Slides prepared

by John Loucks

 2002 South-Western/Thomson Learning TM 1 1

 Chapter 12

Just-In-Time and Lean Manufacturing

2
 Overview


The Just-in-Time Manufacturing Philosophy

Prerequisites for JIT Manufacturing

Elements of JIT Manufacturing

Benefits of JIT Manufacturing

Success and JIT Manufacturing

JIT in Services

Wrap-Up: What World-Class Companies Do

3
 APICS Definition of JIT

“A philosophy of manufacturing based on planned

elimination of waste and continuous improvement of
productivity ……”

4
 APICS Definition of JIT

“The primary elements of Just-in-Time are:


to have only the required inventory when needed;

to improve quality to zero defects;

to reduce lead times by reducing setup times,
queue lengths, and lot sizes;

to incrementally revise the operations themselves;

and to accomplish these things at minimum cost”.

5
 JIT Synonyms


IBM - Continuous Flow Manufacturing

HP - Stockless Production
- Repetitive Manufacturing System

GE - Management by Sight

Motorola - Short Cycle Manufacturing

Japanese - The Toyota System

Boeing - Lean Manufacturing

6
 APICS Definition of Lean Manufacturing

“A philosophy of production that emphasizes the minimization

of the amount of all the resources (including time) used in the
various activities of the enterprise. It involves:

… identifying and eliminating non-value-adding activities,

… employing teams of multi-skilled workers,

… using highly flexible, automated machines”


American Production and Inventory Control Society (APICS)
is an organization for professionals working in the field of
Operations Management

7
 Traditional View of Manufacturing


Key objective was to fully utilize capacity so that
more products were produced by fewer workers and
machines

How? With large queues of in-process inventory
waiting at work centers

Workers and machines never had to wait for product
to work on, so capacity utilization was high and
production costs were low

Result: Products spent most of their time in
manufacturing just waiting, an arrangement that is
unacceptable in today’s time-based competition

8
JIT Philosophy

9
 Time-Based Competition


It is not enough for firms to be high-quality and low-
cost producers

Today, they must also be first in getting products and
services to the customer fast

To compete in this new environment, the order-to-
delivery cycle must be drastically reduced

JIT is the weapon of choice today to reduce the
elapsed time of this cycle

10
 Order-to-Delivery Cycle

Manufacturing
Cumulative Lead Time
Custo- Manufacturing Distri-
Engi- Lead Times bution and
mer Order Sched-
neering
Places Entry uling Purchasing Customer
Design
Order Lead Times Service

Order-to-Delivery Cycle

11
 JIT Logic

Fab Vendor

Sub
Fab Vendor
Customers Final Assy

Sub Fab Vendor

Fab Vendor

12
 JIT Manufacturing Philosophy


The main objective of JIT manufacturing is to reduce
manufacturing lead times

This is primarily achieved by drastic reductions in
work-in-process (WIP)

The result is a smooth, uninterrupted flow of small
lots of products throughout production

13
 JIT Production

WHAT IT IS WHAT IT DOES

• Attacks waste
• Management philosophy
• Exposes problems and bottlenecks
• Pull system though the plant
• Achieves streamlined production

WHAT IT REQUIRES WHAT IT ASSUMES

• Employee participation
• Industrial engineering/basics • Stable environment
• Continuing improvement
• Total quality control
• Small lot sizes
14
 Successful JIT Applications


Most successful JIT applications have been in
repetitive manufacturing, where batches of standard
products are produced at high speeds and in high
volumes.

Successful use of JIT is rare in large, highly complex
job shops where production planning and control is
extremely complicated.

Smaller, less complex job shops have used JIT, but
operations have been changed so that they behave
somewhat like repetitive manufacturing.

