Operations Management

Transcription

1 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 014 Outline Global Company Profile: Toyota Motor Corporation Just-in-Time, the Toyota Production System, and Lean Operations Eliminate Waste Remove Variability Improve Throughput 008 Prentice Hall, Inc Prentice Hall, Inc. 16 Outline Continued Just-in-Time JIT Partnerships Concerns of Suppliers JIT Layout Distance Reduction Increased Flexibility Impact on Employees Reduced Space and Inventory Outline Continued JIT Inventory Reduce Variability Reduce Inventory Reduce Lot Sizes Reduce Setup Costs JIT Scheduling Level Schedules 008 Prentice Hall, Inc Prentice Hall, Inc Outline Continued JIT uality Toyota Production System Continuous Improvement Respect for People Standard Work Practices Lean Operations Building a Lean Organization Lean Operations in Services Learning Objectives When you complete this chapter you should be able to: 1. Define just-in-time, TPS, and lean operations. Define the seven wastes and the 5 Ss 3. Explain JIT partnerships 4. Determine optimal setup time 008 Prentice Hall, Inc Prentice Hall, Inc

2 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 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 008 Prentice Hall, Inc Prentice Hall, Inc 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 Toyota Prod System (TPS) became Lean Manuf System in the USA 008 Prentice Hall, Inc Prentice Hall, Inc 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 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 008 Prentice Hall, Inc Prentice Hall, Inc. 16 1

3 JIT, TPS, and Lean All are basically used interchangeably We will refer to all as Lean Operations ; the textbook does the same. 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 008 Prentice Hall, Inc Prentice Hall, Inc Origins of Lean Operations Japanese firms, particularly Toyota, in 1970's and 1980's Eiji Toyoda, Taiichi Ohno and Shigeo Shingo ( ) 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 ,6 trucks, 1,008 cars American to Japanese productivity ratio ---9:1 Era of slow growth in 1970's 008 Prentice Hall, Inc Three major issues Effective OM means managers must also address three issues: eliminate waste remove variability improve throughput 008 Prentice Hall, Inc Taiichi Ohno s Seven Wastes Overproduction (more than demanded) ueues (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) 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 008 Prentice Hall, Inc Prentice Hall, Inc

4 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 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 008 Prentice Hall, Inc Prentice Hall, Inc 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 008 Prentice Hall, Inc The 5 Ss Sort/segregate when in doubt, throw it out Simplify/straighten methods analysis Two additional tools Ss Shine/sweep Safety build clean in good daily practices Standardize Support/maintenance remove variations reduce from processes variability and unplanned Sustain/self-discipline downtime review work and recognize progress 008 Prentice Hall, Inc. 16 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 Sources of Variability 1. Incomplete or inaccurate drawings or specifications. Poor production processes resulting in incorrect quantities, late, or non-conforming units 3. Unknown customer demands 008 Prentice Hall, Inc Prentice Hall, Inc

5 Sources of Variability Improve Throughput 1. Incomplete or inaccurate drawings or specifications. Poor production processes resulting in incorrect quantities, late, or non-conforming units 3. Unknown customer demands 008 Prentice Hall, Inc 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 008 Prentice Hall, Inc 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 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 008 Prentice Hall, Inc Prentice Hall, Inc PULL. JIT Logic Fab Vendor JIT and Competitive Advantage Customers Final Assy Sub Fab Vendor Sub Fab Vendor Fab Vendor 4 Figure Prentice Hall, Inc

6 JIT and Competitive Advantage Figure Prentice Hall, Inc 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 (receiving, inspection, bidding, invoicing, payment, etc) Removal of in-plant inventory (small lots) Removal of in-transit inventory Improved quality and reliability 008 Prentice Hall, Inc Figure 16. JIT Partnerships 008 Prentice Hall, Inc 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 uality limited by capital budgets, processes, or technology Lot sizes small lot sizes may transfer costs to suppliers 008 Prentice Hall, Inc 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 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 008 Prentice Hall, Inc Prentice Hall, Inc

