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Just-in-Time and Lean Production Systems

Professor Ahmadi

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WasteWaste is anything other than the is anything other than the minimumminimum amount of equipment, amount of equipment, materials, parts, space, and worker’s materials, parts, space, and worker’s time, which are absolutely essential time, which are absolutely essential to to add valueadd value to the product. to the product.

Shoichiro ToyodaShoichiro Toyoda

President, ToyotaPresident, Toyota

Introductory QuotationIntroductory Quotation

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OverproductionOverproduction WaitingWaiting TransportationTransportation Inefficient processingInefficient processing InventoryInventory Unnecessary motionUnnecessary motion Product defectsProduct defects

Types of WasteTypes of Waste

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Management philosophy of continuous and forced Management philosophy of continuous and forced problem solvingproblem solving

Supplies and components are ‘Supplies and components are ‘pulledpulled’ through ’ through system to arrive system to arrive wherewhere they are needed they are needed whenwhen they are needed.they are needed.

What Does Just-in-Time Do? What Does Just-in-Time Do? Attacks wasteAttacks waste

• Anything not adding value to the productAnything not adding value to the product From the customer’s perspectiveFrom the customer’s perspective

Exposes problems and bottlenecks caused by Exposes problems and bottlenecks caused by variabilityvariability• Deviation from optimumDeviation from optimum

Achieves streamlined productionAchieves streamlined production• By reducing inventoryBy reducing inventory

What is Just-in-Time?What is Just-in-Time?

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Push versus PullPush versus Pull

PushPush system: material is system: material is pushedpushed into into downstream workstations regardless of downstream workstations regardless of whether resources are availablewhether resources are available

PullPull system: material is system: material is pulledpulled to a to a workstation just as it is neededworkstation just as it is needed

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SuppliersSuppliers• reduced number of vendorsreduced number of vendors• supportive supplier relationshipssupportive supplier relationships• quality deliveries on timequality deliveries on time

LayoutLayout• work-cell layouts with work-cell layouts with testing at each step of testing at each step of

the processthe process• movable, changeable, flexible machinerymovable, changeable, flexible machinery• high level of workplace organization and high level of workplace organization and

neatnessneatness• reduced space for inventoryreduced space for inventory• delivery direct to work areasdelivery direct to work areas

JIT Contribution to Competitive AdvantageJIT Contribution to Competitive Advantage

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InventoryInventory• small lot sizessmall lot sizes• low setup timeslow setup times• specialized bins for holding set number of partsspecialized bins for holding set number of parts

SchedulingScheduling• zero deviation from scheduleszero deviation from schedules• level scheduleslevel schedules• suppliers informed of schedulessuppliers informed of schedules• Kanban techniquesKanban techniques

JIT Contribution to Competitive Advantage - JIT Contribution to Competitive Advantage - ContinuedContinued

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JIT Contribution to Competitive Advantage - JIT Contribution to Competitive Advantage - ContinuedContinued

Preventive MaintenancePreventive Maintenance• scheduledscheduled• daily routinedaily routine• operator involvementoperator involvement

Quality ProductionQuality Production• statistical process controlstatistical process control• quality by suppliersquality by suppliers• quality within firmquality within firm

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JIT Contribution to Competitive Advantage - JIT Contribution to Competitive Advantage - ContinuedContinued

Employee EmpowermentEmployee Empowerment• empowered and cross-trained employeesempowered and cross-trained employees• few job classifications to ensure flexibility of few job classifications to ensure flexibility of

employeesemployees• training supporttraining support

CommitmentCommitment• support of management, employees, and support of management, employees, and

supplierssuppliers

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ResultsResults

Queue and delay reduction, speedier throughput, Queue and delay reduction, speedier throughput, freed assetsfreed assets

Quality improvement, reduces waste and wins ordersQuality improvement, reduces waste and wins orders Cost reduction which reduces selling priceCost reduction which reduces selling price Variability reductions in the workplace reduces waste Variability reductions in the workplace reduces waste Rework reduction, reduces waste and wins ordersRework reduction, reduces waste and wins orders Faster response to the customer at lower cost and Faster response to the customer at lower cost and

higher quality, which leads to:higher quality, which leads to:

A competitive advantage!

