Lecture 28 JustinTime Manufacturing Continued Books Introduction to

Lecture 28 Just-in-Time Manufacturing (Continued) Books • Introduction to Materials Management, Sixth Edition, J. R. Tony Arnold, P. E. , CFPIM, CIRM, Fleming College, Emeritus, Stephen N. Chapman, Ph. D. , CFPIM, North Carolina State University, Lloyd M. Clive, P. E. , CFPIM, Fleming College • Operations Management for Competitive Advantage, 11 th Edition, by Chase, Jacobs, and Aquilano, 2005, N. Y. : Mc. Graw-Hill/Irwin. • Operations Management, 11/E, Jay Heizer, Texas Lutheran University, Barry Render, Graduate School of Business, Rollins College, Prentice Hall

Objectives • • • JIT layout Distance reduction Increased flexibility Inventory Reduced variability Reduced setup cost JIT scheduling Kanban JIT quality tactics Lean Operations

JIT Layout Reduce waste due to movement JIT 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

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

Increased Flexibility þ Cells designed to be rearranged as volume or designs change þ Applicable in office environments as well as production settings þ Facilitates both product and process improvement

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

Reduced Space and Inventory þ With reduced space, inventory must be in very small lots þ Units are always moving because there is no storage

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

Reduce Variability Inventory level Process downtime Scrap Setup time Quality problems Late deliveries

Reduce Variability Inventory level Process downtime Scrap Setup time Quality problems Late deliveries

Reduce Lot Sizes Q 1 When average order size = 200 average inventory is 100 Inventory 200 – Q 2 When average order size = 100 average inventory is 50 100 – Time

Reduce Lot Sizes þ Ideal situation is to have lot sizes of one pulled from one process to the next þ Often not feasible þ Can use EOQ analysis to calculate desired setup time þ Two key changes necessary þ Improve material handling þ Reduce setup time

Lot Size Example D = d = per day p = Q = H = S = Q= Annual demand = 400, 000 units Daily demand = 400, 000/250 = 1, 600 Daily production rate = 4, 000 units EOQ desired = 400 Holding cost = $20 per unit Setup cost (to be determined) 2 DS Q 2 = H(1 - d/p) (Q 2)(H)(1 - d/p) S= = 2 D (3, 200, 000)(0. 6) 800, 000 = $2. 40 Setup time = $2. 40/($30/hour) = 0. 08 hr = 4. 8 minutes

Reduce Setup Costs þ High setup costs encourage large lot sizes þ Reducing setup costs reduces lot size and reduces average inventory þ Setup time can be reduced through preparation prior to shutdown and changeover

Lower Setup Costs Holding cost Cost Sum of ordering and holding costs T 1 Setup cost curves (S 1, S 2) T 2 S 1 Lot size

Reduce Setup Times Initial Setup Time Step 1 90 min — Separate setup into preparation and actual setup, doing as much as possible while the machine/process is operating (save 30 minutes) Move material closer and improve material handling (save 20 minutes) Step 2 Step 3 Standardize and improve tooling (save 15 minutes) Step 4 Step 5 Step 6 Use one-touch system to eliminate adjustments (save 10 minutes) Training operators and standardizing work procedures (save 2 minutes) Repeat cycle until subminute setup is achieved 60 min — 45 min — 25 min — 13 min — —

JIT Scheduling þ Schedules must be communicated inside and outside the organization þ Level schedules þ Process frequent small batches þ Freezing the schedule helps stability þ Kanban þ Signals used in a pull system

JIT Scheduling Better scheduling improves performance JIT Scheduling Tactics Communicate schedules to suppliers Make level schedules Freeze part of the schedule Perform to schedule Seek one-piece-make and one-piece move Eliminate waste Produce in small lots Use kanbans Make each operation produce a perfect part

Level Schedules þ Process frequent small batches rather than a few large batches þ Make and move small lots so the level schedule is economical þ “Jelly bean” scheduling þ Freezing the schedule closest to the due dates can improve performance

Scheduling Small Lots JIT Level Material-Use Approach A A B B B C B C C C Large-Lot Approach A A A B B Time B B

Kanban When inventory is moved only as needed, it is referred to as a pull system and the ideal lot size is one. The Japanese call the signal to begin production a Kanban. (card or visual signal) • Kanban “pulls” the material through the operation • Kanban places added emphasis on meeting schedules and reducing the time and cost required by setups

Kanban þ Kanban is the Japanese word for card þ The card is an authorization for the next container of material to be produced þ A sequence of kanbans pulls material through the process þ Many different sorts of signals are used, but the system is still called a kanban

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

Kanban Finished goods Kanban Customer order Work cell Ship Raw Material Supplier Kanban Final assembly Kanban Purchased Parts Supplier Kanban Subassembly Kanban

More Kanban þ When the producer and user are not in visual contact, a card can be used þ When the producer and user are in visual contact, a light or flag or empty spot on the floor may be adequate þ Since several components may be required, several different kanban techniques may be employed

More Kanban þ Usually each card controls a specific quantity or parts þ Multiple card systems may be used if there are several components or different lot sizes þ 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

More Kanban þ Kanban cards provide a direct control and limit on the amount of work-in-process between cells þ 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

The Number of Kanban Cards or Containers þ Need to know the lead time needed to produce a container of parts þ Need to know the amount of safety stock needed Number of kanbans (containers) Demand during Safety lead time + stock = Size of container

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 Number of kanbans = 1, 000 + 250 = 5

Advantage of Kanban • Small batches allow a very limited amount of faulty material. • Bad Aspects of Holding (Carrying) Inventory M M M Poor quality Obsolescene Damage Occupied space Committed assets M M M Increased insurance Increased material Handling Increased accidents

Advantages of Kanban þ Allow only limited amount of faulty or delayed material þ Problems are immediately evident þ Puts downward pressure on bad aspects of inventory þ Standardized containers reduce weight, disposal costs, wasted space, and labor

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

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

Toyota Production System þ Continuous improvement þ Build an organizational culture and value system that stresses improvement of all processes þ Part of everyone’s job þ Respect for people þ People are treated as knowledge workers þ Engage mental and physical capabilities þ Empower employees

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

Lean Operations þ Different from JIT in that it is externally focused on the customer þ Starts with understanding what the customer wants þ Optimize the entire process from the customer’s perspective

Building a Lean Organization þ Transitioning to a lean system can be difficult þ Lean systems tend to have the following attributes þ Use JIT techniques þ Build systems that help employees produce perfect parts þ Reduce space requirements

Building a Lean Organization þ Develop partnerships with suppliers þ Educate suppliers þ Eliminate all but value-added activities þ Develop employees þ Make jobs challenging þ Build worker flexibility

JIT in Services þ The JIT techniques used in manufacturing are used in services þ Suppliers þ Layouts þ Inventory þ Scheduling

End of Lecture 28