Just-in-Time and Lean Production Systems

Waste is ‘anything other than the minimum amount of equipment, materials, parts, space, and worker’s time, which are absolutely essential to add value to the product.’

— Shoichiro Toyoda President, Toyota

© 1995 Corel Corp.

Introductory Quotation

SCM : Supplier – Production – Distribution System

Supplier DistributionInventories

Raw materialin-transit

Sub-assemblyparts in-transit

Maintenance,repair, and orderingsupplies in-transit

Raw MaterialInventory

Work-in-processInventory

FactoryFinishedGoods

Inventory

ComponentInventory

MROInventory

PurchasingProduction and

Inventory ControlShipping and

Traffic

RetailerInventory

Orders

WarehouseInventory

Productions InventoriesCustomer

DistributionInventories

Orders

• Management philosophy of continuous and forced problem solving

• Supplies and components are ‘pulled’ through system to arrive where they are needed when they are needed.

What is Just-in-Time?

Lean Production

• Lean Production supplies customers with exactly what the customer wants, when the customer wants, without waste, through continuous improvement.

• Attacks waste– Anything not adding value to the product

• From the customer’s perspective• Exposes problems and bottlenecks caused by variability

– Deviation from optimum• Achieves streamlined production

– By reducing inventory

What Does Just-in-Time Do?

• Overproduction

• Waiting

• Transportation

• Inefficient processing

• Inventory

• Unnecessary motion

• Product defects© 1995 Corel Corp.

Types of Waste

Waste Reduction (%)

82%

50%

50%

30%

30%

20%

40%

0% 20% 40% 60% 80% 100%

Work-in-Process Inventory

Raw Material Inventory

Lead Time

Space

Finished Goods Inventory

Scrap

Setup Time

JIT Reduced Wasteat Hewlett-Packard

Variability Occurs Because

• Employees, machines, and suppliers produce units that do not conform to standards, are late, or are not the proper quantity

• Engineering drawings or specifications are inaccurate

• Production personnel try to produce before drawings or specifications are complete

• Customer demands are unknown

Push versus Pull

• Push system: material is pushed into downstream workstations regardless of whether resources are available

• Pull system: material is pulled to a workstation just as it is needed

• Suppliers– reduced number of vendors– supportive supplier relationships– quality deliveries on time

• Layout– work-cell layouts with testing at each step of the process– group technology– movable, changeable, flexible machinery– high level of workplace organization and neatness– reduced space for inventory– delivery direct to work areas

JIT Contribution to Competitive Advantage

• Inventory– small lot sizes– low setup times– specialized bins for holding set number of parts

• Scheduling– zero deviation from schedules– level schedules– suppliers informed of schedules– Kanban techniques

JIT Contribution to Competitive Advantage - Continued

JIT Contribution to Competitive Advantage - Continued

• Preventive Maintenance– scheduled– daily routine– operator involvement

• Quality Production– statistical process control– quality by suppliers– quality within firm

JIT Contribution to Competitive Advantage - Continued

• Employee Empowerment– empowered and cross-trained employees– few job classifications to ensure flexibility of

employees– training support

• Commitment– support of management, employees, and suppliers

Results of JIT Contribution

• Queue and delay reduction, speedier throughput, freed assets, and winning orders

• Quality improvement, reduces waste and wins orders

• Cost reduction increases margin or reduces selling price

• Variability reductions in the workplace reduces waste and wins orders

• Rework reduction, reduces waste and wins orders

Yielding

Faster response to the customer at lower cost and higher quality

A competitive advantage!

