OM 4

MMEPI 102 MANUFACTURING SYSTEMS MANAGEMENT

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Module 4

•Just in time manufacturing: Introduction, Elements of JIT, Pull versus Push method, Kanban system.


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What is JIT?

• a corporate system designed to produce output within the minimum lead time and at the lowest total cost by continuously identifying and eliminating all forms of corporate waste and variance.


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Seven Basic Types of Waste

• Transportation waste • Process Waste• Inventory Waste• Waste of motion• Waste from product defects• Waiting time• Overproduction


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• Waste of overproduction: eliminate by reducing setup times, synchronizing

quantities and timing between processes, compacting layout, visibility, and so forth. Make only what is needed now.

• Waste of waiting: eliminate through synchronizing work flow as much as possible, and balance uneven loads by flexible workers and equipment.

• Waste of transportation: establish layouts and locations to make transport and handling unnecessary if possible. Then rationalize transport and material handling that cannot be eliminated.

• Waste of processing itself: First question why this part or product should be made at all, then why each process is necessary. Extend thinking beyond economy of scale or speed.

• Waste of stocks: Reduce by shortening setup times and reducing lead times, by synchronizing work flows and improving work skills, and even by smoothing fluctuations in demand for the product. Reducing all the other wastes reduces the waste of stocks.

• Waste of motion: Study motion for economy and consistency. Economy improves productivity, and consistency improves quality. First improve the motions, then mechanize or automate. Otherwise there is danger of automating waste.

• Waste of making defective products: Develop the production process to prevent defects from being made so as to eliminate inspection. At each process, accept no defects and make no defects. Make process failsafe to do this. From a quality process comes a quality product automatically.


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Common Causes of Waste

• Layout (distance)• Long setup time• Incapable processes• Poor maintenance• Poor work methods• Lack of training

• Inconsistent performance measures

• Ineffective production planning

• Lack of workplace organization

• Poor supply quality/reliability


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Objective of JIT

• Produce only the products the customer wants.

• Produce products only at the rate that the customer wants them.

• Produce with perfect quality

• Produce with minimum lead time.

• Produce products with only those features the customer wants.


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Objectives

• Produce with no waste of labor, material or equipment -- every movement must have a purpose so that there is zero idle inventory.

• Produce with methods that allow for the development of people


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JIT Principles

• Create flow production • one piece flow

• machines in order of processes • small and inexpensive equipment • U cell layout, counter clockwise • multi-process handling workers • easy moving/standing operations • standard operations defined


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Push Vs. Pull Scheduling • Push Scheduling

• traditional approach

• “move the job on when finished”

• problems - creates excessive inventory • Pull scheduling

• coordinated production

• driven by demand (pulled through system)

• extensive use of visual triggers

(production/withdrawal kanbans)


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ADVANTAGES OF JIT Advocates of JIT claim it is a revolutionary concept that all manufacturers will have to adopt in order to remain competitive .JIT encompasses the successful execution of all production activities required to produce a product, from designing to delivery. Its benefits are many:

• 1. Shortened lead time. 2. Reduced time spent on non-process work. 3. Eliminate waste and rework and consequently reduce requirements for raw materials, person, power and machine capacity 4. It increases worker motivation and teamwork. 5. Reduced inventory. As a result: Frees up working capital for other projects. • Less space is needed. • Customer responsiveness increases.

6. Reduce or eliminate setup times 7. Reduce lot sizes (manufacturing and purchase): reducing setup times allows economical pro-duction of smaller lots; close cooperation with suppliers is necessary to achieve reductions in order lot sizes for purchased items, since this will require more frequent deliveries.

8. Problem clarification. 9. Cost savings10. Total product cycle time drops. 11. Product quality improved. 12. Reduced scrap and rework 13. Smoother production flow 14. Less inventory, of raw materials, work-in-progress and finished goods. 15. Higher productivity 16. Higher worker participation 17. More skilled workforce, able and willing to switch roles 18. Reduced space requirement 19. Improved relationships with suppliers


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• Disadvantages of JIT • The JIT method demands a much disciplined assembly-line

process. The entire factory has to be in sync to successfully exploit its methods. Manufacturers can afford fewer errors in the delivery of the supplier’s component; if a part isn’t there, the assembly line stops, and that can result in the loss of manpower and cash.

