JustInTime and Lean Production JIT In Services Competition

Just-In-Time and Lean Production

JIT In Services ü Competition on speed & quality ü Multifunctional department store workers ü Work cells at fast-food restaurants ü Just-in-time publishing for textbooks on demand publishing a growing industry ü Construction firms receiving material just as needed

What is JIT ? ü Producing only what is needed, when it is needed ü A philosophy ü An integrated management system ü JIT’s mandate: Eliminate all waste

Lean Operations: Best Implementation is Toyota Production System • TPS is a production management system that aims for the “ideal” through continuous improvement • Includes, but goes way beyond JIT. Pillars: – Synchronization • Reduce transfer batch sizes • Level load production • Pull production control systems (vs. push): Kanban • Quality at source • Layout: Cellular operations – Continuous Improvement (Kaizen): through visibility & empowerment . .

Toyota’s waste elimination in Operations 1. Overproduction 2. Waiting 3. Inessential handling 4. Non-value adding processing 5. Inventory in excess of immediate needs 6. Inessential motion 7. Correction necessitated by defects

Waste in Operations

Waste in Operations

Waste in Operations

Flexible Resources ü Multifunctional workers ü General purpose machines ü Study operators & improve operations

The Push System • Pre-planned issues of supplies/merchandise regardless of customer demand criteria • Creates excess and shortages • not efficient over the long run

The Pull System ü Material is pulled through the system when needed ü Reversal of traditional push system where material is pushed according to a schedule ü Forces cooperation ü Prevent over and underproduction

Kanban Production Control System ü Kanban card indicates standard quantity of production ü Derived from two-bin inventory system ü Kanban maintains discipline of pull production ü Production kanban authorizes production ü Withdrawal kanban authorizes movement of goods

A Sample Kanban

Types of Kanbans ü Bin Kanban - when bin is empty replenish ü Kanban Square ü Marked area designed to hold items ü Signal Kanban ü Triangular kanban used to signal production at the previous workstation ü Material Kanban ü Used to order material in advance of a process ü Supplier Kanbans ü Rotate between the factory and suppliers

Components of Lead Time ü Processing time ü Reduce number of items or improve efficiency ü Move time ü Reduce distances, simplify movements, standardize routings ü Waiting time ü Better scheduling, sufficient capacity ü Setup time ü Generally the biggest bottleneck

Common Techniques for Reducing Setup Time • • Preset Buttons/settings Quick fasteners Reduce tool requirements Locator pins Guides to prevent misalignment Standardization Easier movement

Uniform Production ü Results from smoothing production requirements ü Kanban systems can handle +/- 10% demand changes ü Smooths demand across planning horizon ü Mixed-model assembly steadies component production

Quality at the Source ü Jidoka is authority to stop production line ü Andon lights signal quality problems ü Undercapacity scheduling allows for planning, problem solving & maintenance ü Visual control makes problems visible ü Poka-yoke prevents defects (mistake proof the system)

Kaizen ü Continuous improvement ü Requires total employment involvement ü Essence of JIT is willingness of workers to ü Spot quality problems ü Halt production when necessary ü Generate ideas for improvement ü Analyze problems ü Perform different functions

Goals of JIT 1. 2. 3. 4. 5. 6. 7. Reduced inventory where? Improved quality Lower costs Reduced space requirements Shorter lead time Increased productivity Greater flexibility 8. 9. 10. 11. 12. 13. Better relations with suppliers Simplified scheduling and control activities Increased capacity Better use of human resources More product variety Continuous Process Improvement

JIT Implementation ü Use JIT to finely tune an operating system ü Somewhat different in USA than Japan ü JIT is still evolving ü JIT as an inventory reduction program isn’t for everyone - JIT as a CPI program is! ü Some systems need Just-in. Case inventory

Supply Chain Security “the single biggest threat facing American traders is supply chain security” Website for C-T PAT

