Operations

Management
Chapter 16
Just-in-Time and
Lean Production Systems
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 6e
Operations Management, 8e

2006
2006 Prentice
Prentice Hall, Inc. Hall, Inc. 16 1
 Outline
Global Company Profile: Green
Gear Cycling
Just-in-Time and Lean Production
Suppliers
Goals of JIT Partnerships
Concerns of Suppliers

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 Outline Continued

JIT Layout
Distance Reduction
Increased Flexibility
Impact on Employees
Reduced Space and Inventory

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 Outline Continued
Inventory
Reduce Variability
Reduce Inventory
Reduce Lot Sizes
Reduce Setup Costs
Scheduling
Level Schedules
Kanban
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 Outline Continued
Quality
Employee Empowerment
Lean Production
Building a Lean Organization
5 Ss
Seven Wastes
JIT In Services
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 Learning Objectives
When you complete this chapter, you
should be able to:
Identify or Define:
Variability
Kanban
5 S System
Seven Wastes

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 Learning Objectives
When you complete this chapter, you
should be able to:
Describe or Explain:
Just-in-time (JIT) Philosophy
Pull Systems
Push Systems
The Goals of JIT Partnerships
Lean Production
Principles of Toyota Production System
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 Green Gear Cycling
Designs and manufactures high
performance travel bicycles (bike-in-a-
suitcase)
Strategy is mass customization with low
inventory, work cells, and elimination of
machine setups
Major focus on JIT and supply-chain
management
One day throughput time
Focus on quality
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 Just-In-Time and
Lean Production
JIT is a philosophy of continuous
and forced problem solving that
supports lean production
Lean production supplies the
customer with their exact wants
when the customer wants it without
waste
Key issues are continual
improvement and a pull system
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 Waste Reduction
Waste is anything that does not
add value from the customer point
of view
Storage, inspection, delay, waiting
in queues, and defective products
do not add value and are 100%
waste

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 Waste Reduction
Faster delivery, reduced work-in-
process, and faster throughput all
reduce waste
Reduced waste reduces room for
errors emphasizing quality
Reduced inventory releases assets
for other, productive purposes

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 Variability Reduction
JIT systems require managers to
reduce variability caused by both
internal and external factors
Variability is any deviation from the
optimum process
Inventory hides variability
Less variability results in less
waste

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 Causes of Variability
1. Employees, machines, and suppliers
produce units that do not conform to
standards, are late, or are not the
proper quantity
2. Engineering drawings or specifications
are inaccurate
3. Production personnel try to produce
before drawings or specifications are
complete
4. Customer demands are unknown
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 Pull Versus Push Systems

A pull system uses signals to

request production and delivery
from upstream stations
Upstream stations only produce
when signaled
System is used within the immediate
production process and with
suppliers

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 Pull Versus Push Systems

By pulling material in small lots,

inventory cushions are removed,
exposing problems and emphasizing
continual improvement
Manufacturing cycle time is reduced
Push systems dump orders on the
downstream stations regardless of
the need

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 JIT and Competitive
Advantage
JIT Requires:

Table 16.1
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 JIT and Competitive
Advantage
Which Results In:

Which Yields:

Table 16.1
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 Suppliers
JIT partnerships exist when a
supplier and purchaser work
together to remove waste and drive
down costs
Four goals of JIT partnerships are:
Elimination of unnecessary activities
Elimination of in-plant inventory
Elimination of in-transit inventory
Elimination of poor suppliers
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 JIT Partnerships
Suppliers
Few suppliers
Nearby suppliers
Repeat business with same suppliers
Support suppliers so they become or remain
price competitive
Competitive bidding mostly limited to new
purchases
Buyer resists vertical integration and subsequent
wipeout of supplier business
Suppliers encouraged to extend JIT buying to
their suppliers
Table 16.2
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 JIT Partnerships
Quantities
Share forecasts of demand
Frequent deliveries of small-lot quantities
Long-term contract
Minimal paperwork to release order (EDI or the
Internet)
Little or no permissible overage or underage
Suppliers package in exact quantities
Suppliers reduce production lot sizes