• Changes in production planning, inaccurate forecasting procedures resulting in under or over forecasting of demand, equipment failures creating capacity problems and employee absenteeism all create problems in implementing JIT.

• JIT requires special training and the reorganization of policies and procedures. • The organizational cultures vary from firm to firm. There are some cultures that tie to JIT success but it is difficult for an organization to change its cultures within a short time. • Difference in implementation of JIT. Because JIT was originally established in Japan, the benefits may vary. • Resistance to change. JIT involves a change throughout the whole organization, but human

nature resists changing. The most common resistances are emotional resistance and rational resistance. Emotional resistances are those psychological feeling which hinder performance such as anxiety. Rational resistance is the deficient of the needed information for the workers to perform the job well.

JIT requires workers to be multi-skilled and flexible to change.


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• A kanban is a card that is attached to a storage and transport container. It identifies the part number and container capacity, along with other information. There are two main types of kanban (some other variations are also used):

• Production Kanban (P-kanban): This signals the need to produce more parts. • Conveyance Kanban (C-kanban): This signals the need to deliver more parts to the next work center (also called a “move kanban” or a “withdrawal kanban”). A kanban system is a pull-system, in which the kanban is used to pull parts to the next production stage when they are needed; a MRP system (or any schedule-based system) is a push system, in which a detailed production schedule for each part is used to push parts to the next production stage when scheduled. The weakness of a push system (MRP) is that customer demand must be forecast and production lead times must be estimated. Bad guesses (forecasts or estimates) result in excess inventory, and the longer the lead time, the more room for error.


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• (a) Two Card Kanban (Double Kanban). This is the original Toyota method, developed at a time when replenishment supplies were routed through a component or parts store (though it can also be used when no stores intervention is involved). The card released by the user authorizes the stores to ‘move’ a replenishment supply to the user. When they do so, a second card, which is found on the pallet they are about to supply, is removed and sent to the component supplier as authority to ‘produce’ another standard quantity.

• Dual-Card Kanban Rules • No parts to be made unless P-kanban authorizes production. • Exactly one P-kanban and one C-kanban should be there for each container (the number of containers per part number is a management decision). • Only standard containers are used, and they are always filled with the prescribed (small)quantity.


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• (b) The 1 Card Kanban. Similar to the 2-card system, but a single card acts as both ‘move’ and‘produce’ authority. This method is typically used where the supply point is close to the user point, so that the supply and user operatives move the empty and full pallets between the two work centers themselves without the intervention of a stores function. It is also commonly used where the movement of pallets is automated.

• (c) The Container-Based Kanban. In this variant the Kanban card is dispensed with altogether. Instead, there are a predetermined number of containers or pallets in the system, all uniquely identified to a particular part number or component: if the maker of the component has an empty container waiting he or she fills it; if there is no empty container waiting, then the operator must stop production of that component and switch to some other task. This procedure is often used when special-purpose containers or pallets are provided, so that there is no doubt as to which components have to go into them. However, it is also possible to use multipurpose containers in what is in effect a cross between the container-based and the 1 card systems, by painting the appropriate part number and standard quantity on the containers itself. Another useful technique is to paint containers for similar parts in different colors, so that operators can identify the right container easily.

• (d) The Shelf-space Kanban. Anyone who has used a motorway cafeteria will be familiar with this method. At the cafeteria counter a range of dishes is provided to the customer via a display/dispensing cabinet, which is subdivided into a number of ‘pigeon-holes’, each providing one compartment for each type of dish. The instructions to the kitchen staff are ‘ensure that there is always at least one and not more than three of each type of dish available in the cabinet. If there are three dishes available of all types of dish, stop producing and find something else to do (like cleaning your equipment)’. The same principle, applied to the factory, takes the form of shelf spaces marked up with the part number/description of different parts. Someone is given the task of making sure that empty shelf places are filled. When all spaces are filled, production of the item stops.

