Just in Time Inventory

8/4/2019 Just in Time Inventory

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Just-in-Time



©The McGraw-Hill Companies, Inc., 2004

B01.2314 -- Operations -- Prof. Juran 2

Outline

• The Goal debrief• JIT Defined

• The Toyota Production System

• Blocking, Starving, and Buffers

• JIT Implementation Requirements

• JIT in Services





Just-In-Time (JIT) Defined

• JIT can be defined as an integrated set ofactivities designed to achieve high-volumeproduction using minimal inventories (rawmaterials, work in process, and finished goods)

• JIT also involves the elimination of waste inproduction effort

• JIT also involves the timing of production

resources (i.e., parts arrive at the nextworkstation “just in time”)





Just-In-Time (JIT) Defined

• Not one tool or technique, but many ideas that work together(see Exhibit 11.8 on page 435)

• Key elements

– Product/Process design with an eye towards variance reduction

• Setup time reduction• Small lot sizes

• Quality management

– Communication links with suppliers and customers

– Balance between production stability and responsiveness

– Redefined role of inventory

– JIT also involves the timing of production resources (i.e., parts arrive atthe next workstation “just in time”)





Planning

Planning

Implementation

Implementation

Traditional Approach

JIT Approach





Key Terms

• Pull system• Focused factories

• Group technology

• Heijunka (uniform plant loading)

• Kanban (card)




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JIT Demand-Pull Logic

Customers

Sub

Sub

Fab

Fab

Fab

Fab

Vendor

Vendor

Vendor

Vendor

Final

Assembly

Here the customer starts

the process, pulling an

inventory item from

Final Assembly…

Then sub-

assembly work is

pulled forward by

that demand…

The process continues

throughout the entire

production process and

supply chain




The Toyota Production System

Based on two philosophies:

• 1. Elimination of waste

• 2. Respect for people




Waste in 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




Minimizing Waste:Focused Factory Networks

CoordinationSystem Integration

These are small specialized

plants that limit the range

of products produced

(sometimes only one type of

product for an entire

facility)

Some plants in

Japan have as

few as 30 and as

many as 1000

employees




Minimizing Waste: Group Technology (Part 1)

Using Departmental Specialization (a.k.a. Functional Layout) for plantlayout can cause a lot of unnecessary material movement

Saw Saw

Lathe PressPress

Grinder

LatheLathe

Saw

Press

Heat Treat

Grinder

Note how the flow lines are going back and forth




Minimizing Waste: Group Technology (Part 2)

Revising by using Group Technology Cells (a.k.a. Product

Layout) can reduce movement and improve product flow

Press

Lathe

Grinder

Grinder

A

2

BSaw

Heat Treat

LatheSaw Lathe

PressLathe

1




Minimizing Waste: Uniform Plant Loading (Heijunka)

Not uniform Jan. Units Feb. Units Mar. Units Total

1,200 3,500 4,300 9,000

Uniform Jan. Units Feb. Units Mar. Units Total

3,000 3,000 3,000 9,000

Suppose we operate a production plant that produces a single

product. The schedule of production for this product could beaccomplished using either of the two plant loading schedulesbelow.

How does the uniform loading help save labor costs?

or




Minimizing Waste: Just-In-Time Production

• Management philosophy• “Pull” system though the plant

WHAT IT IS

• Employee participation• Industrial engineering/basics• Continuing improvement• Total quality control• Small lot sizes

WHAT IT REQUIRES

• Attacks waste• Exposes problems and bottlenecks• Achieves streamlined production

WHAT IT DOES

• Stable environment

WHAT IT ASSUMES




Minimizing Waste: InventoryHides Problems

Work in

process

queues

(banks)

Changeorders

Engineering design

redundancies

Vendor

delinquencies

Scrap

Design

backlogs

Machine

downtime

Decision

backlogs

Inspection

backlogs

Paperwork

backlog

Example: By identifyingdefective items from avendor early in theproduction process thedownstream work is

saved

Example: By identifyingdefective work byemployees upstream, thedownstream work issaved




Slide courtesy of Robert B. Decosimo (MBA’11)




Minimizing Waste: Kanban Systems

StoragePart A

StoragePart AMachine

CenterAssemblyLine

Material Flow

Card (signal) Flow

Withdrawalkanban

Once the Production kanban is

received, the Machine Centerproduces a unit to replace the onetaken by the Assembly Linepeople in the first place

This puts thesystem back wereit was before theitem was pulled

The process begins by the Assembly Line

people pulling Part A from Storage

Production kanban




Determining the Number of Kanbans Needed

• Setting up a kanban system requires determiningthe number of kanbans cards (or containers)needed

• Each container represents the minimumproduction lot size

• An accurate estimate of the lead time required to

produce a container is key to determining howmany kanbans are required




k = Number of Kanbans

D = Average demand

L = Lead time

S = Safety stock (as a % of expected lead time demand)

C = Container size

k ContainertheofSize

stockSafetytimeleadduringdemandExpected

C

SDL

1




Example of Kanban Card Determination

• A switch assembly is assembled in batches of 4 units froman “upstream” assembly area and delivered in a specialcontainer to a “downstream” control-panel assemblyoperation

• The control-panel assembly area requires 5 switchassemblies per hour

• The switch assembly area can produce a container of switchassemblies in 2 hours

• Safety stock has been set at 10% of needed inventory





Example of Kanban Card

Determination: Calculations

Always round up!

k

C

SDL

1

4

10.0125

75.2





Respect for People

• Level payrolls

• Cooperative employee unions

• Subcontractor networks

• Bottom-round management style

• Quality circles (Small Group InvolvementActivities or SGIA’s)





Toyota Production System’s Four Rules

1. All work shall be highly specified as to content, sequence,

timing, and outcome

2. Every customer-supplier connection must be direct, andthere must be an unambiguous yes-or-no way to send

requests and receive responses

3. The pathway for every product and service must besimple and direct

4. Any improvement must be made in accordance with thescientific method, under the guidance of a teacher, at thelowest possible level in the organization





Blocking, Starving, Buffers

Activity A4 per minute

Activity B8 per minute

Activity C3 per minute

Activity D5 per minute

Buffer?Buffer? Buffer?

Process Flow

Assume that these are random processing times.

Where is the most important place to have a buffer?





JIT Implementation: Kanban-Pull

•Demand pull•Backflush Accounting•All product costs are first accumulated in Cost of Goods Sold

account•At the end of the period all the costs are “flushed back” or

they are worked backed into the appropriate inventoryaccounts

•The usefulness of this is to save recording time by having allthe cost go straight to final destination and then determinethe proper balances for the inventory accounts

•Has no material inventory account

•Backflush costing uses fewer accounts and avoids recordingseveral transactions

•Reduce lot sizes





JIT in Services (Examples)

• Organize Problem-Solving Groups

• Upgrade Housekeeping

• Upgrade Quality

• Clarify Process Flows

• Revise Equipment and Process Technologies






Summary

• JIT Defined• The Toyota Production System

• JIT Implementation Requirements

• JIT in Services

Documents

Just in Time Inventory