Operations
Management
Chapter 16 –
JIT and Lean
Operations
PowerPoint presentation to accompany
Heizer/Render
Operations Management, 11ed
Some additions and deletions have been made by Ömer Yağız to
this slide set. March 2014
© 2008 Prentice Hall, Inc.
16 – 1
Outline
 Global Company Profile:
Toyota Motor Corporation
 Just-in-Time, the Toyota
Production System, and Lean
Operations
 Eliminate Waste
 Remove Variability
 Improve Throughput
© 2008 Prentice Hall, Inc.
16 – 2
Outline – Continued
 Just-in-Time
 JIT Partnerships
 Concerns of Suppliers
 JIT Layout
 Distance Reduction
 Increased Flexibility
 Impact on Employees
 Reduced Space and Inventory
© 2008 Prentice Hall, Inc.
16 – 3
Outline – Continued
 JIT Inventory
 Reduce Variability
 Reduce Inventory
 Reduce Lot Sizes
 Reduce Setup Costs
 JIT Scheduling
 Level Schedules
 Kanban
© 2008 Prentice Hall, Inc.
16 – 4
Outline – Continued
 JIT Quality
 Toyota Production System
 Continuous Improvement
 Respect for People
 Standard Work Practices
 Lean Operations
 Building a Lean Organization
 Lean Operations in Services
© 2008 Prentice Hall, Inc.
16 – 5
Learning Objectives
When you complete this chapter you
should be able to:
1. Define just-in-time, TPS, and lean
operations
2. Define the seven wastes and the
5 Ss
3. Explain JIT partnerships
4. Determine optimal setup time
© 2008 Prentice Hall, Inc.
16 – 6
Learning Objectives
When you complete this chapter you
should be able to:
5. Define kanban
6. Compute the required number of
kanbans
7. Explain the principles of the Toyota
Production System
© 2008 Prentice Hall, Inc.
16 – 7
Toyota Motor Corporation
 Largest vehicle manufacturer in the
world with annual sales of over 9
million vehicles
 Success due to two techniques, JIT
and TPS
 Continual problem solving is central
to JIT
 Eliminating excess inventory makes
problems immediately evident
© 2008 Prentice Hall, Inc.
16 – 8
Toyota Motor Corporation
 Central to TPS is a continuing effort
to produce products under ideal
conditions
 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
• Toyota Prod System (TPS) became
Lean Manuf System in the USA
© 2008 Prentice Hall, Inc.
16 – 10
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
 TPS emphasizes continuous
improvement, respect for people, and
standard work practices
 Lean production supplies the
customer with their exact wants when
the customer wants it without waste
© 2008 Prentice Hall, Inc.
16 – 11
Just-In-Time, TPS, and
Lean Operations
 JIT emphasizes forced problem
solving
 TPS emphasizes employee
learning and empowerment in an
assembly-line environment
 Lean operations emphasize
understanding the customer
© 2008 Prentice Hall, Inc.
16 – 12
JIT, TPS, and Lean
All are basically used interchangeably
We will refer to all as “Lean
Operations “ ; the textbook does the
same.
© 2008 Prentice Hall, Inc.
16 – 13
Lean Operations
• Doing more with less inventory, fewer
workers, less space
• Just-in-time (JIT)
– 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 – 14
Origins of Lean Operations
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
“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
Three major issues
Effective OM means managers must also
address three issues:
 eliminate waste
 remove variability
 improve throughput
© 2008 Prentice Hall, Inc.
16 – 16
Taiichi Ohno’s Seven
Wastes
 Overproduction (more than demanded)
 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)
 Defective products (rework, scrap,
returns, warranty claims)
© 2008 Prentice Hall, Inc.
16 – 17
Eliminate Waste
 Waste is anything that does not
add value from the customer point
of view
 Storage, inspection, delay, waiting
in queues, and defective products
do not add value and are 100%
waste
© 2008 Prentice Hall, Inc.
16 – 18
Eliminate Waste
 Other resources such as energy,
water, and air are often wasted
 Efficient, ethical, and socially
responsible production minimizes
inputs, reduces waste
 Traditional “housekeeping” has
been expanded to the 5 Ss
© 2008 Prentice Hall, Inc.
16 – 19
The 5 Ss
• 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:
• 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
© 2008 Prentice Hall, Inc.