• (e) The Floor Grid Kanban. Exactly the same as a shelf-space Kanban, but typically used for bulky or heavy components which are unsuitable for putting on shelves.


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• We apply JIT concept in many of our routine activities even without feeling about it. We get the newspapers delivered to our doorsteps on JIT basis everyday because we want to read them when the news items are fresh and current. We won’t accept the newspapers if they are two days old - after all who wants to read them as history. Even the nature likes many things the JIT way. We are supplied oxygen by nature on JIT basis. We don’t store them normally. Many consumers prefer to have their food items (chapati or flat bread, pizzas, burger, tea, coffee, etc.) supplied on JIT basis right at the time of need - not before or after. This means there is an inbuilt desire to have the JIT implemented in our day to day life but it is because of our mindset that we don’t do so in industries.


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Limitations of JIT

• Preconditions to JIT • trust must be present • labor/management • suppliers/consumers

• recognition of processes • familiarity with problem solving • quality at the source • agreement over value and waste


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Limitations of JIT

• Right Settings • applicable in growth to maturity phases of Product Life Cycle • standard product • Steinway and JIT

• standard/fixed pay-rate • problems with piece-rate scheme

• Universal agreement that change needed


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Theoretical Benefits of JIT

• Unpleasant surprises eliminated

• Less computerization

• visual control • Improved quality• WIP reduced• Better

communications

• Less pressure on receiving docks and incoming inspection areas

• Lower costs • Change in attitude

• Defects are treasures

• Definition:

Supply Chain Management is primarily concerned with the efficient integration of suppliers, factories, warehouses and stores so that merchandise is produced and distributed in the right quantities, to the right locations and at the right time, and so as to minimize total system cost subject to satisfying customer service requirements.

• Notice:– Who is involved– Cost and Service Level– It is all about integration

Supply Chain Management

Copyright 2006 John Wiley & Sons, Inc.

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Supply Chain

All facilities, functions, activities, associated All facilities, functions, activities, associated with flow and transformation of goods with flow and transformation of goods and services from raw materials to and services from raw materials to customer, as well as the associated customer, as well as the associated information flowsinformation flows

An integrated group of processes to An integrated group of processes to “source,” “make,” and “deliver” products“source,” “make,” and “deliver” products

Copyright 2006 John Wiley & Sons, Inc.

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Supply Chain Management (SCM)

• Managing flow of information through supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering costs

• Keys to effective SCM– information– communication– cooperation– trust

A picture is better than 1000 words!How many words would be better than 3

pictures?- A supply chain consists of

- aims to Match Supply and Demand, profitably for products and services

SUPPLY SIDE DEMAND SIDE

The rightProduct

HigherProfits

The rightTime

The rightCustomer

The rightQuantity

The rightStore

The rightPrice =++ ++ +

- achieves

SupplierSupplier ManufacturerManufacturer DistributorDistributor RetailerRetailer CustomerCustomer

UpstreamDownstream

Flows in a Supply Chain

Customer

Material

Information

Funds

The flows resemble a chain reaction.

Supplier

SCM in a Supply Network

Supply Chain Management (SCM) is concerned with the management and control of the flows of material, information, and finances in supply chains.

Supply

Demand

Products and Services

Cash

Supply Side OEM Demand Side

THAILAND INDIA MEXICO TEXAS USN-Tier Suppliers Suppliers Logistics Distributors Retailers

Information

The task of SCM is to design, plan, and execute the activities at the different stages so as to provide the desired levels of service to supply chain customers profitably

Push vs Pull System

• What instigates the movement of the work in the system?

