Operations Management

Toyota Production System (TPS),

Just-in-Time (JIT),
and Lean Manufacturing
Handout

Dr. Ahmad Syamil, CFPIM, CIRM, CSCP
http://www.clt.astate.edu/asyamil/
asyamil AT yahoo DOT com

APICS
www.apics.org
Old Name: The American Production and Inventory Control Society
New Name: The Association for Operations Management -
Advancing Productivity, Innovation, and Competitive Success.
APICS offers four internationally recognized professional certification
programs:
1. CPIM: Certified in Production and Inventory Management
2. CFPIM: Certified Fellow in Production and Inventory Management =
CPIM + extensive knowledge sharing with others through presenting,
teaching, publishing, and other APICS educational activities.
3. CIRM: Certified in Integrated Resource Management
4. Beginning 2006: Certified Supply Chain Professional (CSCP) designation
is designed for professionals interested in increasing their knowledge of
supply chain management, those currently working in the field of supply
chain management (SCM), and for those individuals working with
enterprise resources planning (ERP) systems.


Why Toyota?

Toyota is now the world's largest
carmaker
Toyota sold 2.348 million vehicles in the
first three months of 2007.

General Motors (GM) is estimated to have
sold 2.26 million cars and small trucks
during the same period.
Why Toyota?

Why Toyota?

Why not Toyota?
GM lost $10.6 billion in 2005.
GM's pension obligations under funded by about $31
billion
GM will eliminate 30,000 jobs and close 12 North
American factories by 2008
Ford earned $2 billion worldwide, but lost $1.6 billion in
its North American operations.
Ford is shutting 10 plants and laying off 25,000 hourly
workers.
Daimler paid $36 billion for Chrysler in 1998.
Chrysler reported a $1.5 billion loss for the third quarter of
2006 and a $2 billion loss for the first quarter of 2007.
DaimlerChysler finally sold 80.1% of Chrysler to Cerberus
Capital for $7.4 billion in May of 2007.
Why Toyota?

History of Manufacturing Management
History
Sakichi Toyoda, the founder of the Toyota group of
companies, started Toyota as a textile machine
company.

Kiichiro Toyoda, son of Sakichi and founder of the
Toyota automobile business, developed the concept
of Just-in-Time in the 1930s. He decreed that Toyota
operations would contain no excess inventory and
that Toyota would strive to work in partnership with
suppliers to level production.

Taiichi Ohno, Toyota's chief of production in the post-
WWII period. He was THE main developer of Toyota
Production System (TPS).

Dr. Shigeo Shingo: A consultant to Toyota.

PS: Shingo Prize is the highest manufacturing
excellence award in the U.S. The prize is given both
to companies and individuals who contribute to the
development of manufacturing excellence.
History (cont.)
Toyota Production System (TPS) drew wide attention from the
industrial community because Toyota was a profitable car company in
Japan during and after the oil embargo in 1970s.

Outside Japan, dissemination began in earnest with the creation of the
Toyota-General Motors joint venture-NUMMI (New United Motor
Manufacturing Inc.) in California in 1984.

Widespread recognition of TPS as the model production system grew
rapidly with the publication in 1990 of The Machine That Changed the
World: The Story of Lean Production, the result of five years of
research led by the Massachusetts Institute of Technology.

The MIT researchers found that TPS was so much more effective and
efficient than traditional, mass production that it represented a
completely new paradigm and coined the term lean production to
indicate this radically different approach to production.

The term was coined by John Krafcik, a research assistant at MIT with
the International Motor Vehicle Program in the late 1980s. He then
worked for General Motors and now is a Vice President of Hyundai,
U.S.



Toyota Production System (TPS)
Definition: The production system developed by Toyota
Motor Corporation to provide best quality, lowest cost, and
shortest lead time through the elimination of waste.
TPS is comprised of two pillars, Just-in-Time and Jidoka
(autonomation) , and is often illustrated with the "house"
shown on the next slide.
TPS is maintained and improved through iterations of
standardized work and kaizen (continuous improvement),
following PlanDo-Check-Act (PDCA Cycle from Dr.
Deming), or the scientific method.

