
Stabilizing the Master Schedule
To use JIT, the master schedule must be stabilized and leveled. This requires constant daily production, within the time frame of the master schedule, and mixed model assembly. As a result, the demand on preceding work centers is nearly constant.
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Stabilizing the Master Schedule
Suppose that 1 month of production is scheduled in advance as follows:
20,000 units of product A10,000 units of product B10,000 units of product C
If there are 20 days of operation, then daily schedule will call for 1000A, 500B, and 500C. The production sequence will be |AABC|AABC|AABC|AABC|……...
Pull System
Customers
Sub
Sub
Fab
Fab
Fab
Fab
Vendor
Vendor
Vendor
Vendor
Final Assembly
Here the customer starts the process, pulling an inventory item from Final Assembly…
Here the customer starts the process, pulling an inventory item from Final Assembly…
Then sub-assembly work is pulled forward by that demand…
Then sub-assembly work is pulled forward by that demand…
The process continues throughout the entire production process and supply chain
The process continues throughout the entire production process and supply chain
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KANBAN System
InputArea
OutputArea
InputArea
OutputArea
WorkCenter
A
WorkCenter
BIn Transit
ProductionKanban Post
WithdrawalKanban Post
ProductionCard
Withdrawal Card
Withdrawal KANBAN Cards
Part NumberPart Name
W262WHEEL
Box Capacity Box Type Issue No.
20 B 40F8
Preceding Process
Subsequent Process
STAMPINGA12
RUBBER TIREB6
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Withdrawal KANBAN Cards
Store ShelfNo.
Item No.
Item BackNo.
Item Name
Box Capacity Box Type Issue No.
20 B 418
Preceding Process
Subsequent Process
FORGINGB-2
MACHININGM-6
Car Type
5E215 A2-1535670S07
DRIVE PINION
SX50BC
Production KANBAN Cards
Part NumberPart Name
Y16032WHEEL RIM
ProcessSTAMPING
A12
Container Capacity:
Stock Location atWhich to store: 1879-2
20
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Production KANBAN Cards
Store ShelfNo.
Item No.
Item BackNo.
56790-321
ProcessMACHINING
SB-8
Car Type
Item Name CRANK SHAFT
SX50BC-150
F26-18 A5-34
The Number of Containers
n = DT/Cn = total number of containersD = demand rate of the using work centerC = container size in number of parts, usually less than 10% of daily demandT= time for a container to complete an entire circuit: filled, wait, moved, used, and returned to be filled again. This is also called lead time.
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Reducing Setup Time and Lot Sizes
Reducing lot sizes, setup times and lead time is the key to decreasing inventories in a JIT system. The objective is a lot size of 1 unit. This is done through small-group improvement activities and management and labor cooperative efforts.
From Single Setups to One-touch
Single setups have been sought in many manufacturing plants. They have been evolving to a setup of less than 3 minutes and further 1 minutes.
Step 1: Separating external and internal setupsStep 2: converting internal setups to external
setups as much as possible
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Non-JIT Initial Layout
Stockrooms
FinalAssembly
Supplier A Supplier B
Work Centers
JIT Layout
FinalAssembly
Supplier A Supplier B
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JIT Layout with GT
FinalAssembly
Supplier A Supplier B
LINE 1
LINE 2
Maintenance of Equipment
With a JIT system, inventories have been cut to the bone. Equipment must be kept in a good state of repair.Workers take responsibility for the most of their own maintenance.Maintenance time is also provided between shifts for routine and preventive maintenance.
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Multifunction Workers
Each worker must be able tooperate several machines in a group,shut off the machines and move on to another, setup machines, do routine maintenance, and inspect the parts
Workers must be cross-trained in several different skills.Pay is often based on seniority and job skill level.
Participation in Problem-Solving Activities
To engage the workers and engineers actively in problem-solving activities on the shop floor, JIT systems use quality teams and suggestion systems. An environment of participation must be created to get all employees to contribute toward problem solving.