7 Increased Flexibility Manufacturing Cell With Worker Routes Cells designed to be rearranged as volume or designs change Applicable in office environments as well as production settings Enter Worker 1 Worker Worker 3 Machines Facilitates both product and process improvement Exit Key: Product route Worker route 008 Prentice Hall, Inc Prentice Hall, Inc 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 Reduced Space and Inventory With reduced space, inventory must be in very small lots Units are always moving because there is no storage 008 Prentice Hall, Inc Prentice Hall, Inc 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 Prentice Hall, Inc 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 008 Prentice Hall, Inc

8 Inventory level Holding Costs Holding Costs Cost (and range) as a Percent of Category Inventory Value Housing costs (building rent or 6% (3-10%) depreciation, operating costs, taxes, insurance) Material handling costs (equipment lease or 3% (1-3.5%) depreciation, power, operating cost) Labor cost 3% (3-5%) Investment costs (borrowing costs, taxes, 11% (6-4%) and insurance on inventory) Pilferage, space, and obsolescence 3% ( - 5%) Overall carrying cost 6% Cost (and range) as a Percent of Category Inventory Value Housing costs (building rent or 6% (3-10%) depreciation, operating costs, taxes, insurance) Material handling costs (equipment lease or 3% (1-3.5%) depreciation, power, operating cost) Labor cost 3% (3-5%) Investment costs (borrowing costs, taxes, 11% (6-4%) and insurance on inventory) Pilferage, space, and obsolescence 3% ( - 5%) Overall carrying cost 6% Table Prentice Hall, Inc Table Prentice Hall, Inc Inventory Models for Independent Demand YOU ARE NOT RESPONSIBLE FOR THE SUBSEUENT MATERIAL Need to determine when and how much to order Basic economic order quantity Production order quantity uantity discount model 008 Prentice Hall, Inc Prentice Hall, Inc Basic EO Model Inventory Usage Over Time Important assumptions 1. Demand is known, constant, and independent. Lead time is known and constant Order quantity = (maximum inventory level) Usage rate Average inventory on hand 3. Receipt of inventory is instantaneous and complete 4. uantity discounts are not possible 5. Only variable costs are setup and holding 6. Stockouts can be completely avoided Minimum inventory 0 Time Figure Prentice Hall, Inc Prentice Hall, Inc

9 Annual cost Minimizing Costs Objective is to minimize total costs Minimum total cost Table 11.5 Curve for total cost of holding and setup Optimal order quantity (*) Holding cost curve Setup (or order) cost curve Order quantity 008 Prentice Hall, Inc The EO Model = Number of pieces per order * = Optimal number of pieces per order (EO) D = Annual demand in units for the inventory item S = Setup or ordering cost for each order H = 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 Number of units in each order D = (S) Annual setup cost = Setup or order cost per order D S 008 Prentice Hall, Inc The EO Model = Number of pieces per order * = Optimal number of pieces per order (EO) D = Annual demand in units for the inventory item S = Setup or ordering cost for each order H = Holding or carrying cost per unit per year The EO Model = Number of pieces per order * = Optimal number of pieces per order (EO) D = Annual demand in units for the inventory item S = Setup or ordering cost for each order H = Holding or carrying cost per unit per year Annual holding cost = (Average inventory level) x (Holding cost per unit per year) = Order quantity (Holding cost per unit per year) = D Annual setup cost = S (H) Annual holding cost = H 008 Prentice Hall, Inc Optimal order quantity is found when annual setup cost equals annual holding cost Solving for * D S = H DS = H = DS/H * = DS/H D Annual setup cost = S Annual holding cost = H 008 Prentice Hall, Inc An EO Example Determine optimal number of needles to order D = 1,000 units S = $10 per order H = $.50 per unit per year * = * = DS H (1,000)(10) 0.50 = 40,000 = 00 units An EO Example Determine optimal number of needles to order D = 1,000 units * = 00 units S = $10 per order H = $.50 per unit per year Expected number of orders Demand D = N = = Order quantity * N = 1, = 5 orders per year 008 Prentice Hall, Inc Prentice Hall, Inc

