25.03.2009
Operations
Management
Outline
 Global Company Profile:
Toyota Motor Corporation
Chapter 16 –
JIT and Lean
Operations
 Just-in-Time, the Toyota
Production System, and Lean
Operations
 Eliminate Waste
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
 Remove Variability
 Improve Throughput
Some additions and deletions have been made by Ömer Yağız to
this slide set.
© 2008 Prentice Hall, Inc.
16 – 1
© 2008 Prentice Hall, Inc.
Outline – Continued
16 – 2
Outline – Continued
 JIT Inventory
 Just-in-Time
 JIT Partnerships
 Reduce Variability
 Concerns of Suppliers
 Reduce Inventory
 Reduce Lot Sizes
 JIT Layout
 Reduce Setup Costs
 Distance Reduction
 JIT Scheduling
 Increased Flexibility
 Impact on Employees
 Level Schedules
 Reduced Space and Inventory
 Kanban
© 2008 Prentice Hall, Inc.
16 – 3
© 2008 Prentice Hall, Inc.
16 – 4
Learning Objectives
Outline – Continued
When you complete this chapter you
should be able to:
 JIT Quality
 Toyota Production System
 Continuous Improvement
1. Define just-in-time, TPS, and lean
operations
 Respect for People
2. Define the seven wastes and the
5 Ss
 Standard Work Practices
 Lean Operations
3. Explain JIT partnerships
 Building a Lean Organization
4. Determine optimal setup time
 Lean Operations in Services
© 2008 Prentice Hall, Inc.
16 – 5
© 2008 Prentice Hall, Inc.
16 – 6
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25.03.2009
Learning Objectives
Toyota Motor Corporation
When you complete this chapter you
should be able to:
 Largest vehicle manufacturer in the
world with annual sales of over 9
million vehicles
5. Define kanban
 Success due to two techniques, JIT
and TPS
6. Compute the required number of
kanbans
 Continual problem solving is central
to JIT
7. Explain the principles of the Toyota
Production System
© 2008 Prentice Hall, Inc.
 Eliminating excess inventory makes
problems immediately evident
16 – 7
© 2008 Prentice Hall, Inc.
16 – 8
Toyota Motor Corporation
 Central to TPS is a continuing effort
to produce products under ideal
conditions
• Toyota Prod System (TPS) became
Lean Manuf System in the USA
 Respect for people is fundamental
 Small building but high levels of
production
 Subassemblies are transferred to the
assembly line on a JIT basis
 High quality and low assembly time
per vehicle
© 2008 Prentice Hall, Inc.
16 – 9
© 2008 Prentice Hall, Inc.
Just-In-Time, TPS, and
Lean Operations
Just-In-Time, TPS, and
Lean Operations
 JIT is a philosophy of continuous and
forced problem solving via a focus on
throughput and reduced inventory
 JIT emphasizes forced problem
solving
 TPS emphasizes employee
learning and empowerment in an
assembly-line environment
 TPS emphasizes continuous
improvement, respect for people, and
standard work practices
 Lean operations emphasize
understanding the customer
 Lean production supplies the
customer with their exact wants when
the customer wants it without waste
© 2008 Prentice Hall, Inc.
16 – 10
16 – 11
© 2008 Prentice Hall, Inc.
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25.03.2009
JIT, TPS, and Lean
Lean Operations
• Doing more with less inventory, fewer
workers, less space
• Just-in-time (JIT)
All are basically used interchangeably
We will refer to all as ―Lean
Operations ― ; the textbook does the
same.
– smoothing the flow of material to arrive just as
it is needed
– ―JIT‖ and ―Lean Production‖ are used
interchangeably
• Muda
– waste, anything other than that which adds
value to the product or service
© 2008 Prentice Hall, Inc.
16 – 13
© 2008 Prentice Hall, Inc.
Origins of Lean Operations
16 – 14
Three major issues
Japanese firms, particularly Toyota, in
1970's and 1980's
Eiji Toyoda, Taiichi Ohno and Shigeo
Shingo ( http://en.wikipedia.org/wiki/Eiji_Toyoda )
Geographical and cultural roots
Japanese objectives
Effective OM means managers must also
address three issues:
 eliminate waste
 remove variability
 improve throughput
―catch up with America‖ (within 3 years of 1945)
small lots of many models
Japanese motivation
Japanese domestic production in 1949 --- 25,622
trucks, 1,008 cars
American to Japanese productivity ratio ---9:1
Era of ―slow growth‖ in 1970's
© 2008 Prentice Hall, Inc.
