Operations
Management
BA 301 – Spring 2003
Just-in-Time Systems
Supplement 12
Who developed “Just-in Time”?
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1.
2.
3.
What we know today as “Just-in-Time”
is known in Japan as the
“Toyota Production System”.
The developers at Toyota were:
Taiichi Ohno – Shop Manager & VP
Eiji Toyoda – President
Shigeo Shingo - Consultant
What is Just-in-Time today?
Management philosophy of continuous
and forced problem solving
 The production system is intentionally
stressed in order to identify problems
 Supplies and components are ‘pulled’
through system to arrive where they are
needed when they are needed.
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JIT Systems

JIT systems were originally designed to
reduce inventory levels at Toyota Motor
Company.
 Toyoda understood that the Japanese were
short on:
– Capital to finance inventory
– Storage space for inventory

Toyoda launched a campaign to “eliminate
waste” and inventory was the primary
contributor to the “waste”.
What Does Just-in-Time Do?

Attacks waste
– Anything not adding value to the product
• From the customer’s perspective
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Exposes problems and bottlenecks
caused by variability
– Deviation from optimum

Achieves streamlined production
– By reducing inventory
Types of Waste
Inventory
 Waiting
 Transportation
 Inefficient processing
 Over Production
 Unnecessary motion
 Product defects
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© 1995
Corel
Corp.
The Ten Elements of JIT
1.
2.
3.
4.
5.
Workers are cross-trained to use small, generalpurpose machines.
Small general purpose machines are grouped into
“cellular layouts” to process a “family” of parts.
Pull Production System produces parts and subassemblies only when needed by the next
“customer”. This was designed after a US
Supermarket.
Kanban Production Control – Workers are
signaled to produce a fixed quantity for their
customer by a signal (kanban).
Small-Lot Production – Required because of
restrictions on both space and financial capital.
Stressed system and exposed problems which
were then solved.
The Ten Elements of JIT
6.
7.
8.
9.
10.
Quick Setups – In order to produce in small-lots,
machines have to be changed over frequently.
Shingo’s “SMED”
Uniform Production Levels – Some type of each
automobile is made each day and the system can
be adjusted just before it begins.
Quality at the Source – Workers produce in small
lots and inspect their own output. They are also
empowered to halt the production process (Jidoka)
when they discover problems.
Total Productive Maintenance – An advancement
over “breakdown or preventive maintenance”.
Supplier Networks – Develop long-term
relationships with a small number of suppliers, who
are located near the manufacturing facility and
practice JIT themselves.
Inventory
Traditional View: inventory exists in
case problems arise
 JIT objective: Eliminate inventory
 JIT requires

– Small lot sizes (“order sizes”)
– Low setup time
– Containers for fixed number of parts

JIT inventory: Minimum inventory to
keep system running
Lowering Inventory
Attacks “Waste”
Work in process inventory level
(hides problems)
Unreliable
Vendors
Scrap
Capacity
Imbalances
Lowering Inventory
Attacks 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 Inventory results in
Streamlined Production
Traditional Flow
Production Process
(stream of water)
Suppliers
Flow with JIT
Suppliers
Customers
Inventory (stagnant
ponds)
Material
(water in
stream)
Customers
JIT Inventory Tactics
Reduce the level of work-in-process
(WIP) inventory by:
 Reducing lot size (How much you
fabricate each time)
 But this will cost setup costs to increase
unless you are able to:
 Reduce setup time
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Shigeo Shingo
Toyota Motor Company
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Toyota Camry front left doors:
D = 300,000 Cost = $100
I = 25%
WDPY = 300 d = 1,000 p = 4000
Setup time = 6 hours
Setup labor cost = $500 per hour
Calculate POQ and Annual Cost
POQ = 9798 Annual Cost = $183,712
Shingo decides to attack “waste” by reducing
WIP inventory
Creates “SMED” process.
Steps to Reduce Setup Time: Shingo’s “Single
Minute Exchange of Dies (SMED)
Initial Setup Time
Step 1
360 min
Separate setup into preparation, and actual setup,
doing as much as possible while the machine/
process is running (save 240 minutes)
120 min
Step 2
Move material closer and improve
material handling (save 90 minutes)
Standardize and
improve tooling
(save 20 minutes)
Step 3
Step 4
Step 5
Use one-touch
One-touch
system to system
eliminate
minimizeto
adjustments
(save
5 min)
adjustments
(save 10
Standardizing
work
minutes)
procedures (save 2 min))
30 min
10 min
5 min
3 min
Shigeo Shingo
Toyota Motor Company
Using the “SMED” improvement process,
Shingo reduced the setup time to three
(3) minutes.
 What is the new POQ?
400
 What is the new Annual Cost?
$7,500
 How much was saved on Toyota front left
doors alone?
$179,962

Computer Motherboard Platform (A-62)

D=3000/year; H=$5/unit/year; p=30; d=10
 Based on a set up time of 2 hours and a labor
cost of $100/hour, the set up cost is $200.
The POQ was calculated to be 600 units.
Average Inventory = 200 units
Annual Inventory Holding Cost = $1000
Annual Set up Cost = $1000
Total Annual Costs = $2000
 If Set up time could be reduced to 15
minutes, how much $ could be saved?
Computer Motherboard Platform (A-62)
Calculate POQ with setup time =15 min.
 Setup cost = $25
 POQ = sq rt ((2*3000*25)/(5*0.67))=212
 Average Inventory = 141
 Annual Inventory Holding Cost =$354
 Annual Setup Cost =$354
 Total Annual Cost =$708
 Total Annual Savings =$1292
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