Table 16.2
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 JIT Partnerships
Quality
Minimal product specifications imposed on
supplier
Help suppliers meet quality requirements
Close relationships between buyers and
suppliers quality assurance people
Suppliers use poka-yoke and process control
charts

Table 16.2
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 JIT Partnerships
Shipping
Scheduling inbound freight
Gain control by using company-owned or
contract shipping and warehousing
Use of advanced shipping notice (ASN)

Table 16.2
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 JIT Layout
Reduce waste due to movement
Layout Tactics
Build work cells for families of products
Include a large number operations in a small area
Minimize distance
Design little space for inventory
Improve employee communication
Use poka-yoke devices
Build flexible or movable equipment
Cross train workers to add flexibility
Table 16.3

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 Distance Reduction
Large lots and long production
lines with single-purpose
machinery are being replaced by
smaller flexible cells
Often U-shaped for shorter paths
and improved communication
Often using group technology
concepts

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 Increased Flexibility

Cells designed to be rearranged

as volume or designs change
Applicable in office environments
as well as production settings
Facilitates both product and
process improvement

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 Impact on Employees
Employees are cross trained
for flexibility and efficiency
Improved communications
facilitate the passing on of
important information about the
process
With little or no inventory
buffer, getting it right the first
time is critical
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 Reduced Space and
Inventory

With reduced space, inventory

must be in very small lots
Units are always moving because
there is no storage

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 Inventory
Inventory is at the minimum level
necessary to keep operations running
JIT Inventory Tactics
Use a pull system to move inventory
Reduce lot sizes
Develop just-in-time delivery systems with suppliers
Deliver directly to point of use
Perform to schedule
Reduce setup time
Use group technology
Table 16.4
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 Reduce Variability

Inventory level

Process
Scrap downtime

Setup Quality
time problems

Late deliveries
Figure 16.1

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 Reduce Variability

Inventory
level

Process
Scrap downtime

Setup Quality
time problems

Late deliveries
Figure 16.1

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 Reduce Lot Sizes
Q1 When average order size = 200
average inventory is 100
200
Inventory

Q2 When average order size = 100

average inventory is 50
100

Time

Figure 16.2
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 Reduce Lot Sizes
Ideal situation is to have lot sizes
of one pulled from one process to
the next
Often not feasible
Can use EOQ analysis to calculate
desired setup time
Two key changes
Improve material handling
Reduce setup time
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 Lot Size Example
D= Annual demand = 400,000 units
d= Daily demand = 400,000/250 = 1,600 per day
p= Daily production rate = 4,000 units
Q= EOQ desired = 400
H= Holding cost = $20 per unit
S= Setup cost (to be determined)

2DS 2DS
Q= Q2 =
H(1 - d/p) H(1 - d/p)

(Q2)(H)(1 - d/p) (3,200,000)(0.6)

S= 2D = 800,000 = $2.40

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 Lower Setup Costs

Holding cost
Sum of ordering
and holding costs
Cost

T1
Setup cost curves (S1, S2)
T2
S1
S2

Lot size
Figure 16.3

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 Reduce Setup Costs

High setup costs encourage large

lot sizes
Reducing setup costs reduces lot
size and reduces average
inventory
Setup time can be reduced through
preparation prior to shutdown and
changeover

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 Reduce Setup Times
Initial Setup Time 90 min

Separate setup into preparation and actual

setup, doing as much as possible while the
Step 1 machine/process is operating
(save 30 minutes)

60 min
Move material closer and
Step 2 improve material handling
(save 20 minutes)
45 min
Standardize and
Step 3 improve tooling
(save 15 minutes)
25 min
Use one-touch system to eliminate
Step 4
adjustments (save 10 minutes)
15 min
Training operators and standardizing 13 min
Step 5 work procedures (save 2 minutes)
Figure 16.4 Repeat cycle until subminute
setup is achieved
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 Scheduling
Schedules must be communicated
inside and outside the organization
Level schedules
Process frequent small batches
Freezing the schedule helps
stability
Kanban
Signals used in a pull system