Why should you care about SC Security? • Is it a US problem? • Global Problem • Heathrow Airport delays Superbowl weekend 2005 • RFID – is the solution? • ISO Guidelines for SC Security • Terrorism Insurance

Supply Chain Security What’s the cost of 9/11 to the Supply Chain? Fortune Magazine - $50 -80 billion a year • inefficient supply chains • higher transportation costs • increased inventory

Problem? • • • Terrorism/Piracy Obsolescence Pilferage Information Breach Proprietary Data – Camera Phones; Thumb Drives Cyberspace Security RFID Data Security 66% of Sealift Containers arrive at 20 Major Ports >58 % of all inbound containers come through New York/New Jersey, Los Angeles, Long Beach • ~44% through Los Angeles/Long Beach in 2003 • Lengthening of Supply Chains – coupled with Globalization 11/29/2020

Recent Headlines • IMB identifies rash of false shipments into North Africa • Pirates intensify attacks in new areas, with first Somali hijacking reported in Red Sea • Maersk Alabama Captain Held by Pirates • Peanut Corporation of America • Somali piracy is worst in world – BBC News • Russia Sends Warship to Somali Coast to Fight Piracy – Bloomberg. com • UN adopts new Somalia piracy resolution

Supply Chain Headlines • “New Budget includes $10. 2 Billion for Border Security. ” • “Battling the Bad Guys: 2005 Was a Tough Year” Dec 2005 Baseline Magazine • “Major Data Theft Leads to Major Legal Problems” Baseline Magazine • “Polo Ralph Lauren – Lost Point of Sale Data” • “Somali pirates hijack fourth vessel in a week , ” January 2, 2010 11/29/2020 31

More Headlines • “Somali pirates hijack cargo ship near Seychelles, ” April 11, 2010, AP News • “Somali pirates attempt attack on Dutch warship, ” March 17, 2010 • “New suite of ISO supply chain management standards to reduce risks of terrorism, piracy and fraud” 11/29/2020 32

Examples • • • Major Distributor, Dec 2006 Locks on trucks SAFE Port Initiative Scanning of Containers C-TPAT ISO Standards for Supply Chain Security Threats in the international marketplace know no borders.

Terrorism Risk Insurance U. S. Terrorism Risk Insurance Act (TRIA) – property and casualty insurance experts are helping clients with interests in the United States make informed decisions about terrorism coverage. U. S. President George W. Bush signed the Terrorism Risk Insurance Act (TRIA) into law in November 2002 to stimulate business investment that had slowed to a trickle after the events of September 11, 2001. The law creates a three-year federal program that backs up insurance companies and guarantees that certain terrorist-related claims will be paid. TRIA is a short-term measure designed to give the insurance market time to recover and develop new solutions.

On December 26, 2007, the President signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2007 which extends the Terrorism Risk Insurance Act through December 31, 2014. The law extends the temporary federal Program that provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism.

Supply Chain Security “We have proved to our management that good security is good business. ” — Ann Lister of Texas Instruments

Risk Supply Chains are inherently complex, dynamic, and fluid, characterized by uncertainty, ambiguity, and friction. These characteristics cloud the operating environment: they create risks

Risk Assessment • Terrorism • Port Security – over 12 million containers annually to the US; 200 million world wide • Port Security – 300 US Ports • Longshoremen Strike – 2002 • Potential Airport Attack – LAX; MPS; LGA

Risk Assessment “If you do things the way you’ve always done them, you’ll get the same things you’ve always got. ” -Darrell Waltrip This is not your Dad’s Supply Chain! Security is an integral part of the Supply Chain and Homeland Defense

What are Supply Chain Hazards? • • Theft/Pilferage Competition Information Systems Cell Phones Thumb Drives Camera Phones Disgruntled Employees Lack of Training

Problems? • 66% of Sealift Containers arrive at 20 Major Ports • >58 % of all inbound containers come through New York/New Jersey, Los Angeles, Long Beach • ~44% through Los Angeles/Long Beach in 2003 • Lengthening of Supply Chains – coupled with Globalization • Top 5 “Hottest Global Markets”: China, Mexico, Eastern Europe, Southeast Asia, India

What is a Catastrophic Risk? • • • Inaccurate receipts? Customer Satisfaction? Sloppy Warehousing? National Emergency? Hurricane? Or, Only when it makes it to CNN?