16 – 15
© 2008 Prentice Hall, Inc.
Taiichi Ohno’s Seven
Wastes
16 – 16
Eliminate Waste
 Overproduction (more than demanded)
 Waste is anything that does not
add value from the customer point
of view
 Queues (idle time, storage, waiting)
 Transportation (materials handling)
 Inventory (raw, WIP, FG, excess operating
supplies)
 Motion (movement of people & equipment)
 Overprocessing (work that adds no value)
 Storage, inspection, delay, waiting
in queues, and defective products
do not add value and are 100%
waste
 Defective products (rework, scrap,
returns, warranty claims)
© 2008 Prentice Hall, Inc.
16 – 17
© 2008 Prentice Hall, Inc.
16 – 18
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The 5 Ss
Eliminate Waste
• The method of 5 S's is an important part of
Lean. Named after five Japanese concepts,
the 5 S's is a set of workplace organization or
housekeeping rules for keeping the factory in
perfect order. The method is regarded as a
prerequisite for Lean. The 5 S's include:
 Other resources such as energy,
water, and air are often wasted
 Efficient, ethical, and socially
responsible production minimizes
inputs, reduces waste
• Seiri - sorting, i.e., proper arrangement of all
items, storage, equipment, tools, inventory
and traffic
Seiton - orderliness
Seiso - cleanliness
Seiketsu - standardization, and
Shitsuke - self-discipline
 Traditional ―housekeeping‖ has
been expanded to the 5 Ss
© 2008 Prentice Hall, Inc.
16 – 19
© 2008 Prentice Hall, Inc.
16 – 20
The 5 Ss
The 5 Ss
 Sort/segregate – when in doubt,
throw it out
 Simplify/straighten – use methods
analysis tools
 Shine/sweep – clean daily
 Standardize – remove variations
from processes (SOP’s and
checklists)
 Sustain/self-discipline – review work
and recognize progress
 Sort/segregate – when in doubt,
throw it out
 Simplify/straighten – methods
analysis
tools Ss
Two additional
 Shine/sweep
– clean
daily practices
 Safety – build
in good
 Standardize
– remove variations
 Support/maintenance
– reduce
from processes
variability and unplanned
 Sustain/self-discipline
– review work
downtime
and recognize progress
© 2008 Prentice Hall, Inc.
16 – 21
© 2008 Prentice Hall, Inc.
Remove Variability
16 – 22
Sources of Variability
 JIT systems require managers to
reduce variability caused by both
internal and external factors
1. Incomplete or inaccurate drawings
or specifications
 Variability is any deviation from the
optimum process
2. Poor production processes
resulting in incorrect quantities,
late, or non-conforming units
 Inventory hides variability
3. Unknown customer demands
 Less variability results in less
waste
© 2008 Prentice Hall, Inc.
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© 2008 Prentice Hall, Inc.
16 – 24
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Sources of Variability
Improve Throughput
1. Incomplete or inaccurate drawings
or specifications
 The time it takes to move an
order from receipt to delivery
2. Poor production processes
resulting in incorrect quantities,
late, or non-conforming units
 The time between the arrival of
raw materials and the shipping of
the finished order is called
manufacturing cycle time
3. Unknown customer demands
 A pull system increases
throughput
© 2008 Prentice Hall, Inc.
16 – 25
© 2008 Prentice Hall, Inc.
16 – 26
Just-In-Time (JIT)
Improve Throughput
• Powerful strategy for improving operations
• Materials arrive where they
are needed when they are
needed
• Identifying problems and
driving out waste reduces
costs and variability and
improves throughput
• Requires a meaningful
buyer-supplier relationship
 By pulling material in small lots,
inventory cushions are removed,
exposing problems and emphasizing
continual improvement
 Manufacturing cycle time is reduced
 Push systems dump orders on the
downstream stations regardless of
the need
© 2008 Prentice Hall, Inc.