Suppliers

Preventive Maintenance

Layout

Inventory

Scheduling

Quality

Employee Empowerment

JIT

Just-in-TimeSuccess Factors

• Incoming material and finished goods involve waste• Buyer and supplier form JIT partnerships • JIT partnerships eliminate

– Unnecessary activities– In-plant inventory– In-transit inventory– Poor suppliers

Suppliers

– Few– Nearby– Repeat business– Analysis and support to enable desirable suppliers

to become or stay price competitive– Competitive bidding mostly limited to new

purchases– Buyer resists vertical integration and subsequent

wipeout of supplier business– Suppliers encouraged to extend JIT to their

suppliers (2nd and 3rd tier suppliers)

Characteristics of JIT PartnershipsSuppliers

Characteristics of JIT Partnerships Quantities

– Steady output rate– Frequent deliveries in small-lot quantities– Long-term contract agreements– Minimal or no paperwork (use EDI or internet)– Delivery quantities fixed for whole contract term– Little or no permissible overage or underage– Suppliers package in exact quantities– Suppliers reduce their production lot sizes

– Minimal product specifications imposed on suppliers

– Help suppliers meet quality requirements– Close relationship between buyers’ and

suppliers quality assurance people– Suppliers use poka-yoke and process

control charts instead of lot-sampling techniques

Characteristics of JIT Partnerships Quality

Characteristics of JIT Partnerships Shipping

–Scheduling of inbound freight

–Gain control by use of company-owned or contract shipping and warehousing

–Use of Advanced Shipping Notice (ASN)

Goals of JIT partnerships

Elimination of unnecessary activitiesElimination of in-plant inventoryElimination of in-transit inventoryElimination of poor suppliers

• Diversification

• Poor customer scheduling

• Frequent engineering changes

• Quality assurance

• Small lot sizes

• Physical proximity

Concerns of Suppliers

Streamlined Production

Flow with JIT

Traditional Flow

CustomersSuppliers

Customers

Suppliers

Production Process (stream of water)

Inventory (stagnant ponds) Material

(water in stream)

• JIT objective: Reduce movement of people and material– Movement is waste!

• JIT requires– Work cells for product families– Moveable or changeable machines– Short distances– Little space for inventory– Delivery directly to work areas

Layout

Process Layout Work Cell

Saw

Lathe

Grinder

HeatTreat

Lathe

Lathe

Lathe Saw

HeatTreat

Grinder

Grinder

Press

Press 1

1

2

3

45

2

6

Saw

Press

Work Cell versus Process Layout

Layout Tactics

• Build work cells for families of products

• 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

• Traditional: inventory exists in case problems arise

• JIT objective: eliminate inventory• JIT requires

– Small lot sizes– Low setup time– Containers for fixed number of parts

• JIT inventory: Minimum inventory to keep system running

Inventory

JIT Inventory Tactics• Use a pull system to move inventory• Reduce lot size• Reduce setup time• Develop Just-in-Time delivery systems

with suppliers• Deliver directly to point of use• Perform-to-schedule• Reduce setup time• Use group technology

Inventory Hides Problems Just as Water in a Lake Hides Rocks

ScrapSetup time

Late deliveries

Quality problems

Process downtime

ScrapSetup time

Late deliveries

Quality problems

Process downtime

Inventory level

Inventory level

Scrap

Work in process inventory level(hides problems)

Unreliable Vendors

Capacity Imbalances

Lowering Inventory Reduces Waste

Scrap

Reducing inventory revealsproblems so they can be solved.

Unreliable Vendors

Capacity Imbalances

WIP

Lowering Inventory Reduces Waste

Scrap

Reducing inventory revealsproblems so they can be solved.

Unreliable Vendors

Capacity Imbalances

WIP

Lowering Inventory Reduces Waste

Customer orders 10

Lot size = 5Lot 1 Lot 2

Lot size = 2Lot 1 Lot 2 Lot 3 Lot 4 Lot 5

Reducing Lot Sizes Increases the Number of Lots

…Which Increases Inventory Costs

Lot Size

Cost

Holding CostTotal Cost

Setup Cost

Optimal Lot Size

SmallerLot Size

Unless Setup Costs are Reduced

Lot Size

Cost

Holding CostTotal Cost

Setup Cost

Original optimal lot size

New optimal lot size

Frequent Orders can Reduce Average Inventory

Time

Inve

ntor

y10 0

20 0Q1 When average order size = 200, average inventory is 100

Q2 When average order size = 100, average inventory is 50

Lower Total Cost Requires Small Lot Sizes and Lower

Setup Costs

Lot size

Sum of ordering and holding cost

T1

T2

S2S1

Cos

t

Steps to Reduce Setup TimeInitial Setup Time

Separate setup into preparation, and actual setup, doing as much as possible while the machine/process

is running (save 30 minutes)

