Chapter 15
Just-In-Time and
Lean Production
JIT In Services
 Competition on speed & quality
 Multifunctional department store
workers
 Work cells at fast-food restaurants
 Just-in-time publishing for
textbooks - on demand publishing
a growing industry
 Construction firms receiving
material just as needed
What is JIT ?
 Producing only what is needed,
when it is needed
 A philosophy
 An integrated management system
 JIT’s mandate:
Eliminate all waste
Lean Operations:
Best Implementation is Toyota Production System
• TPS is a production management system that aims for the “ideal”
through continuous improvement
• Includes, but goes way beyond JIT. Pillars:
– Synchronization
• Reduce transfer batch sizes
• Level load production
• Pull production control systems (vs. push): Kanban
• Quality at source
• Layout: Cellular operations
– Continuous Improvement (Kaizen): through visibility &
empowerment
....
Basic Elements of JIT
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Flexible resources
Cellular layouts
Pull production system
Kanban production control
Small-lot production
Quick setups
Uniform production levels
Quality at the source
Total productive maintenance
Supplier networks
Toyota’s waste elimination in Operations
1. Overproduction
2. Waiting
3. Inessential handling
4. Non-value adding processing
5. Inventory in excess of immediate needs
6. Inessential motion
7. Correction necessitated by defects
Other Important Points
•
•
•
•
•
Only make what you need
only buy what you need,when you need it
SMED – single minute exchange of dies
continuous process improvement
as the level of the water lowers, new problems
or inefficiencies are identified
Reducing waste: Increase Problem Visibility
Lower the Water to Expose the Rocks
Inventory
Missed Due Dates
Late
Deliveries
Too Much
Space
Too much paperwork
Engineering
Change Orders
Scrap &
Rework
Poor
Quality
100% inspection
Long queues
Machine
Downtime
Waste in Operations
Waste in Operations
Waste in Operations
Flexible Resources
 Multifunctional workers
 General purpose machines
 Study operators & improve
operations
The Push System
• Pre-planned issues of
supplies/merchandise regardless of
customer demand criteria
• Creates excess and shortages
• not efficient over the long run
The Pull System
 Material is pulled through the system
when needed
 Reversal of traditional push system
where material is pushed according
to a schedule
 Forces cooperation
 Prevent over and underproduction
Kanban Production Control System
 Kanban card indicates standard quantity
of production
 Derived from two-bin inventory system
 Kanban maintains discipline of pull
production
 Production kanban authorizes production
 Withdrawal kanban authorizes movement
of goods
A Sample Kanban
The Origin of Kanban
a) Two-bin inventory system
system
b) Kanban inventory
Bin 1
Kanban
Bin 2
Reorder
card
Q-R
R
R
Q = order quantity
R = reorder point - demand during lead time
Types of Kanbans
 Bin Kanban - when bin is empty
replenish
 Kanban Square
 Marked area designed to hold items
 Signal Kanban
 Triangular kanban used to signal
production at the previous workstation
 Material Kanban
 Used to order material in advance of a
process
 Supplier Kanbans
 Rotate between the factory and suppliers
Small-Lot Production
In theory:
 Requires less space & capital
investment
 Moves processes closer together
 Makes quality problems easier to
detect
 Makes processes more dependent
on each other
Components of Lead Time
 Processing time
 Reduce number of items or improve
efficiency
 Move time
 Reduce distances, simplify
movements, standardize routings
 Waiting time
 Better scheduling, sufficient capacity
 Setup time
 Generally the biggest bottleneck
SMED Principles
1. Separate internal setup from
external setup
2. Convert internal setup to external
setup
3. Streamline all aspects of setup
4. Perform setup activities in
parallel or eliminate them entirely
Common Techniques for Reducing
Setup Time
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•
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•
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Preset Buttons/settings
Quick fasteners
Reduce tool requirements
Locator pins
Guides to prevent misalignment
Standardization
Easier movement
Uniform Production
 Results from smoothing production
requirements
 Kanban systems can handle +/- 10%
