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JIT & LEAN OPERATIONSChapter 14

MIS 373: Basic Operations Management

MIS 373: Basic Operations Management 2

LEARNING OBJECTIVES

• After this lecture, students will be able to 1. Explain the terms lean operations and JIT.2. Describe the main characteristics of lean systems.3. List some of the benefits and some of the risks of lean operation.4. List the three goals of a lean system and explain the importance of

each.

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LEAN OPERATIONS

• Lean operation• A flexible system of operation that uses considerably less

resources than a traditional system• Tend to achieve

• Greater productivity• Lower costs• Shorter cycle times• Higher quality

• Goal:• Achieve a system that matches supply to customer demand;

supply is synchronized to meet customer demand in a smooth uninterrupted flow

• A balanced system• One that achieves a smooth, rapid flow of materials and/or work

through the system

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GOALS AND BUILDING BLOCKS OF LEAN SYSTEMS

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LEAN: SUPPORTING GOALS

1. Eliminate disruptions• Poor quality (lean systems do not carry extra inventory),

equipment breakdowns, schedule changes, late deliveries.

2. Make the system flexible• Mix of products, levels of output.• Require reducing setup-times & lead-times.

3. Eliminate waste, especially excess inventory• http://videos.asq.org/waste-analysis

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WASTESeven sources of waste in lean systems:

1. Inventory• Idle resource, requires space, holding cost

2. Overproduction• Overuse of manufacturing resources

3. Waiting time• Require space, WIP

4. Unnecessary transporting• Handling cost

5. Processing waste• Unnecessary production steps, scrap, paperwork, redundancy (e.g.,

approvals)

6. Inefficient work methods• Reduced productivity, increased scrap, increased WIP

7. Product defects• Rework costs, customer dissatisfaction

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LEAN: BUILDING BLOCKS

1. Product design

2. Process design

3. Personnel/ organizational elements

4. Manufacturing planning and control

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LEAN SERVICES• In service the focus is often on the time needed to perform the service

- speed is often the order winner

• Provide services when they are needed

• Lean benefits can be achieved in the following ways:• Eliminate disruptions

• e.g., avoid having service providers also answer phones.

• Make system flexible• Train workers to handle more variety.

• Reduce setup and lead times• Estimate what parts and tools are frequently needed and have them on hand

• Eliminate waste• Eliminate errors and duplicate work.

• Minimize WIP• e.g., orders waiting to be processed, calls waiting to be answered, packages waiting for

delivery, truck waiting to be loaded/unloaded etc.

• Simplify the process • e.g., self-service systems such as in retail, ATMs, vending machines, service systems

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LEAN VS. TRADITIONAL PHILOSOPHIES

Factor Traditional LeanInventory Much to offset forecast

errors, late deliveriesMinimal necessary to operate

Deliveries Few, large Many, small

Lot sizes Large Small

Vendors Long-term relationships are unusual

Partners

Workers Necessary to do the work Assets

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TRANSITIONING TO LEAN SYSTEMS

1. Make sure top management is committed and that they know what will be required

2. Decide which parts/processes will need the most effort to convert

3. Obtain support and cooperation of workers. Reassure workers that their jobs are secure.

4. Begin by trying to reduce setup times while maintaining the current system

5. Gradually convert operations, begin at the end and work backwards. At each stage, make sure the conversion has been successful before moving on.

6. Convert suppliers to JIT. Narrow the list of vendors.

7. Prepare for obstacles

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OBSTACLES TO CONVERSION

1. Management may not be fully committed or willing to devote the necessary resources to conversion

2. Workers/management may not be cooperative. Management losses control as more responsibility is shifted to the workers. Workers have increased responsibility.

3. It can be difficult to change the organizational culture to one consistent with the lean philosophy

4. Suppliers may resist:• Not enough assistance from buyer to perform transformation

• Uneasy about long term commitment to buyer

• Small frequent deliveries may be difficult

• Burden of quality control

• Frequent engineering changes that may result from buyer’s lean improvements

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KEY BENEFITS/RISKS OF LEAN SYSTEMS

• Key benefits:• Reduced waste

• inventory levels• scrap and rework• space requirements

• High quality• Flexibility• Reduced lead times• Increased productivity and

equipment utilization

• Key Risks:• Absence of buffers (personnel,

inventory) to fall back on if something goes wrong.

• Possible loss off sale and lost customers.

RISKS OF JIT

• For Lean Factories, No Buffer (wsj.com 4/29/2011)• The just-in-time approach to manufacturing, which has swept the world's

factories over the past two decades, has made a virtue out of keeping inventories lean. But some manufacturers think it has gone too far, and that having a little extra padding might be a healthier option.

• Prior to the recession—and now in the recovery—we aren't just lean, we've become anorexic

• One reason this recovery hasn't been faster is that demand is there—but there hasn't necessarily been product on the shelf to meet that demand

JIGSAW

• Decoding the DNA of the Toyota Production System• http://

hbr.org/1999/09/decoding-the-dna-of-the-toyota-production-system

• Lean Knowledge Work• http://hbr.org/2011/10/lean-knowledge-work

• Lean Start-Up• http://hbr.org/2013/05/why-the-lean-start-up-changes-everything

• The Lean Service Machine• http://hbr.org/2003/10/the-lean-service-machine

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KEY POINTS

• Lean systems produce high-quality goods or services using fewer resources than traditional operations systems.

• Lean thinking helps business organizations to become more productive, reduce costs, and be more market-responsive.

• Lean operations are designed to eliminate waste (value stream mapping), minimize inventory (JIT deliveries), maximize work flow (small batches with quick changeovers), make only what is needed (demand pull), empower work teams, do it right the first time (quality at the source), and continually improve.

• Despite the benefits, lean systems have some potential risks.