16 – 27
JIT and Competitive
Advantage
© 2008 Prentice Hall, Inc.
16 – 28
JIT Logic
PULL….
Fab
Vendor
Fab
Vendor
Fab
Vendor
Fab
Vendor
Sub
Customers
Final Assy
Sub
Figure 16.1
© 2008 Prentice Hall, Inc.
16 – 29
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JIT and Competitive
Advantage
JIT Partnerships
 JIT partnerships exist when a
supplier and purchaser work
together to remove waste and drive
down costs
 Four goals of JIT partnerships are:
 Removal of unnecessary activities
 Removal of in-plant inventory
 Removal of in-transit inventory
 Improved quality and reliability
Figure 16.1
© 2008 Prentice Hall, Inc.
16 – 31
© 2008 Prentice Hall, Inc.
16 – 32
Concerns of Suppliers
JIT Partnerships
 Diversification – ties to only one customer
increases risk
 Scheduling – don’t believe customers can
create a smooth schedule
 Changes – short lead times mean
engineering or specification changes can
create problems
 Quality – limited by capital budgets,
processes, or technology
 Lot sizes – small lot sizes may transfer
costs to suppliers
Figure 16.2
© 2008 Prentice Hall, Inc.
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© 2008 Prentice Hall, Inc.
JIT Layout
16 – 34
Distance Reduction
Reduce waste due to movement
 Large lots and long production
lines with single-purpose
machinery are being replaced by
smaller flexible cells
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
 Often U-shaped for shorter paths
and improved communication
 Often using group technology
concepts
Table 16.1
© 2008 Prentice Hall, Inc.
16 – 35
© 2008 Prentice Hall, Inc.
16 – 36
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25.03.2009
Manufacturing Cell With
Worker Routes
Increased Flexibility
Machines
 Cells designed to be rearranged
as volume or designs change
Enter
Worker 2
 Applicable in office environments
as well as production settings
Worker
3
Worker 1
 Facilitates both product and
process improvement
Exit
Key:
© 2008 Prentice Hall, Inc.
16 – 37
Product route
Worker route
© 2008 Prentice Hall, Inc.
Impact on Employees
16 – 38
Reduced Space and
Inventory
 Employees are cross trained
for flexibility and efficiency
 With reduced space, inventory
must be in very small lots
 Improved communications
facilitate the passing on of
important information about the
process
 Units are always moving because
there is no storage
 With little or no inventory
buffer, getting it right the first
time is critical
© 2008 Prentice Hall, Inc.
16 – 39
© 2008 Prentice Hall, Inc.
16 – 40
Holding, Ordering, and
Setup Costs
Inventory
Inventory is at the minimum level
necessary to keep operations running
 Holding costs - the costs of holding
or ―carrying‖ inventory over time
JIT Inventory Tactics
 Ordering costs - the costs of
placing an order and receiving
goods
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
 Setup costs - cost to prepare a
machine or process for
manufacturing an order
Table 16.2
© 2008 Prentice Hall, Inc.
16 – 41
© 2008 Prentice Hall, Inc.
16 – 42
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25.03.2009
Holding Costs
Category
Housing costs (building rent or
depreciation, operating costs, taxes,
insurance)
Material handling costs (equipment lease or
depreciation, power, operating cost)
Labor cost
Holding Costs
Cost (and range)
as a Percent of
Inventory Value
Category
Housing costs (building rent or
depreciation, operating costs, taxes,
insurance)
Material handling costs (equipment lease or
depreciation, power, operating cost)
Labor cost
6% (3 - 10%)
3% (1 - 3.5%)
3% (3 - 5%)
Investment costs (borrowing costs, taxes,
and insurance on inventory)
Pilferage, space, and obsolescence
11% (6 - 24%)
Overall carrying cost
26%
3% (2 - 5%)
Cost (and range)
as a Percent of
Inventory Value
6% (3 - 10%)
3% (1 - 3.5%)
3% (3 - 5%)
Investment costs (borrowing costs, taxes,
and insurance on inventory)
Pilferage, space, and obsolescence
11% (6 - 24%)
Overall carrying cost
26%
3% (2 - 5%)
Table 12.1
© 2008 Prentice Hall, Inc.