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Link with Suppliers
Suppliers are viewed as the external factory and part of the production team, as much as internal work centers.Local suppliers with short lead times are preferred. In some cases four deliveries are required each day.Deliveries are made directly to assembly line without receiving or inspection.
Long-term Relationship with Suppliers
Direct deliveries to assembly line require complete confidence in the supplier’s quality. To ensure the quality of parts and to establish a long-term relationship with suppliers, there is a tendency to use single-source suppliers.
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Implementation of JIT SystemObtain commitment from top managementGain the cooperation of the work force Start with the final assembly lineReduce setup times and lot sizes in fabrication areas, working backward from final assemblyBalance fabrication rates with final assembly production ratesExtend JIT to the suppliers
Features of Lean Production
• Management philosophy• “Pull” system though the plant
WHAT IT IS
• Employee participation• Industrial engineering/basics• Continuing improvement• Total quality control• Small lot sizes
WHAT IT REQUIRES
• Attacks waste• Exposes problems and bottlenecks• Achieves streamlined production
WHAT IT DOES
• Stable environment
WHAT IT ASSUMES
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Lean Implementation Requirements:Total Quality Control
Worker responsibility
Measure SQC
Enforce compliance
Fail-safe methods
Automatic inspection
Lean Implementation Requirements:Improve Product Design
Standard product configuration
Standardize and reduce number of parts
Process design with product design
Quality expectations
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Lean Implementation Requirements: Concurrently Solve Problems
Root cause
Solve permanently
Team approach
Line and specialist responsibility
Continual education
Lean Implementation Requirements:Measure Performance
Emphasize improvement
Track trends
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Supply-chain is a term that describes how organizations (suppliers, manufacturers, distributors, and customers) are linked together
What is a Supply Chain?
Suppliers
Inputs
Suppliers
Service support operations
Transformation
Manufacturing
Local service providers
Localization
Distribution
Customers
Output
Customers
Services
Supply networks
Manufacturing
What is Supply Chain Management?
Supply-chain management is a total system approach to managing the entire flow of information, materials, and services from raw-material suppliers through factories and warehouses to the end customer
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Formulas for Measuring Supply-Chain Performance
One of the most commonly used measures in all of operations management is “Inventory Turnover”
In situations where distribution inventory is dominant, “Weeks of Supply” is preferred and measures how many weeks’ worth of inventory is in the system at a particular time
valueinventory aggregate Averagesold goods ofCost turnoverInventory =
weeks52 sold goods ofCost
valueinventory aggregate Averagesupply of Weeks
=
Example of Measuring Supply-Chain Performance
Suppose a company’s new annual report claims their costs of goods sold for the year is $160 million and their total average inventory (production materials + work-in-process) is worth $35 million. This company normally has an inventory turn ratio of 10. What is this year’s Inventory Turnover ratio? What does it mean?
Suppose a company’s new annual report claims their costs of goods sold for the year is $160 million and their total average inventory (production materials + work-in-process) is worth $35 million. This company normally has an inventory turn ratio of 10. What is this year’s Inventory Turnover ratio? What does it mean?
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Example of Measuring Supply-Chain Performance (Continued)
= $160/$35= 4.57
Since the company’s normal inventory turnover ration is 10, a drop to 4.57 means that the inventory is not turning over as quickly as it had in the past. Without knowing the industry average of turns for this company it is not possible to comment on how they are competitively doing in the industry, but they now have more inventory relative to their cost of goods sold than before.
= $160/$35= 4.57
Since the company’s normal inventory turnover ration is 10, a drop to 4.57 means that the inventory is not turning over as quickly as it had in the past. Without knowing the industry average of turns for this company it is not possible to comment on how they are competitively doing in the industry, but they now have more inventory relative to their cost of goods sold than before.
valueinventory aggregate Averagesold goods ofCost turnoverInventory =
Bullwhip Effect
Ord
er
Qua
ntity
Time
Retailer’s Orders
Ord
er
Qua
ntity
Time
Wholesaler’s Orders
Ord
er
Qua
ntity
Time
Manufacturer’s Orders
The magnification of variability in orders in the supply-chainThe magnification of variability in orders in the supply-chain
A lot of retailers each with little variability in their orders….