15
 Elements of JIT Manufacturing


Eliminating waste

Enforced problem solving and continuous
improvement

People make JIT work

Total Quality Management (TQM)

Parallel processing

Kanban production control

JIT purchasing

Reducing inventories

Working toward repetitive manufacturing
16
 Waste--Operations

(1) Waste from overproduction

(2) Waste of waiting time
(3) Transportation waste
(4) Inventory waste
(5) Processing waste
(6) Waste of motion
(7) Waste from product defects

17
 JIT: A Pull System


In a push system, such as an MRP system, we look at
the schedule to determine what to produce next

In a pull system, such as JIT, we look only at the next
stage of production and determine what is needed
there, and then we produce only that

As Robert Hall states, “You don’t never make
nothing and send it no place. Somebody has got to
come and get it”

18
 Changes Required for JIT


JIT requires certain changes to the factory and the
way it is managed:

Stabilize production schedules

Make the factories more focused

Increase work center capacities

Improve product quality

Cross-train workers

Reduce equipment breakdowns

Develop long-term supplier relations

19
 Capacity Utilization

Production Lead Times (days)

60

50
Traditional
Manufacturing
40

30

20 JIT
Manufacturing
10
% Capacity
Utilization
10 20 30 40 50 60 70 80 90 100

20
 Increasing Production Capacity
Reduces Manufacturing Lead Times

Only slight increases in production capacities can
lead to:

Significant reduction of manufacturing lead times

Significant reduction of work-in-process inventory

Queuing theory can be used to analyze waiting-line
production problems

21
 Necessary Production Capacity


We know from queuing theory (Chapter 9) that the
average time in the system (manufacturing lead time)
is:
1
ts 
(   )

If we have an average lead time in mind, we can
solve for the required production rate:
1
  
ts

22
 Work-in-Process Inventory


We also know from queuing theory that the average
number of jobs in the system (work-in-process
inventory) is:

ns 
(   )

23
Example: Necessary Production Capacity

A production manager believes reducing the

firm’s manufacturing lead time will give the firm a
significant competitive advantage. Two days is the
lead time goal.
Currently, jobs are arriving at the rate of 6 per
day and the operation can process an average of 6.125
jobs per day.
What is the current average lead time for a job?
What is the necessary production rate to achieve the
two-day lead time goal?

24
 Example: Necessary Production Capacity


Current Lead Time
1 1 1
ts     8 days
(    ) (6.125  6.0) 0.125

Necessary Production Rate
1 1
      6.0  6.5 jobs per day
ts 2

Conclusion
A 6% increase in the production rate (from 6.125
to 6.5) results in a 75% reduction in manufacturing
lead time (from 8 to 2).

25
 Example: Reduction in WIP

In the preceding example, the production rate was

increased from 6.125 jobs per day to 6.5. This 6%
increase in the production rate yielded a 75%
reduction in manufacturing lead time!
How much of a reduction in WIP will result from
the 6 % production rate increase?

26
 Example: Reduction in WIP


WIP before production rate increase
 6
old ns    48 jobs
(    ) (6.125  6)

WIP after production rate increase
 6
new ns    12 jobs
(    ) (6.500  6)

Conclusion
A 6% increase in the production rate (from 6.125
to 6.5) results in a 75% reduction in work-in-process
(from 48 to 12).
27
Problem Solving and Continuous Improvement


JIT is a system of enforced problem solving.

One approach is to lower inventory gradually to
expose problems and force their solution.

With no buffer inventories to rely on in times of
production interruptions, problems are highly visible
and cannot be ignored.

The job of eliminating production problems is never
finished.

Continuous improvement - a practice the Japanese
call kaizen - is central to the philosophy of JIT.
28
 Uncovering Production Problems

Visible Production

We must lower the water level! Problems are Only
5% of the Total!
Machine
Breakdowns
Out-of-Spec
In-Process Workload
Materials
Inventory Imbalances
Worker Material Quality
Quality
Absenteeism Shortages Problems
Problems

29
 People Make JIT Work


JIT has a strong element of training and involvement
of workers.

A culture of mutual trust and teamwork must be
developed.

An attitude of loyalty to the team and self-discipline
must be developed.

Another crucial element of JIT is empowerment of
workers, giving them the authority to solve
production problems.