House of Toyota
Toyota Production System (TPS):
Related Terms

Ohno System
MAN (Material as Needed) - Harley
Davidson
MIPS (Minimum Inventory Production
Systems) - Westinghouse
Stockless production - Hewlett Packard
Zero inventory production system
Lean Manufacturing/Production - MIT




How to make money?
Profit equation: Sales Cost = Profit

Traditional pricing strategy: Cost + Profit = Selling price

Example:

When the cost goes up, the product selling price is raised to
reflect the higher costs and maintain the desired level of
profit.
Some even argues that the profit added should be large
enough to cover potential losses if the product does not
sell well.

Toyota accepts neither this formula nor these arguments!


Toyotas philosophy
Selling price Cost = Profit
Customers decide the selling price.
Profit is what remains after subtracting the cost from it.
The main way to increase profit is to reduce cost.
Consequently, cost reduction through waste elimination
should have the highest priority.
Toyotas paradox: Reducing cost (waste), will reduce lead
time while increasing quality and customer satisfaction.
How? We will discuss it soon.




House of Toyota
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?
Waste (muda in Japanese) 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
Founder, Toyota
1995 Corel Corp.
Introductory Quotation
Variability Occurs Because
Employees, machines, and suppliers
produce units that do not conform to
standards, are late, or are not the proper
quantity
Engineering drawings or specifications are
inaccurate
Production personnel try to produce before
drawings or specifications are complete
Customer demands are unknown
Continuous Flow
Producing and moving one item at a time (or a
small and consistent batch of items) through a
series of processing steps as continuously as
possible, with each step making just what is
requested by the next step.

It is also called the one-piece flow, single-piece
flow, and make one, move one.

Continuous Flow Production
Flow with JIT
Traditional Flow
Customers
Suppliers
Customers
Suppliers
Production Process
(stream of water)
Inventory (stagnant
ponds)
Material
(water in
stream)
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

Traditional U.S. Manufacturing Firm:
Push (old style MRP / Material
Requirements Planning System)
The production of items at times required
by a given schedule planned in advance

Material
Information (Production Schedule)
Work
Station 1
WS 2
WS 3
Pull (JIT) System
The production of items only as demanded for
use or to replace those taken for use.


Material
Information (via Kanban/Card)
Work
Station 1
WS 2
WS 3
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
Triangular Kanban
Part #
Trigger (Reorder) Point
Part Description Location
Date Triggered Lot Size
Tool #
Machine #
Kanban
Figure S12.5
Basic Fixed-Order Quantity Model and
Reorder Point Behavior
R = Reorder point
Q = Economic order quantity
L = Lead time
L
L
Q Q Q
R
Time
Number
of units
on hand
1. You receive an order quantity Q.
2. Your start using
them up over time.
3. When you reach down to
a level of inventory of R,
you place your next Q
sized order.
4. The cycle then repeats.
Kanban
The function of Kanban

The function of Inventory Reorder Point
(ROP)
Kanban System
Single card
Move only containers
with C (Conveyance)-
kanban)
e.g.: Kawasaki
Dual card
Move only container
with C- kanban
Produce only when
authorized by P
(Production)- kanban
e.g.: Toyota
Transparency 17.5
Traditional: inventory exists in case problems
arise
JIT objective: Eliminate inventory
JIT requires
Small lot sizes
Low setup time
Containers for fixed number of parts
JIT inventory: Minimum inventory to keep
system running
Inventory
Reduce ripple effect of small variations in
schedules (e.g., final assembly)
Production quantities evenly distributed over
time (e.g., 7/day)
Build same mix of products every day
Results in many small lots
1 month = 20 working days
Item Monthly Quantity Daily Quantity
A 40 2

B 60 3
Heijunka = Leveling (Smoothing) Production
Schedule using Mixed Model Sequencing
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
Photo S12.4
40 10 4
40 10 4
10 10 1



Heijunka = Leveling (Smoothing) Production Schedule using
Mixed Model Sequencing = Uniform Plant Loading
Product Demand Requirements
Monthly Daily
800 20 40
800 20 40
200 20 10