Table 12.1
16 – 43
Inventory Models for
Independent Demand
© 2008 Prentice Hall, Inc.
16 – 44
Basic EOQ Model
Important assumptions
Need to determine when and how
much to order
1. Demand is known, constant, and
independent
2. Lead time is known and constant
3. Receipt of inventory is instantaneous and
complete
4. Quantity discounts are not possible
5. Only variable costs are setup and holding
6. Stockouts can be completely avoided
 Basic economic order quantity
 Production order quantity
 Quantity discount model
© 2008 Prentice Hall, Inc.
16 – 45
© 2008 Prentice Hall, Inc.
16 – 46
Minimizing Costs
Inventory Usage Over Time
Order
quantity = Q
(maximum
inventory
level)
Average
inventory
on hand
Q
2
Curve for total
cost of holding
and setup
Minimum
total cost
Annual cost
Inventory level
Objective is to minimize total costs
Usage rate
Minimum
inventory
0
Time
Figure 12.3
© 2008 Prentice Hall, Inc.
Table 11.5
16 – 47
© 2008 Prentice Hall, Inc.
Holding cost
curve
Setup (or order)
cost curve
Optimal order
quantity (Q*)
Order quantity
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25.03.2009
D
The EOQ Model
Annual setup cost =
S
Q
Q
Q*
D
S
H
The EOQ Model
= Number of pieces per order
= Optimal number of pieces per order (EOQ)
= Annual demand in units for the inventory item
= Setup or ordering cost for each order
= Holding or carrying cost per unit per year
Q
Q*
D
S
H
Annual setup cost = (Number of orders placed per year)
x (Setup or order cost per order)
= Number of pieces per order
= Optimal number of pieces per order (EOQ)
= Annual demand in units for the inventory item
= Setup or ordering cost for each order
= Holding or carrying cost per unit per year
Annual holding cost = (Average inventory level)
x (Holding cost per unit per year)
=
Annual demand
Setup or order
Number of units in each order cost per order
=
Order quantity
(Holding cost per unit per year)
2
=
D (S)
Q
=
Q (H)
2
© 2008 Prentice Hall, Inc.
16 – 49
© 2008 Prentice Hall, Inc.
The EOQ Model
Q
Q*
D
S
H
Determine optimal number of needles to order
D = 1,000 units
S = $10 per order
H = $.50 per unit per year
Optimal order quantity is found when annual setup cost
equals annual holding cost
D
Q
S =
H
Q
2
2DS = Q2H
Q2 = 2DS/H
Q* =
2DS/H
D
S
Q
Q
Annual holding cost =
H
2
Q* =
2DS
H
Q* =
2(1,000)(10)
=
0.50
Annual setup cost =
© 2008 Prentice Hall, Inc.
16 – 50
An EOQ Example
= Number of pieces per order
= Optimal number of pieces per order (EOQ)
= Annual demand in units for the inventory item
= Setup or ordering cost for each order
= Holding or carrying cost per unit per year
Solving for Q*
D
S
Q
Q
Annual holding cost =
H
2
Annual setup cost =
16 – 51
40,000 = 200 units
© 2008 Prentice Hall, Inc.
An EOQ Example
16 – 52
An EOQ Example
Determine optimal number of needles to order
D = 1,000 units
Q* = 200 units
S = $10 per order
H = $.50 per unit per year
Determine optimal number of needles to order
D = 1,000 units
Q* = 200 units
S = $10 per order
N = 5 orders per year
H = $.50 per unit per year
Expected
Demand
D
=
number = N =
Order
quantity
Q*
of orders
1,000
N=
= 5 orders per year
200
Number of working
Expected
days per year
=T=
time
N
between
250
orders
T=
= 50 days between orders
5
© 2008 Prentice Hall, Inc.
16 – 53
© 2008 Prentice Hall, Inc.
16 – 54
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An EOQ Example
Robust Model
Determine optimal number of needles to order
D = 1,000 units
Q* = 200 units
S = $10 per order
N = 5 orders per year
H = $.50 per unit per yearT = 50 days
Total annual cost = Setup cost + Holding cost
D
Q
TC =
S +
H
Q
2
1,000
200
TC =
($10) +
($.50)
200
2
 The EOQ model is robust
 It works even if all parameters
and assumptions are not met
 The total cost curve is relatively
flat in the area of the EOQ
TC = (5)($10) + (100)($.50) = $50 + $50 = $100
© 2008 Prentice Hall, Inc.