30
 TQM and JIT


Long-term relationships with suppliers

Certified suppliers eliminate incoming inspection

Share design process for new products

Simplify design/processes

Poka-yoke

Process capable of meeting tolerances

Operators responsible for quality of own work

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 Parallel Processing

• Operations performed in series:

Cycle Time for Each Operation = 1 Hour
Total Product Cycle Time = 1 x 8 = 8 Hours
Op 1 Op 2 Op 3 Op 4 Op 5 Op 6 Op 7 Op 8

• Operations performed in parallel:

Cycle Time for Each Operation = 1 Hour
Op 2 Total Product Cycle Time = 1 x 5 = 5 Hours
Op 1 Op 3 Op 6 Op 7 Op 8
Op 5 • Operations 2 and 4 start the
Op 4 same time as Operation 1
32
Group Technology & JIT

33
 Kanban Production Control


At the core of JIT manufacturing at Toyota is
Kanban, an amazingly simple system of planning and
controlling production

Kanban, in Japanese, means card or marquee

Kanban is the means of signaling to the upstream
workstation that the downstream workstation is ready
for the upstream workstation to produce another
batch of parts

34
 Kanbans and Other Signals


There are two types of Kanban cards:

a conveyance card (C-Kanban)

a production card (P-Kanban)

Signals come in many forms other than cards,
including:

an empty crate

an empty designated location on the floor

35
 How Kanban Operates

When a worker at downstream Work Center #2 needs a

container of parts, she does the following:

She takes the C-Kanban from the container she just
emptied

She finds a full container of the needed part in
storage

She places the C-Kanban in the full container and
removes the P-Kanban from the full container and
places it on a post at Work Center #1

She takes the full container of parts with its C-
Kanban back to Work Center #2
36
 Kanban Cards

Conveyance Kanban Card

Part number to produce: M471-36 Part description: Valve Housing

Lot size needed: 40 Container type: RED Crate

Card number: 2 of 5 Retrieval storage location: NW53D

From work center: 22 To work center: 35

37
 Kanban Cards

Production Kanban Card

Part number to produce: M471-36 Part description: Valve Housing

Lot size needed: 40 Container type: RED crate

Card number: 4 of 5 Completed storage location: NW53D

From work center: 22 To work center: 35

Materials required:
Material no. 744B Storage location: NW48C
Part no. B238-5 Storage location: NW47B

38
 How Kanban Operates

When a worker at downstream Work Center #2 needs a

container of parts, he does the following:

He takes the C-Kanban from the container he just
emptied.

He finds a full container of the needed part in storage.

He places the C-Kanban in the full container and
removes the P-Kanban from the full container and
places it on a post at Work Center #1.

He takes the full container of parts with its C-Kanban
back to Work Center #2.
39
 Flow of Kanban Cards and Containers

P-Kanban and C-Kanban and

empty container empty container
Full container Full container
and P-Kanban and C-Kanban

In-process
Upstream Downstream
storage
Work Center #1 Work Center #2

Parts Flow

40
 Containers in a Kanban System


Kanban is based on the simple idea of replacement of
containers of parts, one at a time.

Containers are reserved for specific parts, are
purposely kept small, and always contain the same
standard number of parts for each part number.

At Toyota the containers must not hold more than
about 10% of a day’s requirements.

There is a minimum of two containers for each part
number, one at the upstream “producing” work center
and one at the downstream “using” work center.
41
 Calculating the Number of Containers
between Work Centers

UT(1+P)
N=
C
N = Total number of containers between 2 stations
U = Usage rate of downstream operation
T = Average elapsed time for container to make
entire cycle
P = Policy variable indicating efficiency... 0 - 1
C = Capacity (number of parts) of standard container

42
 Example: Number of Containers

There are two adjacent work centers, one of

which is fed parts from the other. The production
rate of the using work center is 165 parts per hour.
Each standard Kanban container holds 24 parts.
It takes an average of 0.6 hour for a container to
make the entire cycle from the time it leaves the
upstream center until it is returned, filled with
production, and leaves again. The efficiency of the
system is observed to be 0.2.
How many containers are needed?