16 – 20
The 5 Ss
 Sort/segregate – when in doubt,
throw it out
 Simplify/straighten – use methods
analysis tools to improve workflow
and reduce wasted motion
 Shine/sweep – clean daily; no clutter
 Standardize – remove variations
from processes (SOP’s and
checklists)
 Sustain/self-discipline – review work
and recognize progress
© 2008 Prentice Hall, Inc.
16 – 21
The 5 Ss
 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 – 22
Remove Variability
 JIT systems require managers to
reduce variability caused by both
internal and external factors
 Variability is any deviation from the
optimum process
 Inventory hides variability
 Less variability results in less
waste
© 2008 Prentice Hall, Inc.
16 – 23
Sources of Variability
1. Incomplete or inaccurate drawings
or specifications
2. Poor production processes
resulting in incorrect quantities,
late, or non-conforming units
3. Unknown customer demands
© 2008 Prentice Hall, Inc.
16 – 24
Sources of Variability
1. Incomplete or inaccurate drawings
or specifications
2. Poor production processes
resulting in incorrect quantities,
late, or non-conforming units
3. Unknown customer demands
© 2008 Prentice Hall, Inc.
16 – 25
Improve Throughput
 Throughput: the time it takes to
move an order through the
production process, from receipt
to delivery
 The time between the arrival of
raw materials and the shipping of
the finished order is called
manufacturing cycle time
 A pull system increases
throughput
© 2008 Prentice Hall, Inc.
16 – 26
Improve Throughput
 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
Just-In-Time (JIT)
• 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
© 2008 Prentice Hall, Inc.
16 – 28
JIT Logic
PULL….
Fab
Vendor
Fab
Vendor
Fab
Vendor
Fab
Vendor
Sub
Customers
Final Assy
Sub
4
JIT and Competitive
Advantage
Figure 16.1
© 2008 Prentice Hall, Inc.
16 – 30
JIT and Competitive
Advantage
Figure 16.1
© 2008 Prentice Hall, Inc.
16 – 31
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:
© 2008 Prentice Hall, Inc.
 Removal of unnecessary activities
(receiving, inspection, bidding,
invoicing, payment, etc)
 Removal of in-plant inventory (small
lots)
 Removal of in-transit inventory
 Improved quality and reliability
16 – 32
JIT Partnerships
Figure 16.2
© 2008 Prentice Hall, Inc.
16 – 33
Concerns of Suppliers
 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
© 2008 Prentice Hall, Inc.
16 – 34
JIT Layout
Reduce waste due to movement
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
Table 16.1
© 2008 Prentice Hall, Inc.
16 – 35
Distance Reduction
 Large lots and long production
lines with single-purpose
machinery are being replaced by
smaller flexible cells
 Often U-shaped for shorter paths
and improved communication
 Often using group technology
concepts
© 2008 Prentice Hall, Inc.
16 – 36
Increased Flexibility
 Cells designed to be rearranged
as volume or designs change
 Applicable in office environments
as well as production settings
 Facilitates both product and
process improvement
© 2008 Prentice Hall, Inc.
16 – 37
Manufacturing Cell With
Worker Routes
Machines
Enter
Worker 2
Worker
3
Worker 1
Exit
Key:
© 2008 Prentice Hall, Inc.
Product route
Worker route
16 – 38
Impact on Employees
 Employees are cross trained
for flexibility and efficiency
 Improved communications
facilitate the passing on of
important information about the
process
 With little or no inventory
buffer, getting it right the first
time is critical
© 2008 Prentice Hall, Inc.
16 – 39
Reduced Space and
Inventory
 With reduced space, inventory
must be in very small lots
 Units are always moving because
there is no storage
© 2008 Prentice Hall, Inc.
16 – 40
Inventory
Inventory is at the minimum level
necessary to keep operations running
JIT Inventory Tactics
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
Table 16.2
© 2008 Prentice Hall, Inc.
16 – 41
Holding, Ordering, and
Setup Costs
 Holding costs - the costs of holding
or “carrying” inventory over time
 Ordering costs - the costs of
placing an order and receiving
goods
 Setup costs - cost to prepare a
machine or process for
manufacturing an order
© 2008 Prentice Hall, Inc.
16 – 42
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
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.
16 – 43
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
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.
