JUST IN TIME Manuel Rincón, M.Sc. October 22nd, 2004
Lecture Outline 1. Just-in-Time Philosophy 2. Suppliers Goals of JIT Partnerships Concerns of Suppliers 3. JIT Layout Distance Reduction Increased Flexibility Impact on Employees Reduced Space and Inventory 4. Inventory Reduce Variability Reduce Inventory Reduce Lot Sizes Reduce Setup Costs 5. Scheduling Level Schedules Kanban 6. Quality 7. Employee Empowerment 8. Lean Production 9. JIT in Services 10. MRP vs. JIT
Introductory Quotation Waste is anything other than the minimum amount of equipment, materials, parts, space, and worker s time, which are absolutely essential to add value to the product. Shoichiro Toyoda President, Toyota 1995 Corel Corp.
Supplier-Production-Distribution System Supplier Distribution Inventories Raw material in-transit Raw Material Inventory Component Inventory Productions Inventories Work-in-process Inventory Factory Finished Goods Inventory Customer Distribution Inventories Retailer Inventory Orders Orders Sub-assembly parts in-transit MRO Inventory Warehouse Inventory Maintenance, repair, and ordering supplies in-transit Purchasing Production and Inventory Control Shipping and Traffic
What is Just-in-Time? Definition Delivery of parts to meet production Production to meet customer demands Means of production control Which aspects are under the control of the company? Which are not?
What is Just-in-Time? Management philosophy of continuous and forced problem solving Supplies and components are pulled through system to arrive where they are needed when they are needed.
What does Just-in-Time do? Attacks waste Anything not adding value to the product From the customer s perspective Exposes problems and bottlenecks caused by variability Deviation from optimum Achieves streamlined production By reducing inventory
Types of Waste Overproduction Waiting Transportation Inefficient processing Inventory Unnecessary motion Product defects
Example: JIT reduced waste at Hewlett-Packard Setup Time Scrap Finished Goods Inventory Space Lead Time Raw Material Inventory Work-in-Process Inventory 20% Waste Reduction (%) 30% 30% 40% 50% 50% 82% 0% 20% 40% 60% 80% 100%
Variability occurs because Employees, machines, and suppliers produce units that do not conform to standards, are late, or are not the proper quantity Engineering drawings or specifications are inaccurate Production personnel try to produce before drawings or specifications are complete Customer demands are unknown
Push vs Pull systems Push system: material is pushed into downstream workstations regardless of whether resources are available Pull system: material is pulled to a workstation just as it is needed
JIT contribution to Competitive Advantage Suppliers reduced number of vendors supportive supplier relationships quality deliveries on time
JIT contribution to Competitive Advantage Layout work-cell layouts with testing at each step of the process group technology movable, changeable, flexible machinery high level of workplace organization and neatness reduced space for inventory delivery direct to work areas
JIT contribution to Competitive Advantage Inventory small lot sizes low setup times specialized bins for holding set number of parts Scheduling zero deviation from schedules level schedules suppliers informed of schedules Kanban techniques
JIT contribution to Competitive Advantage Preventive Maintenance scheduled daily routine operator involvement Quality Production statistical process control quality by suppliers quality within firm
JIT contribution to Competitive Advantage Employee Empowerment empowered and cross-trained employees few job classifications to ensure flexibility of employees training support Commitment support of management, employees, and suppliers
Results Queue and delay reduction, speeds throughput, frees assets, and wins orders Quality improvement, reduces waste and wins orders Cost reductions, increases margin or reduces selling price Variability reductions in the workplace, reduces waste and wins orders Rework reduction, reduces waste and wins orders
Yielding Faster response to the customer and higher quality A competitive advantage!