16 – 55
© 2008 Prentice Hall, Inc.
16 – 56
An EOQ Example
An EOQ Example
Management underestimated demand by 50%
1,500 unitsQ* = 200 units
D = 1,000 units
S = $10 per order
N = 5 orders per year
H = $.50 per unit per yearT = 50 days
D
S
Q
1,500
TC =
200
TC =
Q
+
2
H
D
Q
S +
H
Q
2
1,500
244.9
TC =
($10) +
($.50)
244.9
2
TC = $61.24 + $61.24 = $122.48
TC =
200
($10) + ($.50) = $75 + $50 = $125
2
Total annual cost increases by only 25%
© 2008 Prentice Hall, Inc.
Actual EOQ for new demand is 244.9 units
1,500 unitsQ* = 244.9 units
D = 1,000 units
S = $10 per order
N = 5 orders per year
H = $.50 per unit per yearT = 50 days
16 – 57
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16 – 58
Reorder Points
Reorder Point Curve
Inventory level (units)
 EOQ answers the ―how much‖ question
 The reorder point (ROP) tells when to
order
ROP =
Lead time for a
Demand
per day new order in days
=dxL
Q*
Slope = units/day = d
ROP
(units)
D
d=
Number of working days in a year
Figure 12.5
© 2008 Prentice Hall, Inc.
Only 2%
less than
the total
cost of
$125 when
the order
quantity
was 200
16 – 59
© 2008 Prentice Hall, Inc.
Time (days)
Lead time = L
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Production Order Quantity
Model
Reorder Point Example
Demand = 8,000 iPods per year
250 working day year
Lead time for orders is 3 working
days
D
d=
Number of working days in a year
 Used when inventory builds up
over a period of time after an
order is placed
 Used when units are produced
and sold simultaneously
= 8,000/250 = 32 units
ROP = d x L
= 32 units per day x 3 days = 96 units
© 2008 Prentice Hall, Inc.
16 – 61
Inventory level
Production Order Quantity
Model
Q = Number of pieces per order
p = Daily production rate
H = Holding cost per unit per year
d = Daily demand/usage rate
t = Length of the production run in days
Annual inventory
Holding cost
= (Average inventory level) x
holding cost
per unit per year
Demand part of cycle
with no production
Annual inventory
= (Maximum inventory level)/2
level
t
Maximum
Total produced during
=
inventory level
the production run
Time
© 2008 Prentice Hall, Inc.
16 – 63
Production Order Quantity
Model
–
© 2008 Prentice Hall, Inc.
p = Daily production rate
d = Daily demand/usage rate
Setup cost = (D/Q)S
Total used during
the production run
1
Holding cost =2
1
However, Q = total produced = pt ; thus t = Q/p
Holding cost =
16 – 64
Q = Number of pieces per order
H = Holding cost per unit per year
D = Annual demand
= pt – dt
Maximum
Q
inventory level = p p
–d
Q
p
=Q 1–
(D/Q)S = 2
d
p
Maximum inventory level
(H) =
2
Q2 =
Q
d
1–
2
p
Total used during
the production run
Production Order Quantity
Model
Q = Number of pieces per order
p = Daily production rate
H = Holding cost per unit per year
d = Daily demand/usage rate
t = Length of the production run in days
Maximum
Total produced during
=
inventory level
the production run
–
= pt – dt
Figure 12.6
© 2008 Prentice Hall, Inc.
16 – 62
Production Order Quantity
Model
Part of inventory cycle during
which production (and usage)
is taking place
Maximum
inventory
© 2008 Prentice Hall, Inc.
H
2DS
H[1 - (d/p)]
Q*p =
16 – 65
© 2008 Prentice Hall, Inc.
