Transparency Masters to accompany Heizer/Render

Principles of Operations Management, 5e, and Operations

Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-1
Operations
Management

Just-in-Time and Lean Production
Systems

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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-2
Outline
JUST-IN-TIME AND LEAN PRODUCTION
GLOBAL COMPANY PROFILE: GREEN GEAR
CYCLING
SUPPLIERS
Goals of JIT Partnerships
Concerns of Suppliers
JIT LAYOUT
Distance Reduction
Increased Flexibility
Impact on Employees
Reduced Space and Inventory

Transparency Masters to accompany Heizer/Render
Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-3
Outline - Continued
INVENTORY
Reduce Variability
Reduce Inventory
Reduce Lot Sizes
Reduce Setup Costs
SCHEDULING
Level Schedules
Kanban
QUALITY
EMPLOYEE EMPOWERMENT
LEAN PRODUCTION
JIT IN SERVICES


Transparency Masters to accompany Heizer/Render
Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-4
Learning Objectives
When you complete this supplement, you should
be able to :
Identify or Define:
Types of waste
Variability
Kanban
Describe or Explain:
Just-in-Time (JIT) philosophy
Pull systems
Push systems
The goals of JIT partnerships
Lean Production
Transparency Masters to accompany Heizer/Render
Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-5
Waste is anything other than the
minimum amount of equipment,
materials, parts, space, and
workers time, which are absolutely
essential to add value to the
product.
Shoichiro Toyoda
President, Toyota
1995 Corel Corp.
Introductory Quotation
Transparency Masters to accompany Heizer/Render
Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-6
Green Gear Cycling
Designs and manufacturers high performance
travel bicycles (bike-in-a-suitcase!)
Strategy is mass customization with low inventory,
work cells, and elimination of machine setups.
Major focus on JIT and supply-chain
management.
Two lines with seven work cells
One day throughput time
Focus on quality
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-7
Supplier Production Distribution
System
Supplier Distribution
Inventories
Raw material
in-transit
Sub-assembly
parts in-transit
Maintenance,
repair, and ordering
supplies in-transit
Raw Material
Inventory
Work-in-process
Inventory
Factory
Finished
Goods
Inventory
Component
Inventory
MRO
Inventory
Purchasing
Production and
Inventory Control
Shipping and
Traffic
Retailer
Inventory
Orders
Warehouse
Inventory
Productions Inventories
Customer
Distribution
Inventories
Orders
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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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.
What is Just-in-Time?
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Lean Production
Lean Production supplies customers with exactly
what the customer wants, when the customer
wants, without waste, through continuous
improvement.
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Attacks waste
Anything not adding value to the product
From the customers perspective
Exposes problems and bottlenecks caused by
variability
Deviation from optimum
Achieves streamlined production
By reducing inventory
What Does Just-in-Time Do?
Transparency Masters to accompany Heizer/Render
Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-11
Overproduction
Waiting
Transportation
Inefficient processing
Inventory
Unnecessary motion
Product defects
1995
Corel
Corp.
Types of Waste
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-12
Waste Reduction (%)
82%
50%
50%
30%
30%
20%
40%
0% 20% 40% 60% 80% 100%
Work-in-Process
Inventory
Raw Material
Inventory
Lead Time
Space
Finished Goods
Inventory
Scrap
Setup Time
JIT Reduced Waste
at Hewlett-Packard
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-13
Push versus Pull
Push system: material is pushed into
downstream workstations regardless of whether
resources are available