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 Kanban
1. User removes a
standard sized
container
2. Signal is seen by
the producing
department as
authorization to
replenish
Signal marker
on boxes

Figure 16.6 Part numbers

mark location
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 Scheduling Small Lots
JIT Level Material-Use Approach
A A B B B C A A B B B C

Large-Lot Approach
A A A A A A B B B B B B B B B C C C

Time
Figure 16.5
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 More Kanban
When the producer and user are not
in visual contact, a card can be used
When the producer and user are in
visual contact, a light or flag or
empty spot on the floor may be
adequate
Since several components may be
required, several different kanban
techniques may be employed
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 More Kanban
Usually each card controls a specific
quantity or parts
Multiple card systems may be used if
there are several components or
different lot sizes
Kanban cards provide a direct
control and limit on the amount of
work-in-process between cells

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 More Kanban
In an MRP system, the schedule can
be thought of as a build authorization
and the kanban a type of pull system
that initiates actual production
If there is an immediate storage area,
a two-card system can be used with
one card circulating between the
user and storage area and the other
between the storage area and the
producer
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 Kanban Signals

Kanban Finished Customer

goods order
Work
cell
Ship

Raw Kanban Final Kanban

Material assembly
Supplier
Kanban Kanban
Sub-
Purchased assembly
Parts Kanban
Supplier

Figure 16.7

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 The Number of Cards
or Containers
Need to know the lead time needed to
produce a container of parts
Need to know the amount of safety
stock needed

Demand during Safety

lead time + stock
Number of kanbans =
Size of container

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 Number of Kanbans Example
Daily demand = 500 cakes
Production lead time = 2 days
(wait time +
material handling time +
processing time)
Safety stock = 1/2 day
Container size = 250 cakes

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

1,000 + 250
Number of kanbans = 250 =5

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 Advantages of Kanban

Allow only limited amount of faulty or

delayed material
Problems are immediately evident
Puts downward pressure on bad
aspects of inventory
Standardized containers reduce
weight, disposal costs, wasted space,
and labor

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 Quality
Strong relationship
JIT cuts the cost of obtaining good
quality because JIT exposes poor
quality
Because lead times are shorter,
quality problems are exposed sooner
Better quality means fewer buffers
and allows simpler JIT systems to be
used

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 JIT Quality Tactics

Use statistical process control

Empower employees
Build fail-safe methods (poka-
yoke, checklists, etc.)
Expose poor quality with small
lot JIT
Provide immediate feedback
Table 16.6
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 Employee Empowerment
Empowered employees bring their
knowledge and involvement to daily
operations
Some traditional staff tasks can move to
empowered employees
Training, cross-training, and fewer job
classifications can mean enriched jobs
Companies gain from increased
commitment from employees

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 Lean Production

Different from JIT in that it is

externally focused on the customer
Often called the Toyota Production
System (TPS)
In practice, JIT, Lean Systems, and
TPS are often essentially the same

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 Toyota Production System
Work shall be completely specified as to
content, sequence, timing, and outcome
Every customer-supplier connection must
be direct
Product and service flows must be simple
and direct
Any improvement must be made in
accordance with the scientific method at
the lowest possible level of the
organization
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 Lean Systems

Use JIT techniques

Build systems that help employees
produce perfect parts
Reduce space requirements
Develop close relationships with
suppliers

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 Lean Systems
Educate suppliers
Eliminate all but value-added
activities
Develop the workforce
Make jobs more challenging
Reduce the number of job classes

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 The 5 Ss
Sort/segregate
Simplify/straighten
Shine/sweep
Standardize
Sustain/self discipline
Safety
Support/maintenance
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 Seven Wastes

Overproduction A broader
Queues perspective
suggests other
Transportation resources like
energy and water
Inventory are wasted but
Motion should not be

Over-processing
Defective product
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 JIT in Services
The JIT techniques used in
manufacturing are used in services
Suppliers
Layouts
Inventory
Scheduling

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