10 An EO Example An EO Example Determine optimal number of needles to order D = 1,000 units * = 00 units S = $10 per order N = 5 orders per year H = $.50 per unit per year Expected time between orders Number of working days per year = T = N 50 T = = 50 days between order 5 Determine optimal number of needles to order D = 1,000 units * = 00 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 TC = S + H 1, TC = ($10) + ($.50) 00 TC = (5)($10) + (100)($.50) = $50 + $50 = $ Prentice Hall, Inc Prentice Hall, Inc Robust Model The EO 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 EO An EO Example Management underestimated demand by 50% D = 1,000 units 1,500 units * = 00 units S = $10 per order N = 5 orders per year H = $.50 per unit per yeart = 50 days D TC = S + H 1, TC = ($10) + ($.50) = $75 + $50 = $15 00 Total annual cost increases by only 5% 008 Prentice Hall, Inc Prentice Hall, Inc An EO Example Actual EO for new demand is 44.9 units D = 1,000 units 1,500 units * = 44.9 units S = $10 per order N = 5 orders per year H = $.50 per unit per yeart = 50 days D TC = S + H 1, TC = ($10) + ($.50) 44.9 TC = $ $61.4 = $1.48 Only % less than the total cost of $15 when the order quantity Reorder Points EO answers the how much question The reorder point (ROP) tells when to order ROP = Demand per day = d x L Lead time for a new order in days d = D Number of working days in a year 008 Prentice Hall, Inc was Prentice Hall, Inc

11 Inventory level (units) Inventory level Reorder Point Curve Reorder Point Example Figure 1.5 * ROP (units) Lead time = L Slope = units/day = d Time (days) Demand = 8,000 ipods per year 50 working day year Lead time for orders is 3 working days D d = Number of working days in a year = 8,000/50 = 3 units ROP = d x L = 3 units per day x 3 days = 96 units 008 Prentice Hall, Inc Prentice Hall, Inc Production Order uantity Model Used when inventory builds up over a period of time after an order is placed Used when units are produced and sold simultaneously Production Order uantity Model Maximum inventory Part of inventory cycle during which production (and usage) is taking place Demand part of cycle with no production t Time Figure Prentice Hall, Inc Prentice Hall, Inc Production Order uantity Model = 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 Annual inventory level Maximum inventory level = (Average inventory level) x = (Maximum inventory level)/ Total produced during = the production run = pt dt Holding cost per unit per year Total used during the production run Production Order uantity Model = 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 inventory level Total produced during = the production run = pt dt However, = total produced = pt ; thus t = /p Maximum inventory level = p d = 1 p p d p Total used during the production run Maximum inventory level d Holding cost = (H) = 1 H p 008 Prentice Hall, Inc Prentice Hall, Inc

12 Inventory Production Order uantity Model = Number of pieces per order H = Holding cost per unit per year D = Annual demand Setup cost = (D/)S Holding cost = (D/)S = DS = H[1 - (d/p)] * = p 1 p = Daily production rate d = Daily demand/usage rate DS H[1 - (d/p)] H[1 - (d/p)] 008 Prentice Hall, Inc H[1 - (d/p)] Production Order uantity Example D = 1,000 units p = 8 units per day S = $10 d = 4 units per day H = $0.50 per unit per year * = DS H[1 - (d/p)] (1,000)(10) * = = 80, [1 - (4/8)] = 8.8 or 83 hubcaps 008 Prentice Hall, Inc Production Order uantity Model Note: D d = 4 = = Number of days the plant is in operation 1, Reduce Variability Inventory level When annual data are used the equation becomes DS * = annual demand rate H 1 annual production rate Scrap Setup time Process downtime uality problems Late deliveries Figure Prentice Hall, Inc Prentice Hall, Inc Reduce Variability Reduce Lot Sizes Scrap Setup time Inventory level Process downtime uality problems When average order size = 00 average inventory is 100 Time When average order size = 100 average inventory is 50 Late deliveries Figure 16.3 Figure Prentice Hall, Inc Prentice Hall, Inc