demand changes
 Smooths demand across planning
horizon
 Mixed-model assembly steadies
component production
Quality at the Source
 Jidoka is authority to stop production
line
 Andon lights signal quality problems
 Undercapacity scheduling allows for
planning, problem solving &
maintenance
 Visual control makes problems visible
 Poka-yoke prevents defects (mistake
proof the system)
Visual Control
In use at Harley-Davidson
and at Opal Plant - Russelsheim
Visual Control
Kaizen
 Continuous improvement
 Requires total employment
involvement
 Essence of JIT is willingness of
workers to
Spot quality problems
Halt production when necessary
Generate ideas for improvement
Analyze problems
Perform different functions
Total Productive Maintenance
(TPM)
Commercial industry answer to PMCS
 Breakdown maintenance
 Repairs to make failed machine operational
 Preventive maintenance
 System of periodic inspection & maintenance
to keep machines operating
 TPM combines preventive maintenance &
total quality concepts
TPM Requires Management to:
 Design products that can be easily
produced on existing machines
 Design machines for easier operation,
changeover, maintenance
 Train & retrain workers to operate machines
 Purchase machines that maximize
productive potential
 Design preventive maintenance plan
spanning life of machine
Goals of JIT
1.
2.
3.
4.
5.
6.
7.
Reduced inventory where?
Improved quality
Lower costs
Reduced space
requirements
Shorter lead time
Increased
productivity
Greater flexibility
8.
9.
10.
11.
12.
13.
Better relations with
suppliers
Simplified scheduling
and control activities
Increased capacity
Better use of human
resources
More product variety
Continuous Process
Improvement
JIT Implementation
 Use JIT to finely tune an operating
system
 Somewhat different in
USA than Japan
 JIT is still evolving
 JIT as an inventory reduction program
isn’t for everyone - JIT as a CPI
program is!
 Some systems need Just-inCase inventory
Reverse Logistics:
Important or Irritant?
Estimated $100 billion industry in 2006
“In an ideal world,
reverse logistics would not exist.”
Jim Whalen, “In Through the Out Door,”
Warehousing Management, March 2001
“Now, more than ever,
reverse logistics is seen
as being important.”
Dale Rogers, Going Backwards, 1999
Reverse Logistics - What is it?
The Army’s Definition
The return of serviceable supplies
that are surplus to the needs of the
unit or are unserviceable and in need
of rebuild or remanufacturing to
return the item to a serviceable
status
Reverse Logistics - What is it?
The Commercial Perspective
• Reverse Logistics is the process of
moving products from their typical final
destination to another point, for the
purpose of capturing value otherwise
unavailable, or for the proper disposal
of the products.
Typical Reverse Logistics Activities
• Processing returned merchandise damaged, seasonal, restock, salvage,
recall, or excess inventory
• Recycling packaging
materials/containers
• Reconditioning, refurbishing,
remanufacturing
• Disposition of obsolete stuff
• Hazmat recovery
Why Reverse Logistics?
• Competitive advantage
• Customer service
- Very Important: 57%
- Important: 18%
- Somewhat/unimportant:23%
• Bottom line profits
Reverse Logistics - New Problem?
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Sherman
Montgomery Ward’s - 1894
Recycling/remanufacturing in 1940s
World War II - 77,000,000 square feet of
storage across Europe with over $6.3
billion in excess stuff
• Salvage and reuse of clothing and
shoes in the Pacific Theater World War
II
Key Dates in Reverse Logistics
• World War II – the advent of refurbished
automobile parts due to shortages
• 1984 - Tylenol Scare - Johnson and Johnson
• 1991 - German ordinance that put teeth in
environmental reverse pipeline
• Summer 1996 – UK Packaging and
Packaging Waste Legislation
• 1998 - first real study of reverse logistics in
the US - University of Nevada, Reno
• 2001 – EU goal of 50-65% recovering or
recycling of packaging waste
Reverse Logistics
A US Army Perspective
Operation Iraqi Freedom
The US Army moved the equivalent of
150 Wal-Mart Supercenters to Kuwait in
a matter of a few months
Military Operations and Excess
“In battle, troops get temperamental
and ask for things which they really do
not need. However, where humanly
possible, their requests, no matter how
unreasonable, should be answered.”