Important? • September 11, 2001 - $2 billion per day lost • Longshoremen Strike, 2002 – 300 -500 ships backed up • Potential loss of attack to major port - $20 billion estimate • 2008 estimate ~ 12 million containers into US; up to 490 million containers world wide; 2009 - ~10 million containers

New Problem? • “There were no ‘secure’ rear areas. ” General Joseph Heiser on Vietnam Logistics • Sun Tzu – Chapter 1, The Art of War • Native Americans • American Civil War – Great Train Chase • Pirates of the Caribbean

Supply Chain Security A Global Perspective

Top 5 European Ports • Rotterdam – 9. 743 million TEUs in 2009 • Hamburg – 7. 088 million TEUs (9. 7 mil in 2008) • Antwerp – 7. 3 million TEUs (8. 6 in 2008) • Bremen – 4. 565 million TEUs (5. 5 in 2008) • Valencia – 3. 65 million (3. 6 in 2008)

Other Key Ports • • • Singapore – 25. 87 million TEUs Shanghai – 25 million Hong Kong – 20. 9 million Shenzhen – 18. 25 million Pusan – 11. 98 million

Rotterdam • > 900 intermodal barge moves daily to 72 locations • > 200 rail moves • 220 million people within 600 miles of Rotterdam

Rail • > 15% of cargo to Germany via rail • ~ 13% of Belgium cargo • ~ 14 of French cargo • US Rail – 4 major bridges over the Mississippi River

Other issues • 9000 distribution centers in the Netherlands • 2000 - $64. 4 billion USD in logistics and distribution in The Netherlands

SAFE Port Act • The SAFE Port Act codified into law a number of programs to improve security of U. S. ports, such as: • Additional requirements for maritime facilities • Creation of the Transportation Worker Identification Credentials • Establishment of interagency operational centers for port security

Safe Port Act • Container Security Initiative • Foreign port assessments • Customs Trade Partnership Against Terrorism

Container Security Initiative • CSI consists of four core elements: • Using intelligence and automated information to identify and target containers that pose a risk for terrorism. • Pre-screening those containers that pose a risk at the port of departure before they arrive at U. S. ports. • Using detection technology (X-Rays) to quickly pre-screen containers that pose a risk. Using smarter, tamper-evident containers.

Containers - Concerns • • Cost to X-Ray containers Manpower Delays Radiation

Transportation Worker Identification Credentials • Port Employees • Long Shoremen • Unescorted access personnel

C-TPAT • • Voluntary November 2001 9000 members Canada has a program very similar to CTPAT named FAST – Free and Secure Trade.

C-TPAT • According to US Customs and Border Protection Agency, the benefits of participating in C-TPAT could include: – Playing an active role in the war against terrorism – A reduced number of CBP inspections. – Priority processing for CBP inspections.

Orlando International Airport • No staffing of doors for employee entrance to baggage claim areas • Guns smuggled into planes by employees • “no requirement for us to staff those doors” OIA Spokesperson; TSA – “not my job!” • Identified as security issues in 2004 • 2006 – ½ of TSA Screeners failed test that measured how well employees could identify explosives, guns and other weapons on the scanner – but can identify bottles of mouthwash and toothpaste Source: Mike Thomas, Orlando Sentinel, Mar 15, 2007, p. B-1

Food Security

Bio. Terrorism? • • • Peter Pan Peanut Butter – e coli – 2007 E-coli from fresh Spinach – 2006 Chi’s e-coli – from green onions – 2003 Taco Bell – e coli 2005 None were terrorist attacks but impacted supply chains • US Salmonella/e-coli scare 2008 • Salmonella epidemic 2009 - >3921 separate items recalled