Move material closer and improve material handling (save 20 minutes)

Standardize and improve tooling (save

15 minutes)

90 min

60 min

45 min

25 min

15 minUse one-touch system to

eliminate adjustments (save 10 minutes)

Training operators and standardizing work procedures (save 2

minutes)

Step 1

Step 2

Step 3

Step 513 min

Step 4

• Involves timing of operations

• JIT requires– Communicating schedules to suppliers

– Level schedules

– Freezing part of schedule nearest due date

– Small lots

– Kanban techniques

Scheduling

JIT Scheduling Tactics• Communicate the schedule 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

• Reduce ripple effect of small variations in schedules (e.g., final assembly)

• Production quantities evenly distributed over time (e.g., 7/day)

• Build same mix of products every day– Results in many small lots– ItemMonthly Quantity Daily Quantity

A 40 2B 60 3

Level Schedules

A

A A B B B C

JIT Small Lots

Large-Lot Approach

Time

Time

A A B B B C

A A A B B B B B B C C

JIT produces same amount in same time if setup times are lowered

Small versus Large Lots

Small lots also increase flexibility to meet customer demands

Comparison of Level and Large Lot Material-use Approaches

• Japanese word for card– Pronounced ‘kahn-bahn’ (not ‘can-ban’)

• Authorizes production from downstream operations– ‘Pulls’ material through plant

• May be a card, flag, verbal signal etc.• Used often with fixed-size containers

– Add or remove containers to change production rate

Kanban

Diagram of Outbound Stockpoint with Warning-Signal

Marker

Kanban Signals “Pull” Material Through the Process

Kanban: Additional Points• When producer and user are not in visual contact, a card may

be used; otherwise, a light, flag, or empty spot on the floor may work.

• Because a pull station may require several resupply components, several kanban pull techniques can be used at the same station.

• Usually, each card controls a specific quantity of parts, although multiple card systems can be used if the producing cell produces several components or the lot size is different from the move size.

• In an MRP system, the schedule can be thought of as a “build” authorization and the kanban as a type of “pull” system that initiates the actual production.

Kanban: Additional Points - Continued

• The kanban cards provide direct control (limit) on the amount of work-in-process between cells.

• If there is an intermediate storage area, a two-card system may be used; one card circulates between user and storage area, and the other circulates between the storage area and the producing area.

• All activities involved in keeping equipment in working order

• Done to prevent failure

• JIT requires– Scheduled & daily PM

– Operator performs PM• Knows machines• Responsible for product quality

Preventive Maintenance (PM)

• JIT exposes quality problems by reducing inventory

• JIT limits number defects with small lots• JIT requires TQM

– Statistical process control– Worker involvement

• Inspect own work• Quality circles

– Immediate feedback

Quality

JIT Quality Tactics

• Use statistical process control

• Empower employees

• Build failsafe methods (poka-yoke, checklists, etc.)

• Provide immediate feedback

• Get employees involved in product & process improvements– Employees know job best!

• JIT requires– Empowerment

– Cross-training

– Training support

– Few job classifications

© 1995 Corel Corp.

Employee Empowerment

JIT in Services

All the techniques used in

manufacturing are used in services

SuppliersSuppliers

LayoutsLayouts

InventoryInventory

SchedulingScheduling

Attributes of Lean Producers - They

• use JIT to eliminate virtually all inventory• build systems to help employees product a perfect

part every time• reduce space requirements• develop close relationships with suppliers• educate suppliers• eliminate all but value-added activities• develop the workforce• make jobs more challenging• reduce the number of job classes and build worker

flexibility