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Suppliers

Preventive Maintenance

Layout

Inventory

Scheduling

Quality

Employee Empowerment

JIT

Just-in-TimeJust-in-TimeSuccess FactorsSuccess Factors

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Goals of JIT Partnership with SuppliersGoals of JIT Partnership with Suppliers JIT partnerships eliminateJIT partnerships eliminate

• Unnecessary activitiesUnnecessary activities• In - plant inventoryIn - plant inventory• In - transit inventoryIn - transit inventory• Poor suppliers Poor suppliers

SuppliersSuppliers

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Goals of JIT partnershipsGoals of JIT partnerships

Elimination of unnecessary activitiesElimination of unnecessary activities Elimination of in-plant inventoryElimination of in-plant inventory Elimination of in-transit inventoryElimination of in-transit inventory Elimination of poor suppliersElimination of poor suppliers

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DiversificationDiversification Poor customer schedulingPoor customer scheduling Frequent engineering changesFrequent engineering changes Quality assuranceQuality assurance Small lot sizesSmall lot sizes Physical proximityPhysical proximity

Concerns of SuppliersConcerns of Suppliers

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JIT objective: Reduce movement of people and JIT objective: Reduce movement of people and materialmaterial• Movement is waste!Movement is waste!

JIT requiresJIT requires• Work cells for product familiesWork cells for product families• Moveable or changeable machinesMoveable or changeable machines• Short distancesShort distances• Little space for inventoryLittle space for inventory• Delivery directly to work areasDelivery directly to work areas

LayoutLayout

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Traditional: Traditional: inventory exists in case problems inventory exists in case problems arisearise

JIT objective: JIT objective: eliminate inventoryeliminate inventory JIT requiresJIT requires

• Small lot sizesSmall lot sizes• Low setup timeLow setup time• Containers for fixed number of partsContainers for fixed number of parts

JIT inventory: Minimum inventory to keep JIT inventory: Minimum inventory to keep system runningsystem running

InventoryInventory

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Lot Size ExampleLot Size Example(See page 635 of your textbook)(See page 635 of your textbook)

DD== Annual demand Annual demand = 400,000= 400,000 units unitsdd== Daily demand Daily demand = 400,000/250 = = 400,000/250 = 1,6001,600 per day per daypp== Daily production rate Daily production rate = 4,000= 4,000 units unitsQQ== EOQ desired EOQ desired = 400= 400HH== Holding cost Holding cost = $20= $20 per unit per unitSS== Setup cost Setup cost (to be determined)(to be determined)

Q =Q = 2DS2DSHH(1 -(1 - d/p d/p))

QQ22 = = 2DS2DSHH(1 -(1 - d/p d/p))

S S = = = = = $2.40= $2.40((QQ22)()(HH)(1 -)(1 - d/p d/p))

22DD(3,200,000)(0.6)(3,200,000)(0.6)

800,000800,000

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JIT Inventory TacticsJIT Inventory Tactics

Use a pull system to move inventoryUse a pull system to move inventory Reduce lot sizeReduce lot size Reduce setup timeReduce setup time Develop Develop Just-in-TimeJust-in-Time delivery systems with delivery systems with

supplierssuppliers 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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JIT Scheduling TacticsJIT Scheduling Tactics

Communicate the schedule to Communicate the schedule to supplierssuppliers

Make level schedulesMake level schedules Perform to schedulePerform to schedule Eliminate wasteEliminate waste Produce in small lotsProduce in small lots Use kanbansUse kanbans Make each operation produce a perfect Make each operation produce a perfect

partpart

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Japanese word for cardJapanese word for card• Pronounced ‘kahn-bahn’ (not ‘can-ban’)Pronounced ‘kahn-bahn’ (not ‘can-ban’)

Authorizes production from downstream Authorizes production from downstream operationsoperations• ‘‘Pulls’Pulls’ material through plant material through plant

May be a card, flag, verbal signal etc.May be a card, flag, verbal signal etc. Used often with fixed-size containersUsed often with fixed-size containers

• Add or remove containers to change Add or remove containers to change production rateproduction rate

KanbanKanban

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Kanban: Additional PointsKanban: Additional Points

When producer and user are not in visual When producer and user are not in visual contact, a card may be used; otherwise, a light, contact, a card may be used; otherwise, a light, flag, or empty spot on the floor may work.flag, or empty spot on the floor may work.