16 – 44
YOU ARE NOT RESPONSIBLE FOR
THE SUBSEQUENT MATERIAL
© 2008 Prentice Hall, Inc.
16 – 45
Inventory Models for
Independent Demand
Need to determine when and how
much to order
 Basic economic order quantity
 Production order quantity
 Quantity discount model
© 2008 Prentice Hall, Inc.
16 – 46
Basic EOQ Model
Important assumptions
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
© 2008 Prentice Hall, Inc.
16 – 47
Inventory level
Inventory Usage Over Time
Order
quantity = Q
(maximum
inventory
level)
Usage rate
Average
inventory
on hand
Q
2
Minimum
inventory
0
Time
Figure 12.3
© 2008 Prentice Hall, Inc.
16 – 48
Minimizing Costs
Objective is to minimize total costs
Curve for total
cost of holding
and setup
Annual cost
Minimum
total cost
Table 11.5
© 2008 Prentice Hall, Inc.
Holding cost
curve
Setup (or order)
cost curve
Optimal order
quantity (Q*)
Order quantity
16 – 49
D
The EOQ Model
Annual setup cost =
S
Q
Q
Q*
D
S
H
= 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 setup cost = (Number of orders placed per year)
x (Setup or order cost per order)
Annual demand
Setup or order
=
Number of units in each order cost per order
=
© 2008 Prentice Hall, Inc.
D (S)
Q
16 – 50
The EOQ Model
Q
Q*
D
S
H
= 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)
=
=
© 2008 Prentice Hall, Inc.
Order quantity
(Holding cost per unit per year)
2
Q (H)
2
D
S
Q
Q
Annual holding cost =
H
2
Annual setup cost =
16 – 51
The EOQ Model
Q
Q*
D
S
H
= 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
Optimal order quantity is found when annual setup cost
equals annual holding cost
D
Q
S =
H
Q
2
Solving for Q*
2DS = Q2H
Q2 = 2DS/H
Q* =
© 2008 Prentice Hall, Inc.
2DS/H
D
S
Q
Q
Annual holding cost =
H
2
Annual setup cost =
16 – 52
An EOQ Example
Determine optimal number of needles to order
D = 1,000 units
S = $10 per order
H = $.50 per unit per year
Q* =
2DS
H
Q* =
2(1,000)(10)
=
0.50
© 2008 Prentice Hall, Inc.
40,000 = 200 units
16 – 53
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
Expected
Demand
D
=
number = N =
Order quantity Q*
of orders
1,000
N=
= 5 orders per year
200
© 2008 Prentice Hall, Inc.
16 – 54
An EOQ Example
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
Number of working
Expected
days per year
=T=
time
N
between
250
orders
T=
= 50 days between order
5
© 2008 Prentice Hall, Inc.
16 – 55
An EOQ Example
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
TC = (5)($10) + (100)($.50) = $50 + $50 = $100
© 2008 Prentice Hall, Inc.
16 – 56
Robust Model
 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
© 2008 Prentice Hall, Inc.
16 – 57
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
TC =
S
Q
1,500
TC =
200
Q
+
2
H
200
($10) + ($.50) = $75 + $50 = $125
2
Total annual cost increases by only 25%
© 2008 Prentice Hall, Inc.
16 – 58
An EOQ Example
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
D
Q
TC =
S +
H
Q
2
1,500
244.9
TC =
($10) +
($.50)
244.9
2
TC = $61.24 + $61.24 = $122.48
© 2008 Prentice Hall, Inc.
Only 2%
less than
the total
cost of
$125 when
the order
quantity
was 200
16 – 59
Reorder Points
 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
D
d=
Number of working days in a year
© 2008 Prentice Hall, Inc.
16 – 60
Inventory level (units)
Reorder Point Curve
Figure 12.5
© 2008 Prentice Hall, Inc.
Q*
Slope = units/day = d
ROP
(units)
Time (days)
Lead time = L
16 – 61
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
= 8,000/250 = 32 units
ROP = d x L
= 32 units per day x 3 days = 96 units
© 2008 Prentice Hall, Inc.
16 – 62
Production Order Quantity
Model
 Used when inventory builds up
over a period of time after an
order is placed
 Used when units are produced
and sold simultaneously
© 2008 Prentice Hall, Inc.