George S. Patton, Jr.
Jane’s Defence Weekly
“Recent report (Aug 2003):
There is a 40 hectare (~100 acres)
area in Kuwait with items waiting
to be retrograded back to the US.”
Does this create a problem?
From GAO Audit Report
From GAO Audit Report
Reverse Logistics
The Commercial Perspective
Reverse Logistics
• Rate of returns?
• Cost to process a return?
• Time to get the item back on the shelf if
resaleable?
Costs - above the cost of the item
– Merchandise credits to the customers.
– The transportation costs of moving the
items from the retail stores to the
central returns distribution center.
– The repackaging of the serviceable
items for resale.
– The cost of warehousing the items
awaiting disposition.
– The cost of disposing of items that are
unserviceable, damaged, or obsolete.
Costs
• Process inbound shipment at a
major distribution center = 1.1
days
• Process inbound return
shipment = 8.5 days
• Cost of lost sales
• Wal-Mart: Christmas 2003 returns = 4 Days of Supply for all
of Wal-Mart = 2000 Containers
• PalmOne - 25% return rate on
PDAs
More Costs
• Hoover - $40 Million per year
• Cost of processing $85 per item
• Unnamed Distribution Company $700K items on reverse auction
• 2001 - over $60 billion in returns; $52
billion excess to systems; $40 billion to
process
Is it a problem?
• Estimate of 2004 holiday returns: $13.2 billion
• % of estimated 2004/2005 holiday returns: 25%
• Wal-Mart: $6 Billion in annual returns = 17,000
truck loads (>46 trucks a day)
• Electronics: $10 Billion annually in returns
• Personal Computers: $1.5 Billion annually =
approximately $95 per PC sold
• 79% of returned PCs have no defects
• Home Depot ~ $10 million in returns in the stores
alone
• Local Wal-Mart ~ $1 million a month in returns
Is it a Problem?
• European influence – spread to US - Green Laws
• Estee Lauder - $60 million a year into land fills
• FORTUNE 500 Company - $200 million over their
$300 million budget for returns
• Same Provider - 40,000 products returned per
month; 55% no faults noted
• K-Mart - $980 million in returns 1999
• Warranty vice paid repairs
More consequences
• Increased Customer Wait Times
• Loss of Confidence in the Supply
System
• Multiple orders for the same items
• Excess supplies in the forward pipeline
• Increase in “stuff” in the reverse
pipeline
• Constipated supply chain
Impact?
• Every resaleable item that is in the
reverse supply chain results in a
potential stock out or “zero balance” at
the next level of supply.
• Creates a “stockout” do-loop
Results?
• This potential for a stock out results in
additional parts on the shelves at each
location to prevent a stock out from
occurring.
• More stocks = “larger logistics
footprint” = the need for larger
distribution centers and returns
centers.
Six Symptoms (Continued)
5. The total cost of the returns process is
unknown.
6. Customers lose confidence in the
repair activities.
Reverse Logistics
• According to the Reverse Logistics Executive
Council, the percent increase in costs for processing
a return, as compared to a forward sale, is an
astounding 200-300%.
• “In the U.S. alone, the cost is an annual $100 billion.”
Forbes, March 2005
• Typically, as many as 8-12 more steps per item in the
reverse pipeline than items in the forward pipeline
“The truth is, for one reason or another,
materials do come back and it is up to
those involved in the warehouse to
effectively recover as much of the cost for
these items as possible.”
- Whalen, “In Through the Out Door”
RFID and Returns
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Visibility Tracking
Component tracking
Data Warehouse on what, why, when
Altered products
Not for every product
Impacts of Reverse Logistics
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Forecasting
Carrying costs
Processing costs
Warehousing
Distribution
Transportation
Personnel
Marketing
Upcoming
• Chapters 14, 16, 4
• 4 May – no class