Because a pull station may require several re-Because a pull station may require several re-supply components, several Kanban pull supply components, several Kanban pull techniques can be used at the same station.techniques can be used at the same station.

Usually, each card controls a specific quantity of Usually, each card controls a specific quantity of parts, although multiple card systems can be parts, although multiple card systems can be used if the producing cell produces several used if the producing cell produces several components or the lot size is different from the components or the lot size is different from the move size.move size.

In an MRP system, the schedule can be thought In an MRP system, the schedule can be thought of as a of as a “build”“build” authorization and the Kanban as authorization and the Kanban as a type of a type of “pull”“pull” system that initiates the actual system that initiates the actual productionproduction..

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Kanban: Additional Points - ContinuedKanban: Additional Points - Continued

The Kanban cards provide direct control (limit) The Kanban cards provide direct control (limit) on the amount of work-in-process between on the amount of work-in-process between cells.cells.

If there is an intermediate storage area, a two-If there is an intermediate storage area, a two-card system may be used; one card circulates card system may be used; one card circulates between user and storage area, and the other between user and storage area, and the other circulates between the storage area and the circulates between the storage area and the producing area.producing area.

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The Number of CardsThe Number of Cardsor Containersor Containers

Need to know the lead time needed to produce a container of parts

Need to know the amount of safety stock needed

Number of kanbans =Number of kanbans =

Demand during Demand during SafetySafetylead timelead time ++ stockstockSize of containerSize of container

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Number of Kanbans ExampleNumber of Kanbans Example(See page 640 of your textbook)(See page 640 of your textbook)

Daily demandDaily demand == 500500 cakes cakesProduction lead timeProduction lead time== 22 days days(wait time + (wait time + material handling time + material handling time + processing time)processing time)Safety stockSafety stock == 1/21/2 day dayContainer sizeContainer size == 250250 cakes cakes

Demand during lead time Demand during lead time = 2= 2 days days x 500x 500 cakes cakes = 1,000= 1,000

Number of kanbans Number of kanbans = = 5= = 51,000 + 2501,000 + 250

250250

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JIT reduces inventoryJIT reduces inventory JIT limits number defects with small lotsJIT limits number defects with small lots JIT requires TQMJIT requires TQM

• Statistical process controlStatistical process control• Worker involvementWorker involvement

Inspect own workInspect own work Quality circlesQuality circles

• Immediate feedbackImmediate feedback

QualityQuality

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JIT Quality TacticsJIT Quality Tactics

Use statistical process controlUse statistical process control Empower employeesEmpower employees Build failsafe methods (checklists, etc.)Build failsafe methods (checklists, etc.) Provide immediate feedbackProvide immediate feedback

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Get employees involved in product & process Get employees involved in product & process improvementsimprovements• Employees know job best!Employees know job best!

JIT requiresJIT requires• EmpowermentEmpowerment• Cross-trainingCross-training• Training supportTraining support• Few job classificationsFew job classifications

Employee EmpowermentEmployee Empowerment

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Lean ProductionLean Production

Lean Production supplies Lean Production supplies customers with exactly customers with exactly whatwhat the the customer wants, customer wants, whenwhen the the customer wants, without customer wants, without wastewaste, , through through continuous continuous improvementimprovement..

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Attributes of Lean ProducersAttributes of Lean Producers

use JIT to eliminate virtually all inventoryuse JIT to eliminate virtually all inventory build systems to help employees produce a build systems to help employees produce a

perfect part every timeperfect part every time reduce space requirementsreduce space requirements develop close relationships with suppliersdevelop close relationships with suppliers educate supplierseducate suppliers eliminate all but value-added activitieseliminate all but value-added activities make jobs more challengingmake jobs more challenging reduce the number of job classes and build reduce the number of job classes and build

worker flexibilityworker flexibility