13 Cost Reduce Lot Sizes Ideal situation is to have lot sizes of one pulled from one process to the next Often not feasible Can use EO analysis to calculate desired setup time Two key changes necessary Improve material handling Reduce setup time 008 Prentice Hall, Inc Lot Size Example D = Annual demand = 400,000 units d = Daily demand = 400,000/50 = 1,600 per day p = Daily production rate = 4,000 units = EO desired = 400 H = Holding cost = $0 per unit S = Setup cost (to be determined) = DS H(1 - d/p) = DS H(1 - d/p) ( )(H)(1 - d/p) (3,00,000)(0.6) S = D = 800,000 = $.40 Setup time = $.40/($30/hour) = 0.08 hr = 4.8 minutes 008 Prentice Hall, Inc Reduce Setup Costs Lower 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 T Sum of ordering and holding costs T 1 S S 1 Setup cost curves (S 1, S ) Lot size Holding cost Figure Prentice Hall, Inc Prentice Hall, Inc Reduce Setup Times JIT Scheduling Step 1 Step Figure 16.6 Step 4 Initial Setup Time Separate setup into preparation and actual setup, doing as much as possible while the machine/process is operating (save 30 minutes) Step 3 Move material closer and improve material handling (save 0 minutes) Standardize and improve tooling (save 15 minutes) Step 5 Step 6 90 min 60 min 45 min 5 min Use one-touch system to eliminate adjustments (save 10 minutes) 15 min Training operators and standardizing 13 min work procedures (save minutes) Repeat cycle until subminute setup is achieved 008 Prentice Hall, Inc 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 Signals used in a pull system 008 Prentice Hall, Inc

14 JIT Scheduling Better scheduling improves performance JIT Scheduling Tactics 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 Table 16.3 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 008 Prentice Hall, Inc Prentice Hall, Inc Scheduling Small Lots JIT Level Material-Use Approach A A B B B C A A B B B C Large-Lot Approach A A A A A A B B B B B B B B B C C C Time Figure Prentice Hall, Inc 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 008 Prentice Hall, Inc A REAL KANBAN 1. User removes a standard sized container. Signal is seen by the producing department as authorization to replenish Signal marker on boxes Figure 16.8 Part numbers mark location 008 Prentice Hall, Inc Prentice Hall, Inc

15 Production Control System Dual s Production Withdrawal P W P Machine Center A B Assembly Line X X X Process A W Container with withdrawal kanban X X Process B A s Input A s Output B s Input B s Output Flow of work Storage P Container with production kanban Flow of kanban 008 Prentice Hall, Inc Dual s P W P X X X Process A X X Process B A s Input A s Output B s Input B s Output Raw Material Supplier Work cell Final assembly Finished goods Customer order Ship W P Container with withdrawal kanban Container with production kanban Flow of work Flow of kanban Purchased Parts Supplier Subassembly Figure Prentice Hall, Inc More 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 More 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 008 Prentice Hall, Inc Prentice Hall, Inc

16 More 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 The Number of 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 Number of kanbans (containers) Demand during Safety lead time + stock = Size of container 008 Prentice Hall, Inc Prentice Hall, Inc Number of s Example Daily demand = 500 cakes Production lead time = days (Wait time + Material handling time + Processing time) Safety stock = 1/ day Container size = 50 cakes Demand during lead time = days x 500 cakes = 1,000 1, Number of kanbans = 50 = 5 Advantages of 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 008 Prentice Hall, Inc Prentice Hall, Inc uality 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 JIT uality 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 Prentice Hall, Inc Prentice Hall, Inc

17 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 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 008 Prentice Hall, Inc Prentice Hall, Inc 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 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 008 Prentice Hall, Inc Prentice Hall, Inc Building a Lean Organization Develop partnerships with suppliers Educate suppliers Eliminate all but value-added activities Develop employees Make jobs challenging Build worker flexibility JIT in Services The JIT techniques used in manufacturing are used in services Suppliers Layouts Inventory Scheduling 008 Prentice Hall, Inc Prentice Hall, Inc