43
 Example: Number of Containers


Number of Containers, N

N = UT(1 + P) / C
= 165(0.6)(1 + 0.2) / 24
= 99(1.2) / 24
= 118.8 / 24
= 4.95 or 5 containers

44
 Essential Elements of JIT Purchasing


Cooperative and long-term relationship between
customer and supplier.

Supplier selection based not only on price, but also
delivery schedules, product quality, and mutual trust.

Suppliers are usually located near the buyer’s factory.

Shipments are delivered directly to the customer’s
production line.

Parts are delivered in small, standard-size containers
with a minimum of paperwork and in exact quantities.

Delivered material is of near-perfect quality.
45
 E-Commerce and JIT Purchasing


Internet-based information systems allow firms to
quickly place orders for materials with their suppliers

This is an efficient and effective purchasing process

Saves the time of paperwork

Avoids errors associated with paperwork

Reduces procurement lead time

Reduces labor costs

… and Kanbans can be sent to suppliers

46
 Reducing Inventories
through Setup Time Reduction

Central to JIT is the reduction of production lot sizes
so that inventory levels are reduced.

Smaller lot sizes result in more machine setups

More machine setups, if they are lengthy, result in:

Increased production costs

Lost capacity (idle machines during setup)

The answer is: REDUCE MACHINE SETUP TIMES

47
 Setup Time Required for an EOQ


The economic production lot size (EOQ) model
(detailed in Chapter 14) is:

2DS  p 
EOQ =  
C  p-d 
where: D = annual demand rate
d = daily demand rate
p = daily production rate
C = carrying cost per unit per year
S = cost per setup
… more
48
 Setup Time Required for an EOQ


The setup cost required for a given lot size can be
derived from the EOQ model as:

C(EOQ) 2  p-d 
S=  
2D  p 

The setup time can be derived from the setup cost, S:
S
Setup Time =
Labor rate

49
 Example: Setup Time Required

A firm wants to determine what the length of the

setup time of an operation should be in order to make
an production lot size (EOQ) of 50 economical. An
analyst has made the following estimates:
D = 16,800 units (annual demand)
d = 84 units (daily demand rate @ 200 days/yr)
p = 140 units (daily production rate)
C = $20 (carrying cost per unit per year)
Labor rate = $25.00/hour

50
 Example: Setup Time Required


Setup Cost Required for EOQ = 50
C(EOQ)  p-d 
2
S=  
2D  p 
$42(50)  140  84 
2
=    $1.25
2(16,800)  140 

51
 Example: Setup Time Required


Setup Time Required for EOQ = 50
S $1.25
Setup Time = = = 0.833 hours
Labor rate $15.00/hr
.0833 hours = 5.0 minutes

52
 Working Toward Repetitive Manufacturing


Reduce setup times and lot sizes to reduce inventories

Change factory layout to allow streamlined flows

Convert process-focused layout to cellular
manufacturing (CM) centers

Install flexible manufacturing systems (FMS)

…..more

53
 Working Toward Repetitive Manufacturing


Standardize parts designs

Train workers for several jobs

Implement preventive maintenance (PM) programs

Install effective quality control programs

Develop an effective subcontractor network

54
 Benefits of JIT


Inventory levels are drastically reduced:

frees up working capital for other projects

less space is needed

customer responsiveness increases

Total product cycle time drops

Product quality is improved

Scrap and rework costs go down

Forces managers to fix problems and eliminate
waste .... or it won’t work!

55
 JIT in Services (Examples)


Organize Problem-Solving Groups

Upgrade Housekeeping

Upgrade Quality

Clarify Process Flows

Revise Equipment and Process Technologies

56
 JIT in Services (Examples)


Level the Facility Load

Eliminate Unnecessary Activities

Reorganize Physical Configuration

Introduce Demand-Pull Scheduling

Develop Supplier Networks

57
 Wrap-Up: World-Class Practice


Focus on time-based competition to capture market
share

JIT method to reduce order-to-delivery cycle

Prerequisites must be present to successfully
implement JIT

behave like repetitive manufacturing

stable schedules

58
End
End of
of Chapter
Chapter 12
12

59