16 – 63
Inventory level
Production Order Quantity
Model
Part of inventory cycle during
which production (and usage)
is taking place
Demand part of cycle
with no production
Maximum
inventory
t
Time
Figure 12.6
© 2008 Prentice Hall, Inc.
16 – 64
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
Annual inventory
= (Maximum inventory level)/2
level
Maximum
Total produced during
=
inventory level
the production run
–
Total used during
the production run
= pt – dt
© 2008 Prentice Hall, Inc.
16 – 65
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
–
Total used during
the production run
= pt – dt
However, Q = total produced = pt ; thus t = Q/p
Maximum
Q
=
p
inventory level
p
Holding cost =
© 2008 Prentice Hall, Inc.
–d
Q
p
=Q 1–
d
p
Maximum inventory level
(H) =
2
Q
d
1–
2
p
H
16 – 66
Production Order Quantity
Model
Q = Number of pieces per order
H = Holding cost per unit per year
D = Annual demand
p = Daily production rate
d = Daily demand/usage rate
Setup cost = (D/Q)S
Holding cost
(D/Q)S
Q2
1
=2
1
=2
HQ[1 - (d/p)]
HQ[1 - (d/p)]
2DS
=
H[1 - (d/p)]
2DS
Q*p =
H[1 - (d/p)]
© 2008 Prentice Hall, Inc.
16 – 67
Production Order Quantity
Example
D = 1,000 units
p = 8 units per day
S = $10
d = 4 units per day
H = $0.50 per unit per year
2(1,000)(10)
2DS
Q* =
Q* =
=
H[1 - (d/p)]
0.50[1 - (4/8)]
80,000
= 282.8 or 283 hubcaps
© 2008 Prentice Hall, Inc.
16 – 68
Production Order Quantity
Model
Note:
d=4
D
=Number of days the plant is in operation
1,000
250 =
When annual data are used the equation
becomes
2DS
Q* =
annual demand rate
H 1–
annual production rate
© 2008 Prentice Hall, Inc.
16 – 69
Reduce Variability
Inventory level
Process
downtime
Scrap
Setup
time
Quality
problems
Late deliveries
Figure 16.3
© 2008 Prentice Hall, Inc.
16 – 70
Reduce Variability
Inventory
level
Process
downtime
Scrap
Setup
time
Quality
problems
Late deliveries
Figure 16.3
© 2008 Prentice Hall, Inc.
16 – 71
Reduce Lot Sizes
Inventory
200 –
Q1 When average order size = 200
average inventory is 100
Q2 When average order size = 100
average inventory is 50
100 –
Time
Figure 16.4
© 2008 Prentice Hall, Inc.
16 – 72
Reduce Lot Sizes
 Ideal situation is to have lot sizes
of one pulled from one process to
the next
 Often not feasible
 Can use EOQ analysis to calculate
desired setup time
 Two key changes necessary
 Improve material handling
 Reduce setup time
© 2008 Prentice Hall, Inc.
16 – 73
Lot Size Example
D=
d=
p=
Q=
H=
S=
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)
Q=
2DS
H(1 - d/p)
Q2
2DS
=
H(1 - d/p)
(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 – 74
Reduce Setup Costs
 High setup costs encourage large
lot sizes
 Reducing setup costs reduces lot
size and reduces average
inventory
 Setup time can be reduced through
preparation prior to shutdown and
changeover
© 2008 Prentice Hall, Inc.
16 – 75
Lower Setup Costs
Holding cost
Cost
Sum of ordering
and holding costs
T1
Setup cost curves (S1, S2)
T2
S2
S1
Lot size
Figure 16.5
© 2008 Prentice Hall, Inc.
16 – 76
Reduce Setup Times
Initial Setup Time
90 min —
Separate setup into preparation and actual
setup, doing as much as possible while the
machine/process is operating
(save 30 minutes)
Step 1
Move material closer and
improve material handling
(save 20 minutes)
Step 2
Standardize and
improve tooling
(save 15 minutes)
Step 3
Step 4
Step 5
Figure 16.6
© 2008 Prentice Hall, Inc.
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
60 min —
45 min —
25 min —
15 min —
13 min —
—
16 – 77
JIT Scheduling
 Schedules must be communicated
inside and outside the organization
 Level schedules
 Process frequent small batches
 Freezing (not allowing changes) the
portion of the schedule closest to
due dates helps stability
 Kanban
 Signals used in a pull system
© 2008 Prentice Hall, Inc.