• In Push systems, work release is based on downstream demand forecasts– Keeps inventory to meet actual demand – Acts proactively

• e.g. Making generic job application resumes today (e.g.: exempli gratia)

• In Pull systems, work release is based on actual demand or the actual status of the downstream customers– May cause long delivery lead times– Acts reactively

• e.g. Making a specific resume for a company after talking to the recruiter

Push/Pull View of Supply Chains

Procurement,Manufacturing andReplenishment cycles

Customer OrderCycle

CustomerOrder ArrivesPush-Pull boundary

PUSH PROCESSES PULL PROCESSES

Drivers of Supply Chain Performance

Efficiency Responsiveness

Inventory Transportation Facilities

Information

Supply chain structure

LogisticalDrivers

How to achieve

Sourcing PricingCross-FunctionalDrivers

1. Inventory

• Convenience: Cycle inventory– No customer buys eggs one by one

• Unstable demand: Seasonal inventory– Bathing suits – Xmas toys and computer sales

• Randomness: Safety inventory– 20% more syllabi than the class size were

available in the first class– Compaq’s loss in 95

• Pipeline inventory– Work in process or transit

2. Transportation

• Air

• Truck

• Rail

• Ship

• Pipeline

• Electronic

3. Facilities

• Production– Flexible vs. Dedicated– Flexibility costs

• Production: Remember BMW: “a sports car disguised as a sedan”• Service: Can your instructor teach music as well as SCM?• Sports: A playmaker who shoots well is rare.

• Inventory-like operations: Receiving, Prepackaging, Storing, Picking, Packaging, Sorting, Accumulating, Shipping – Job Lot Storage: Need more space. Reticle storage in fabs.

– Crossdocking: Wal-Mart

4. Information

• Role in the supply chain– The connection between the various stages in the supply

chain– Crucial to daily operation of each stage in a supply chain

• E.g., production scheduling, inventory levels

• Role in the competitive strategy– Allows supply chain to become more efficient and more

responsive at the same time (reduces the need for a trade-off)– Information technology

• Andersen Windows– Wood window manufacturer, whose customers can choose from a library of

50,000 designs or create their own. Customer orders automatically sent to the factory.

Characteristics of the Good Information

Information Global Scope

CoordinatedDecisions

Supply ChainSuccess

Strategy Analytical Models

$$$

Information Accurate? Accessible? Up-to-date? In the Correct form?

» If not, database restricted ability. How difficult is it to import data into SAP?

Quality of Information

• Information drives the decisions:– Good information means good decisions

• IT helps: MRP, ERP, SAP, EDI

• Relevant information?

• How to use information?

5. Sourcing

• Role in the supply chain– Set of processes required to purchase goods and services in a supply chain– Supplier selection, single vs. multiple suppliers, contract negotiation

• Role in the competitive strategy– Sourcing is crucial. It affects efficiency and responsiveness in a supply chain– In-house vs. outsource decisions- improving efficiency and responsiveness

• TI: More than half of the revenue spent for sourcing.• Cisco sources: Low-end products (e.g. home routers) from China.

• Components of sourcing decisions– In-house versus outsource decisions– Supplier evaluation and selection– Procurement process:

• Every department of a firm buy from suppliers independently, or all together.– EDS to reduce the number of officers with purchasing authorization.

6. Pricing

• Role in the supply chain– Pricing determines the amount to charge customers in a supply chain

– Pricing strategies can be used to match demand and supply• Price elasticity: Do you know yours?

• Role in the competitive strategy– Use pricing strategies to improve efficiency and responsiveness

– Low price and low product availability; vary prices by response times• Amazon: Faster delivery is more expensive

• Components of pricing decisions– Pricing and economies of scale

– Everyday low pricing versus high-low pricing

– Fixed price versus menu pricing, depending on the product and services

• Packaging, delivery location, time, customer pick up• Bundling products; products and services

Considerations for Supply Chain Drivers

Driver Efficiency Responsiveness

Inventory Cost of holding Availability

Transportation Consolidation Speed

Facilities Consolidation / Dedicated

Proximity / Flexibility

Information Low cost/slow/no duplication

High cost/ streamlined/reliable

Sourcing Low cost sources Responsive sources

Pricing Constant price Low-high price

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