A lot of retailers each with little variability in their orders….
…can lead to greater variability for a fewer number of wholesalers, and…
…can lead to greater variability for a fewer number of wholesalers, and…
…can lead to even greater variability for a single manufacturer.
…can lead to even greater variability for a single manufacturer.
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What is Outsourcing?
Outsourcing is defined as the act of moving a firm’s internal activities and decision responsibility to outside providers
Reasons to Outsource
Organizationally-drivenImprovement-drivenFinancially-drivenRevenue-drivenCost-drivenEmployee-driven
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Value Density
Value density is defined as the value of an item per pound of weight
It is used as an important measure when deciding where items should be stocked geographically and how they should be shipped
Mass Customization
Mass customization is a term used to describe the ability of a company to deliver highly customized products and services to different customers
The key to mass customization is effectively postponing the tasks of differentiating a product for a specific customer until the latest possible point in the supply-chain network
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New Product DevelopmentDESIGN PROCESS
Strategies for New-Product Introduction
New-Product Development Process
Cross-Functional Product Design
DESIGN TOOLS
Quality Function Deployment
Design for ManufacturingValue Analysis
Modular Design
Why Does Operations Care?
In the old days, “over the wall”Now
must be able to make ittechnologyavailability of resources
must have the capacitymust deliver a quality product or servicemust decide inventory policies
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Strategies for New Product Introduction
Market Pull (“We Make What We Can Sell”)food industry
Technology Push (“We Sell What We Can Make”)
electronics
Interfunctional Viewpersonal computers
New Product Development Process
Concept Development
Product or Service Design
Pilot Production/Testing
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New Product Design Process
Pilot production/testing Final process design
Preliminary process design
Concept development
Product design
Cross Functional Product Design
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Why Don’t Different Areas Cooperate?
They don’t speak the same language.They have different performance measures.They tend to have different personality types, i.e. they don’t think alike.They are defensive about their own turfs.They are in different physical locations.They “don’t have time.”
Quality Function DeploymentAlso known as “House of Quality”Developed in Japan in 1972.Tool for concurrent design of productsCustomer Attributes (“Voice of the Customer”)Engineering Characteristics (“Voice of the Engineer”)TradeoffsCompetitors’ Comparison
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HOUSE OF QUALITY (QFD)
Design for Manufacturing (DFM)
Value Analysis (or engineering)Simplification of products and processes
Modular DesignMultiple products using common parts, processes and modules.
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Value Analysis
Terms in Value Analysis:Objective: primary purpose of the productBasic Function: Makes the objective possibleSecondary Function: How to perform the basic function
Value analysis seeks to improve the secondary function, e.g. how to open a can or make a tool box.
Objectives of Value AnalysisEnhance the design of a good or service to provide higher quality at the same price, or the same quality at a lower price.
Modify the design of production process to lower the cost of a good or service while maintaining or improving quality.
In other words, improve the ratio of usefulness (quality) to cost.
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DFM: An Example(c) Final design
Design for push-and-snap assembly
(b) Revised design
One-piece base &elimination of fasteners
(a) The original design
Assembly using common fasteners
DFM: An Examplea. Original Design
• 24 different parts to assemble
• 7 unique parts to manage in inventory
b. Revised Design
• 4 different parts to assemble
• 3 unique parts to manage in inventory
c. Final Design
• 2 parts to assemble and manage
Question: How easy would it be to detect an assembly error with each of the designs?
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Modular Design
Allows greater variety through ‘mixing and matching’ of modules
Develops a series of basic product components (modules) for later assembly into multiple products
Reduces complexity and costs associated with large number of product variations
Easy to subcontract production of modules
A Typical Supply Chain
Reverse supply chain