HQ[1 - (d/p)]
HQ[1 - (d/p)]
2DS
H[1 - (d/p)]
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Production Order Quantity
Example
Production Order Quantity
Model
Note:
D = 1,000 units
p = 8 units per day
S = $10
d = 4 units per day
H = $0.50 per unit per year
Q* =
2(1,000)(10)
2DS
Q* =
=
H[1 - (d/p)]
0.50[1 - (4/8)]
D
d = 4 =Number of days the plant is in operation
When annual data are used the equation
becomes
2DS
Q* =
annual demand rate
H 1–
annual production rate
80,000
= 282.8 or 283 hubcaps
© 2008 Prentice Hall, Inc.
1,000
250 =
16 – 67
© 2008 Prentice Hall, Inc.
Reduce Variability
16 – 68
Reduce Variability
Inventory level
Inventory
level
Process
downtime
Scrap
Setup
time
Process
downtime
Scrap
Setup
time
Quality
problems
Late deliveries
Quality
problems
Late deliveries
Figure 16.3
© 2008 Prentice Hall, Inc.
16 – 69
Figure 16.3
© 2008 Prentice Hall, Inc.
Reduce Lot Sizes
Inventory
200 –
16 – 70
Reduce Lot Sizes
 Ideal situation is to have lot sizes
of one pulled from one process to
the next
Q1 When average order size = 200
average inventory is 100
Q2 When average order size = 100
average inventory is 50
100 –
 Often not feasible
 Can use EOQ analysis to calculate
desired setup time
 Two key changes necessary
Time
 Improve material handling
 Reduce setup time
Figure 16.4
© 2008 Prentice Hall, Inc.
16 – 71
© 2008 Prentice Hall, Inc.
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25.03.2009
Lot Size Example
D=
d=
p=
Q=
H=
S=
Reduce Setup Costs
Annual demand = 400,000 units
Daily demand = 400,000/250 = 1,600 per day
Daily production rate = 4,000 units
EOQ desired = 400
Holding cost = $20 per unit
Setup cost (to be determined)
2DS
H(1 - d/p)
Q=
Q2 =
 High setup costs encourage large
lot sizes
 Reducing setup costs reduces lot
size and reduces average
inventory
2DS
H(1 - d/p)
 Setup time can be reduced through
preparation prior to shutdown and
changeover
(Q2)(H)(1 - d/p)
(3,200,000)(0.6)
S=
=
= $2.40
2D
800,000
Setup time = $2.40/($30/hour) = 0.08 hr = 4.8 minutes
© 2008 Prentice Hall, Inc.
16 – 73
© 2008 Prentice Hall, Inc.
16 – 74
Lower Setup Costs
Reduce Setup Times
Initial Setup Time
Holding cost
Sum of ordering
and holding costs
Cost
Step 1
T1
Setup cost curves (S1, S2)
T2
S1
Step 4
Step 5
Figure 16.5
© 2008 Prentice Hall, Inc.
Figure 16.6
16 – 75
45 min —
Standardize and
improve tooling
(save 15 minutes)
Step 3
Lot size
60 min —
Move material closer and
improve material handling
(save 20 minutes)
Step 2
S2
90 min —
Separate setup into preparation and actual
setup, doing as much as possible while the
machine/process is operating
(save 30 minutes)
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
25 min —
15 min —
13 min —
© 2008 Prentice Hall, Inc.
JIT Scheduling
JIT Scheduling
 Schedules must be communicated
inside and outside the organization
Better scheduling improves performance
JIT Scheduling Tactics
Table 16.3
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
 Process frequent small batches
 Freezing the schedule helps
stability
 Kanban
 Signals used in a pull system
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Scheduling Small Lots
Level Schedules
JIT Level Material-Use Approach
 Process frequent small batches
rather than a few large batches
A A
 Make and move small lots so the
level schedule is economical
B
B
B
C
A A
B
B
B
C
B
C C C
Large-Lot Approach
 ―Jelly bean‖ scheduling
A A A A A A B
B
B
B
B
B
B
B
 Freezing the schedule closest to the
due dates can improve performance
Time
Figure 16.7
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© 2008 Prentice Hall, Inc.
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Kanban
Kanban
 Kanban is the Japanese word for card
1. User removes a
standard sized
container
 The card is an authorization for the next
container of material to be produced
 A sequence of kanbans
pulls material through
the process
2. Signal is seen by
the producing
department as
authorization to
replenish
 Many different sorts of
signals are used, but
the system is still called
a kanban
Signal marker
on boxes
Figure 16.8
© 2008 Prentice Hall, Inc.