A
B
C
Largest integer that divides into all daily requirements evenly is 10
Product Daily Requirements Divided by 10
A
B
C
Mixed-model sequence
A-B-A-B-A-B-A-B-C Repeat 10 times per day
Transparency 17.7
Determining Production Sequence
Cycle Times
Working time per day = 480 minutes
Daily requirements: A = 40 units; B = 40 units; C = 10 units
The system cycle time = 480/(40+40+10) = 5.33 min/unit
Product Requirements Cycle Time
480 40 12
480 40 12
480 10 48



A 40
B 40
C 10
Transparency 17.8
Scrap
Work in process inventory level
(hides problems)
Unreliable Vendors Capacity Imbalances
Lowering Inventory
Reduces Waste
Scrap
Reducing inventory reveals
problems so they can be solved.
Unreliable Vendors Capacity Imbalances
WIP
Lowering Inventory
Reduces Waste
Scrap
Reducing inventory reveals
problems so they can be solved.
Unreliable Vendors Capacity Imbalances
WIP
Lowering Inventory
Reduces Waste
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
Which Increases
Inventory Costs
Lot Size
Cost
Setup Cost
Optimal
Lot Size
Smaller
Lot Size
Unless Setup Costs are Reduced
Lot Size
Cost
Setup Cost
Original optimal
lot size
New optimal lot size
Quick setup = Quick changeover
Reducing setup cost reducing setup time
Setup reduction time is a prerequisite to lot size
reduction
SMED (Single Minute Exchange of Dies)
method
The method has been developed by Toyota and
then expanded by Dr. Shigeo Shingo (a
consultant to Toyota), and has proven its
effectiveness in many companies by reducing
changeover times (non-value added times) from
hours to a less than 10 minutes
Setup Components
Internal Setup: consists of setup activities that must
be performed while the machine is stopped.
External Setup: consists of setup activities that can
be carried out while the machine is still
operating.
It is desirable to:
1. Convert as much internal setup to external setup
2. Improve the setup procedure


Systematic Setup Reduction

Setup Reduction
Setup Reduction:
Standardizing die holder heights reduces the need to
exchange fastening bolts
Setup Reduction Techniques
Quality At The Source
Doing it right at the first time.
Jidoka allows workers to stop production
line
Andon lights signal quality problems
Under capacity scheduling allows for
planning, problem solving & maintenance
Visual control makes problems visible
Poka-yoke prevents defects
House of Toyota
Jidoka

Toyota Production System (TPS) is supported by two pillars: Just-in-
Time and Jidoka

Jidoka = Autonomation = Automation with human intelligence.

Sakichi Toyoda, founder of the Toyota group of companies, invented
the concept of Jidoka in the early 20th Century by incorporating a
device on his automatic looms that would stop the loom from operating
whenever a thread broke. Dr. Shigeo Shingo then developed his idea
further.

This enabled great improvements in quality and freed people up to do
more value creating work than simply monitoring machines for quality
(separating peoples work and machines work).

Eventually, this simple concept found its way into every machine,
every production line, and every Toyota operation.



Jidoka Techniques
Poka-yoke (mistake or error proofing)

A form of device for building-in quality at each production
process.

This device may take many shapes and designs.

Typical types of Pokayoke are sensors, proximity switches,
stencils, light guards and alignment pins. Simple circuitry is
usually used to operate these electrical error proof devices
as they should be of low cost and simple design.

Goal: Finding defects before they occur = Zero Defects

Statistical Quality Control (SQC): Finding defects after they
occur

Visual management including using Andon Lamp

Poka-Yoke Example
Exhibit 7.10
Visual Management
Andon Lamp
Red - line stoppage
Yellow - call for help
Green - normal
operation

Kaizen
Change for better = continuous
improvement
Kaizen workshop or Kaizen event:
A group of Kaizen activity, commonly lasting
five days, in which a team identifies and
implements a significant improvement in a
process, e.g., creating a manufacturing cell.