Pull system: material is pulled to a workstation
just as it is needed

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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Suppliers
reduced number of vendors
supportive supplier relationships
quality deliveries on time
Layout
work-cell layouts with testing at each step of the process
group technology
movable, changeable, flexible machinery
high level of workplace organization and neatness
reduced space for inventory
delivery direct to work areas
JIT Contribution to Competitive
Advantage
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Inventory
small lot sizes
low setup times
specialized bins for holding set number of parts
Scheduling
zero deviation from schedules
level schedules
suppliers informed of schedules
Kanban techniques
JIT Contribution to Competitive
Advantage - Continued
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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JIT Contribution to Competitive
Advantage - Continued
Preventive Maintenance
scheduled
daily routine
operator involvement
Quality Production
statistical process control
quality by suppliers
quality within firm
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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JIT Contribution to Competitive
Advantage - Continued
Employee Empowerment
empowered and cross-trained employees
few job classifications to ensure flexibility of employees
training support
Commitment
support of management, employees, and suppliers
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Results
Queue and delay reduction, speedier throughput, freed
assets, and winning orders
Quality improvement, reduces waste and wins orders
Cost reduction increases margin or reduces selling
price
Variability reductions in the workplace reduces waste
and wins orders
Rework reduction, reduces waste and wins orders
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-19
Yielding
Faster response to the customer at lower cost and
higher quality
A competitive advantage!
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-20
Suppliers
Preventive
Maintenance
Layout
Inventory
Scheduling
Quality
Employee
Empowerment
JIT
Just-in-Time
Success Factors
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Few
Nearby
Repeat business
Analysis and support to enable desirable suppliers to
become or stay price competitive
Competitive bidding mostly limited to new purchases
Buyer resists vertical integration and subsequent
wipeout of supplier business
Suppliers encouraged to extend JIT to their suppliers
(2
nd
and 3
rd
tier suppliers)
Characteristics of JIT Partnerships
Suppliers
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Characteristics of JIT Partnerships
Quantities
Steady output rate
Frequent deliveries in small-lot quantities
Long-term contract agreements
Minimal or no paperwork (use EDI or internet)
Delivery quantities fixed for whole contract term
Little or no permissible overage or underage
Suppliers package in exact quantities
Suppliers reduce their production lot sizes
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-23
Minimal product specifications imposed on
suppliers
Help suppliers meet quality requirements
Close relationship between buyers and
suppliers quality assurance people
Suppliers use poka-yoke and process control
charts instead of lot-sampling techniques
Characteristics of JIT Partnerships
Quality
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Characteristics of JIT Partnerships
Shipping
Scheduling of inbound freight
Gain control by use of company-owned or
contract shipping and warehousing
Use of Advanced Shipping Notice (ASN)
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Goals of JIT partnerships
Elimination of unnecessary activities
Elimination of in-plant inventory
Elimination of in-transit inventory
Elimination of poor suppliers
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Diversification
Poor customer scheduling
Frequent engineering changes
Quality assurance
Small lot sizes
Physical proximity
Concerns of Suppliers
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Streamlined Production
Flow with JIT
Traditional Flow
Customers
Suppliers
Customers
Suppliers
Production Process
(stream of water)
Inventory (stagnant
ponds)
Material
(water in
stream)
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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JIT objective: Reduce movement of people and
material
Movement is waste!
JIT requires
Work cells for product families
Moveable or changeable machines
Short distances
Little space for inventory
Delivery directly to work areas
Layout
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Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Process Layout Work Cell
Saw
Lathe
Grinder
Heat
Treat
Lathe
Lathe
Lathe Saw
Heat
Treat
Grinder
Grinder
Press
Press
1
1
2
3
4 5
2
6
Saw
Press
Work Cell versus
Process Layout
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Inventory Hides Problems Just as
Water in a Lake Hides Rocks
Scrap
Setup
time
Late
deliveries
Quality
problems
Process
downtime
Scrap
Setup
time
Late
deliveries
Quality
problems
Process
downtime
Inventory level
Inventory level
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Scrap
Work in process inventory level
(hides problems)
Unreliable
Vendors
Capacity
Imbalances
Lowering Inventory
Reduces Waste
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Scrap
Reducing inventory reveals
problems so they can be solved.
Unreliable
Vendors
Capacity
Imbalances
WIP
Lowering Inventory
Reduces Waste
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Scrap
Reducing inventory reveals
problems so they can be solved.
Unreliable
Vendors
Capacity
Imbalances
WIP
Lowering Inventory
Reduces Waste
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
16-34
Customer
orders 10
Lot size = 5
Lot 1 Lot 2
Lot size = 2
Lot 1 Lot 2 Lot 3 Lot 4 Lot 5
Reducing Lot Sizes Increases the
Number of Lots
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Unless Setup Costs are Reduced
Lot Size
Cost
Setup Cost
Original
optimal
lot size
New optimal
lot size
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Principles of Operations Management, 5e, and Operations
Management, 7e
2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Steps to Reduce Setup Time
Initial Setup Time
Separate setup into preparation, and actual setup,
doing as much as possible while the
machine/process is running (save 30 minutes)
Move material closer and improve
material handling (save 20 minutes)
Standardize and
improve tooling (save
15 minutes)
90 min
60 min
45 min
25 min
15 min
Use one-touch system to
eliminate adjustments (save
10 minutes)
Training operators and
standardizing work
procedures (save 2
minutes)
Step 1
Step 2
Step 3
Step 5
13 min
Step 4
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Principles of Operations Management, 5e, and Operations
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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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A
A A B B B C
JIT Small Lots
Large-Lot Approach
Time
Time
A A B B B C
A A A B B B B B B C C
JIT produces same amount in
same time if setup times are
lowered
Small versus Large Lots
Small lots also increase flexibility to meet
customer demands
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Principles of Operations Management, 5e, and Operations
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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Japanese word for card
Pronounced kahn-bahn (not can-ban)
Authorizes production from downstream operations
Pulls material through plant
May be a card, flag, verbal signal etc.
Used often with fixed-size containers
Add or remove containers to change production rate
Kanban
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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Diagram of Outbound Stockpoint
with Warning-Signal Marker
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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Kanban Signals Pull Material
Through the Process
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Principles of Operations Management, 5e, and Operations
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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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JIT in Services
All the techniques
used in
manufacturing are
used in services
Suppliers
Layouts
Inventory
Scheduling
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Principles of Operations Management, 5e, and Operations
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2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
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Attributes of Lean Producers - They
use JIT to eliminate virtually all inventory
build systems to help employees product a perfect part
every time
reduce space requirements
develop close relationships with suppliers
educate suppliers
eliminate all but value-added activities
develop the workforce
make jobs more challenging
reduce the number of job classes and build worker
flexibility