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Part numbers
mark location
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Kanban Production Control
System
A REAL KANBAN
Production
Kanban
Withdrawal
Kanban
A
Machine Center
Assembly Line
B
Storage
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Dual Kanbans
Dual Kanbans
P
X
X
X
W
Process
A
A’s Input
X
X
A’s Output
B’s Input
W Container with withdrawal kanban
P
X
X
X
Process
B
B’s Output
Flow of work
Container with production kanban
W
P
P
Flow of kanban
© 2008 Prentice Hall, Inc.
Process
A
A’s Input
P
X
X
A’s Output
B’s Input
W Container with withdrawal kanban
P
Container with production kanban
Process
B
B’s Output
Flow of work
Flow of kanban
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Kanban
More Kanban
 When the producer and user are not in
visual contact, a card can be used
Finished
goods
Kanban
Customer
order
Work
cell
Ship
Raw
Material
Supplier
Kanban
Final
assembly
Kanban
Kanban
Purchased
Parts
Supplier
Kanban
Kanban
Subassembly
Figure 16.9
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 When the producer and user are in visual
contact, a light or flag or empty spot on
the floor may be adequate
 Since several
components may
be required,
several different
kanban techniques
may be employed
© 2008 Prentice Hall, Inc.
More Kanban
More Kanban
 Usually each card controls a specific
quantity or parts
 Kanban cards provide a direct control
and limit on the amount of work-inprocess between cells
 Multiple card systems may be used if
there are several components or
different lot sizes
 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
 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
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The Number of Kanban Cards
or Containers
Number of Kanbans Example
Daily demand
Production lead time
(Wait time +
Material handling time +
Processing time)
Safety stock
Container size
 Need to know the lead time needed to
produce a container of parts
 Need to know the amount of safety
stock needed
Number of kanbans
=
(containers)
Demand during Safety
lead time
+ stock
Size of container
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1,000 + 250
=5
250
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Quality
Advantages of Kanban
 Strong relationship
 Allow only limited amount of faulty or
delayed material
 JIT cuts the cost of obtaining good
quality because JIT exposes poor
quality
 Problems are immediately evident
 Puts downward pressure on bad
aspects of inventory
 Because lead times are shorter,
quality problems are exposed sooner
 Standardized containers reduce
weight, disposal costs, wasted space,
and labor
© 2008 Prentice Hall, Inc.
= 1/2 day
= 250 cakes
Demand during lead time = 2 days x 500 cakes = 1,000
Number of kanbans =
© 2008 Prentice Hall, Inc.
= 500 cakes
= 2 days
 Better quality means fewer buffers
and allows simpler JIT systems to be
used
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Toyota Production System
JIT Quality Tactics
 Continuous improvement
Use statistical process control
 Build an organizational culture and value
system that stresses improvement of all
processes
Empower employees
 Part of everyone’s job
Build fail-safe methods (pokayoke, checklists, etc.)
 Respect for people
 People are treated as
knowledge workers
Expose poor quality with small
lot JIT
 Engage mental and
physical capabilities
Provide immediate feedback
 Empower employees
Table 16.4
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Toyota Production System
Lean Operations
 Standard work practice
 Work shall be completely specified as to
content, sequence, timing, and outcome
 Different from JIT in that it is
externally focused on the customer
 Internal and external customer-supplier
connection are direct
 Starts with understanding what the
customer wants
 Product and service flows must be simple
and direct
 Optimize the entire process from
the customer’s perspective
 Any improvement must be made in
accordance with the scientific method at the
lowest possible level of the organization
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Building a Lean Organization
© 2008 Prentice Hall, Inc.
Building a Lean Organization
 Transitioning to a lean system can
be difficult
 Develop partnerships with
suppliers
 Lean systems tend to have the
following attributes
 Educate suppliers
 Eliminate all but value-added
activities
 Use JIT techniques
 Develop employees
 Build systems that help employees
produce perfect parts
 Make jobs challenging
 Build worker flexibility
 Reduce space requirements
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JIT in Services
 The JIT techniques used in
manufacturing are used in services
 Suppliers
 Layouts
 Inventory
 Scheduling
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