Just-in-Time and Lean
Production Systems
Introductory Quotation
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.
SCM : Supplier – Production – Distribution System
Supplier Distribution
Inventories
Productions Inventories
Raw Material
Inventory
Work-in-process
Inventory
Raw material
in-transit
Factory
Finished
Goods
Inventory
Customer
Distribution
Inventories
Retailer
Inventory
Orders
Component
Inventory
Sub-assembly
parts in-transit
Warehouse
Inventory
MRO
Inventory
Orders
Maintenance,
repair, and ordering
supplies in-transit
Purchasing
Production and
Inventory Control
Shipping and
Traffic
What is Just-in-Time?
• 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.
Lean Production
• Lean Production supplies customers with exactly
what the customer wants, when the customer
wants, without waste, through continuous
improvement.
What Does Just-in-Time Do?
• 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
Types of Waste
•
•
•
•
•
•
•
Overproduction
Waiting
Transportation
Inefficient processing
Inventory
Unnecessary motion
Product defects
© 1995
Corel
Corp.
JIT Reduced Waste
at Hewlett-Packard
Waste Reduction (%)
Setup Time
20%
Scrap
30%
Finished Goods
Inventory
Space
30%
40%
Lead Time
50%
Raw Material
Inventory
Work-in-Process
Inventory
50%
82%
0%
20%
40%
60%
80%
100%
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
JIT Contribution
to Competitive Advantage
• 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 - Continued
• 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
• 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!
Just-in-Time
Success Factors
Employee
Empowerment
Quality
Preventive
Maintenance
Suppliers
Layout
JIT
Inventory
Scheduling
Suppliers
• 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
Characteristics of JIT Partnerships
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 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
Characteristics of JIT
Partnerships Quality
– 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
Shipping
–Scheduling of inbound freight
–Gain control by use of companyowned or contract shipping and
warehousing
–Use of Advanced Shipping Notice
(ASN)
Goals of JIT partnerships
Elimination of unnecessary activities
Elimination of in-plant inventory
Elimination of in-transit inventory
Elimination of poor suppliers
Concerns of Suppliers
•
•
•
•
•
•
Diversification
Poor customer scheduling
Frequent engineering changes
Quality assurance
Small lot sizes
Physical proximity
Streamlined Production
Traditional Flow
Production Process
(stream of water)
Suppliers
Flow with JIT
Suppliers
Customers
Inventory (stagnant
ponds)
Material
(water in
stream)
Customers
Layout
• 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
Work Cell versus
Process Layout
Process Layout
Lathe
Lathe
5
4
1
Press
Saw
Saw
2
Heat
Treat
3
Press
6
Work Cell
2
Saw
Press
Lathe
Lathe
Grinder
Grinder
Grinder
1
Heat
Treat
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
Inventory
• 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
•
•
•
•
•
•
•
•
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
Inventory level
Inventory level
Scrap
Setup
time
Process
downtime
Quality
problems
Late
deliveries
Scrap
Setup
time
Process
downtime
Quality
problems
Late
deliveries
Lowering Inventory
Reduces Waste
Work in process inventory level
(hides problems)
Unreliable
Vendors
Scrap
Capacity
Imbalances
Lowering Inventory
Reduces Waste
Reducing inventory reveals
problems so they can be solved.
Unreliable
Vendors
WIP
Scrap
Capacity
Imbalances
Lowering Inventory
Reduces Waste
Reducing inventory reveals
problems so they can be solved.
Unreliable
Vendors
Scrap
WIP
Capacity
Imbalances
Reducing Lot Sizes Increases
the Number of Lots
Customer
orders 10
Lot size = 5
Lot 2
Lot 1
Lot 1
Lot size = 2
Lot 2 Lot 3 Lot 4
Lot 5
…Which Increases
Inventory Costs
Cost
Setup Cost
Smaller Optimal
Lot Size Lot Size
Lot Size
Unless Setup Costs are
Reduced
Cost
Setup Cost
New optimal
lot size
Original
optimal
lot size
Lot Size
Frequent Orders can Reduce
Average Inventory
Q1 When average order size = 200,
average inventory is 100
20
0
10
0
Inventory
Q2 When average order size = 100,
average inventory is 50
Time
Lower Total Cost Requires
Small Lot Sizes and Lower
Setup Costs
Cost
Sum of ordering
and holding cost
T1
T2
S2
S1
Lot size
Steps to Reduce Setup Time
Initial Setup Time
Step 1
Separate setup into preparation, and actual setup,
doing as much as possible while the
machine/process is running (save 30 minutes)
Step 2
Move material closer and improve
material handling (save 20 minutes)
Standardize and
improve tooling (save
Step 3
15 minutes)
Use one-touch system to
Training operators and Step 4
eliminate adjustments (save
standardizing work
10 minutes)
Step 5
procedures (save 2
minutes)
90 min
60 min
45 min
25 min
15 min
13 min
Scheduling
• Involves timing of operations
• JIT requires
–
–
–
–
–
Communicating schedules to suppliers
Level schedules
Freezing part of schedule nearest due date
Small lots
Kanban techniques
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
Level Schedules
• 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
– Item Monthly Quantity Daily Quantity
A
40
2
B
60
3
Small versus Large Lots
JIT produces same amount in
same time if setup times are
lowered
JIT Small Lots
A
A
B
B
B
C
A
A
B
B
B
C
C
C
Time
Small lots also increase flexibility to meet
customer demands
Large-Lot Approach
A
A
A
A
B
B
B
Time
B
B
B
Comparison of Level and Large
Lot Material-use Approaches
Kanban
• 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
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.
Preventive Maintenance (PM)
• 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
Quality
• 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
JIT Quality Tactics
• Use statistical process control
• Empower employees
• Build failsafe methods (poka-yoke,
checklists, etc.)
• Provide immediate feedback
Employee Empowerment
• Get employees involved in product &
process improvements
– Employees know job best!
• JIT requires
–
–
–
–
Empowerment
Cross-training
Training support
Few job classifications
© 1995 Corel Corp.
JIT in Services
All the techniques
used in
manufacturing are
used in services
Suppliers
Layouts
Inventory
Scheduling
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