GEMBA
GEMBA" is a Japanese word meaning "real place", where
the real action takes place. In business, GEMBA is where
the value-adding activities to satisfy the client are carried
out.
Manufacturing companies have three main activities in
relation to creating money: developing (designing),
producing and selling products. In a broad sense, GEMBA
means the sites of these three major activities.
In a narrower context, however, GEMBA means the place
where the products are made.
The term is often used to stress the that real improvement
can only take place when there is a shop-floor focus on
direct observation of current conditions where work is
done, e.g., not only in the engineering office.
Five Golden Rules of Gemba
Masaaki Imai promoted Kaizen to people outside Japan through his two highly
acclaimed books:

1. Kaizen: The Key To Japan's Competitive Success.
2. Gemba Kaizen: A Commonsense, Low-Cost Approach to Management

He preaches the Five Golden Rules of Gemba, the first of which is 'When a
problem (abnormality) arises, go to gemba first'. So what's gemba? It's the
shop floor, or equivalent. Once there, you apply

Golden Rule Two: check with gembutsu (relevant objects).

Three: take temporary counter-measures on the spot.

Four: find the root cause.

Five: standardize to prevent recurrence.

Standardization is the managing part of getting good gemba. You also need
good housekeeping (Imai is very keen on cleaning machines) and muda, the
elimination of waste. But all hinges on getting away from your desk. Obey the
master Imai. GO TO GEMBA!

5Whys: Finding the root cause of a
problem.
5 Whys analysis as an effective problem-solving technique. It is also used in Six Sigma.
Example:

Why is our client, Hinson Corp., unhappy? Because we did not deliver our services
when we said we would.


Why were we unable to meet the agreed-upon timeline or schedule for delivery? The job
took much longer than we thought it would.

Why did it take so much longer? Because we underestimated the complexity of the job.


Why did we underestimate the complexity of the job? Because we made a quick
estimate of the time needed to complete it, and did not list the individual stages needed
to complete the project.

Why didn't we do this? Because we were running behind on other projects. We clearly
need to review our time estimation and specification procedures.

Plan-Do-Check-Act
(PDCA/Shewart /Deming Cycle)
Plan: Go to the real place/factory flow (gemba), obverse
the real thing/product (gembutsu), get the real fact
(genjitsu). Focus on reducing response time, lead times,
exposing wastes in your process
Do: Conduct Kaizen. Create models of excellence so
others can aspire to. Flow everything: product, information
material replenishment, services.
Check for direction by aligning activities with long-term
business direction
Act: Take actions to sustain and accelerate improvement
activities

Source: www.leanbreakthru.com


Similarity between 3 Gs and MBWA
The 3 G's (Gemba, Gembutsu, and Genjitsu, which
translate into actual place, actual thing, and actual
situation).
In the early days of Hewlett-Packard (H-P), Dave Packard
and Bill Hewlett devised an active management style that
they called Management By Walking Around (MBWA).
Senior H-P managers were seldom at their desks. They
spent most of their days visiting employees, customers,
and suppliers. This direct contact with key people provided
them with a solid grounding from which viable strategies
could be crafted.
5S: Workplace organization/Housekeeping
5s: Important part of Kaizen/Lean Manufacturing
The S's stand for:

Seiri - keep only what is absolutely necessary, get rid of things that
you don't need, i.e. simplify or sort.
Seiton - create a location for everything, i.e. organize
or straighten.
Seiso - clean everything and keep it clean, i.e. cleanliness or
sweep.
Seiketsu - implement Seiri, Seiton and Seiso plant wide, i.e.
standardize.
Shitsuke - assure that everyone continues to follow the rules of 5S,
i.e. stick to it or self discipline.

5S in the US: Sort, Straighten, Sweep, Standardize, Self Disciple

5S + 1S (Safety) = 6S (Hytrol, etc)
5S + 2S (Safety and Security) = 7 S (Agilent Technology that was part
of Hewlett Packard)


5S
5S is simple to begin and gives good benefits.

Each individual in an organization is asked to get
rid of overburdening items.

Red tag attack: A red tag attack is the strategy of
a group of people going through the plant and
putting red tags on everything that has not been
used within the last 30 days. The items that
people feel are necessary to "hold on to" must be
justified to their superior, or the item is taken out
of the plant!