16 – 78
JIT Scheduling
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
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Level Schedules
 Process frequent small batches
rather than a few large batches
 Make and move small lots so the
level schedule is economical
 “Jelly bean” scheduling
 Freezing the schedule closest to the
due dates can improve performance
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Scheduling Small Lots
JIT Level Material-Use Approach
A A
B
B
B
C
A A
B
B
B
C
B
C C C
Large-Lot Approach
A A A A A A B
B
B
B
B
B
B
B
Time
Figure 16.7
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Kanban
 Kanban is the Japanese word for card
 The card is an authorization for the next
container of material to be produced
 A sequence of kanbans
pulls material through
the process
 Many different sorts of
signals are used, but
the system is still called
a kanban
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Kanban
1. User removes a
standard sized
container
2. Signal is seen by
the producing
department as
authorization to
replenish
Signal marker
on boxes
Figure 16.8
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Part numbers
mark location
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A REAL KANBAN
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Kanban Production Control
System
Production
Kanban
Withdrawal
Kanban
A
Machine Center
Assembly Line
B
Storage
Dual Kanbans
P
X
X
X
Process
A
A’s Input
W
X
X
A’s Output
B’s Input
W Container with withdrawal kanban
P
Container with production kanban
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P
Process
B
B’s Output
Flow of work
Flow of kanba
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Dual Kanbans
W
P
X
X
X
Process
A
A’s Input
X
X
A’s Output
B’s Input
W Container with withdrawal kanban
P
P
Container with production kanban
Process
B
B’s Output
Flow of work
Flow of kanban
Kanban
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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More Kanban
 When the producer and user are not in
visual contact, a card can be used
 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
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More Kanban
 Usually each card controls a specific
quantity or parts
 Multiple card systems may be used if
there are several components or
different lot sizes
 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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More Kanban
 Kanban cards provide a direct control
and limit on the amount of work-inprocess between cells
 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
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The Number of Kanban Cards
or Containers
 Need to know the lead time needed to
produce a container of parts
 Need to know the amount of safety
stock needed
Demand during
Safety
lead time
+ stock
Number of kanbans
=
(containers)
Size of container
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Number of Kanbans Example
Daily demand
Production lead time
(Wait time +
Material handling time +
Processing time)
Safety stock
Container size
= 500 cakes
= 2 days
= 1/2 day
= 250 cakes
Demand during lead time = 2 days x 500 cakes = 1,000
1,000 + 250
Number of kanbans =
=5
250
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Advantages of Kanban
 Allow only limited amount of faulty or
delayed material
 Problems are immediately evident
 Puts downward pressure on bad
aspects of inventory
 Standardized containers reduce
weight, disposal costs, wasted space,
and labor
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Quality
 Strong relationship
 JIT cuts the cost of obtaining good
quality because JIT exposes poor
quality
 Because lead times are shorter,
quality problems are exposed sooner
 Better quality means fewer buffers
and allows simpler JIT systems to be
used
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JIT Quality Tactics
Use statistical process control
Empower employees
Build fail-safe methods (pokayoke, checklists, etc.)
Expose poor quality with small
lot JIT
Provide immediate feedback
Table 16.4
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Toyota Production System
 Continuous improvement
 Build an organizational culture and value
system that stresses improvement of all
processes
 Part of everyone’s job
 Respect for people
 People are treated as
knowledge workers
 Engage mental and
physical capabilities
 Empower employees
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Toyota Production System
 Standard work practice
 Work shall be completely specified as to
content, sequence, timing, and outcome
 Internal and external customer-supplier
connection are direct
 Product and service flows must be simple
and direct
 Any improvement must be made in
accordance with the scientific method at the
lowest possible level of the organization
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Lean Operations
 Different from JIT in that it is
externally focused on the customer
 Starts with understanding what the
customer wants
 Optimize the entire process from
the customer’s perspective
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Building a Lean Organization
 Transitioning to a lean system can
be difficult
 Lean systems tend to have the
following attributes
 Use JIT techniques
 Build systems that help employees
produce perfect parts
 Reduce space requirements
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Building a Lean Organization
 Develop partnerships with
suppliers
 Educate suppliers
 Eliminate all but value-added
activities
 Develop employees
 Make jobs challenging
 Build worker flexibility
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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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