5S in a Factory






Factory tour: Toyota vs.
others.
5S in Office
Before 5 S



After 5 S


Standard Work
When manpower, equipment, and materials are used in the most efficient
combination, this is called Standard Work.
There are three elements to Standard Work:
1) Takt Time
2) Work Sequence
3) Standard Work-in-Process

Once a Standard Work is set, performance is measured and continuously
improved.
Standard Work Sheet
Scope of From Raw mat er i al Date Reviewed:
Operations To Heat Tr eat ment Janary 7, 2000
Quality Safety Standard Work Standard WIP TAKT Cycle Crew
Check Precaution in Process Quantity Time Time Size


FG
2 23.4 min 12.1 min 10
RM
The Importance of Standardized Work:

Without it, all improvement efforts using Kaizen to eliminate
waste (muda) are not sustainable. You will go back to the
original position before Kaizen.
Manufacturing Cell
Worker Routes Lengthened as Volume
Decreases
Cell 5
Worker
2
Cell 2
Worker
1
Cell 1
Worker
3
Cell 3 Cell 4
Figure 11.4
Workload balancing

Aims at maximizing operator utilization
based on the given takt time.
Is the key to adjust JIT lines to demand
fluctuations
Requires flexible operators
Production Line Balancing
Improving Lead Time:

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Current Situation
Percent of Lead Time
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
Approach # 1: Reducing Value Added (VA) Time by 50%
VA
Approach # 2: Reducing Non Value Added (VA) Time by 50%
NVA (Non Value Added)
NVA
NVA
VA
VA
Value Stream Mapping
SM

What?
Why?
Who?
When?
Where?
How?
A visual tool for identifying all activities of the planning,
and manufacturing process to identify waste.


Provides a tool to visualize what is otherwise usually
invisible.

The leaders of each product family need to have a
primary role in developing the maps for their own area.

Develop a current-state map before improvements are
made so that the efforts and benefits can be quantified.

On the shop floor, not from your office. You need the real
information, not opinion or old data.

Next page
Value Stream Map Symbols
Spot weld
ABC
plating
C/T = 30 sec
C/O = 10 min
3 shifts
2% scrap rate
Process
Finished
goods
Vendor Data box
3,000 units
= 1 day
Inventory
Push Supermarket:
the location of a
predetermined
standard inventory
Physical pull
Mon
and
Wed
Shipment
C/T = Cycle Time
C/O = Change over or setup time
Current Value Stream Map
Future Value Stream Map
Attributes of Lean Producers - they
use JIT to eliminate 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
apply Total Productive Maintenance (TPM)
The Five Steps of Lean
Production/Toyota Production
System Implementation

Step 1: Specify Value
Define value from the perspective of the final customer. Express value in terms of a
specific product, which meets the customer's needs at a specific price and at a specific
time.
Step 2: Value Stream Mapping.
Identify the value stream, the set of all specific actions required to bring a specific
product through the three critical management tasks of any business: the problem-
solving task, the information management task, and the physical transformation task.
Create a map of the Current State and the Future State of the value stream. Identify and
categorize waste in the Current State, and eliminate it!
Step 3: Create Continuous Flow
Make the remaining steps in the value stream flow. Eliminate functional barriers and
develop a product-focused organization that dramatically improves lead-time.
Step 4: Create Pull Production
Let the customer pull products as needed.
Step 5: Perfection
There is no end to the process of reducing effort, time, space, cost, and mistakes. Return
to the first step and begin the next lean transformation, offering a product which is ever
more nearly what the customer wants.

Comparison of
MRP (Material Requirements Planning),
JIT, and TOC (Theory of Constraints)
Loading of operations


Batch sizes


Importance of data
accuracy
Speed of scheduled
development
Flexibility
Cost
Goals

Planning focus
Production basis
Checked by capacity
requirements
Planning afterward
One week or more


Critical

Slow

Lowest
Highest
Meet demand
Have doable plan
Master schedule
Plan
Controlled by kanban
system

Small as possible


Unnecessary

Very fast

Highest
Lowest
Meet demand
Eliminate waste
Final assembly schedule
Need
Controlled by
bottleneck operation

Variable to exploit
constraint
Critical for bottleneck
and feeder operations

Fast

Moderate
Moderate
Meet demand
Maximize profits
Bottleneck
Need and plan
MRP JIT TOC