JIT Success Factors Employee Empowerment Suppliers Layout Quality JIT Inventory Preventive Maintenance Scheduling
Suppliers Incoming material and finished goods involve waste Buyer and supplier form JIT partnerships JIT partnerships eliminate Unnecessary activities In-plant inventory In-transit inventory Poor suppliers
Characteristics of JIT Partnership Few Nearby Repeat business Analysis to enable desirable suppliers to become or stay price competitive Competitive bidding mostly limited to new purchases Buyer resists vertical integration and subsequent wipeout of supplier business Suppliers encouraged to extend JIT to their suppliers
Characteristics of JIT Partnership Steady output rate Frequent deliveries in small-lot quantities Long term contract agreements Minimal paperwork Delivery quantities fixed for whole contract term Little or no permissible overage or underage Suppliers package in exact quantities Suppliers reduce their production lot sizes or store unreleased material
Characteristics of JIT Partnership Minimal product specifications imposed on suppliers Help suppliers to meet quality requirements Close relationship between buyers and suppliers quality assurance people Suppliers use process control charts instead of lot-sampling techniques
Characteristics of JIT Partnership Scheduling of inbound freight Gain control by use of company-owned or contract shipping and warehousing
Goals of JIT partnership Elimination of unnecessary activities Elimination of in-plant inventory Elimination of in-transit inventory Elimination of poor suppliers
Supplier Worries Diversification Poor customer scheduling Frequent engineering changes Quality assurance Small lot sizes Physical proximity
Streamlined Production Traditional Flow Production Process (stream of water) Suppliers Flow with JIT Suppliers Inventory (stagnant ponds) Material (water in stream) Customers Customers
Layout JIT objective: Reduce movement of people and material Movement is waste! JIT requires Work cells for product families Moveable or changeable machines Short distances Little space for inventory Delivery directly to work areas
Work Cell vs Process Layout 5 Process Layout Lathe Lathe 4 Press Press 1 2 Heat Treat 6 3 Saw Saw Grinder Grinder Saw Lathe Grinder 1 Work Cell Heat Treat Lathe 2 Press
Layout Tactics Build work cells for families of products 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
Inventory Traditional: inventory exists in case problems arise JIT objective: Eliminate inventory JIT requires Small lot sizes Low setup time Containers for fixed number of parts JIT inventory: Minimum inventory to keep system running
JIT Inventory Tactics Use a pull system to move inventory Reduce lot size Reduce setup time Develop Just-in-Time delivery systems with suppliers Deliver directly to point of use Perform-to-schedule Reduce setup time Use group technology
Lowering Inventory Waste Reduction Work in process inventory level (hides problems) Unreliable Vendors Scrap Capacity Imbalances
Lowering Inventory Waste Reduction Reducing inventory reveals problems so they can be solved. Unreliable Vendors Scrap WIP Capacity Imbalances
Lowering Inventory Waste Reduction Reducing inventory reveals problems so they can be solved. Unreliable Vendors Scrap WIP Capacity Imbalances
To lower inventory reduce lot sizes Inventory Level Lot Size 200 Average inventory = 40 Average inventory = 100 Lot Size 80 Average inventory = (Lot size)/2 Time
Reducing lot sizes increases the number of lots Customer orders 10 Lot size = 5 Lot 1 Lot 2 Lot size = 2 Lot 1 Lot 2 Lot 3 Lot 4 Lot 5
which increases inventory costs Cost Total Cost Holding Cost Setup Cost Smaller Lot Size Optimal Lot Size Lot Size
unless setup costs are reduced Cost Total Cost Holding Cost Setup Cost New optimal lot size Original optimal lot size Lot Size
Steps to reduce Setup Time Step 1 Initial Setup Time Separate setup into preparation, and actual setup, doing as much as possible while the machine/process is running (save 30 minutes) Step 2 Step 3 Move material closer and improve material handling (save 20 minutes) Standardize and Step 4 Step 5 improve tooling (save 15 minutes) Use one-touch system to eliminate adjustments (save 10 minutes) Training operators and standardizing work procedures (save 2 minutes) 90 min 60 min 45 min 25 min 15 min 13 min
Scheduling Involves timing of operations JIT requires Communicating schedules to suppliers Level schedules Freezing part of schedule nearest due date Small lots Kanban techniques
JIT Scheduling Tactics Communicate the schedule to suppliers Make level schedules Freeze part of the schedule Perform to schedule Seek one-piece-make and onepiece-move Eliminate waste Produce in small lots Use kanbans Make each operation produce a perfect part
Level Schedules Reduce ripple effect of small variations in schedules (e.g., final assembly) Production quantities evenly distributed over time (e.g., 7/day) Build same mix of products every day Results in many small lots Item Monthly Quantity Daily Quantity A 40 2 B 60 3
Small lots vs Large lots JIT Small Lots A A B B B C JIT produces same amount in same time if setup times are lowered A A B B B C Large-Lot Approach Time Small lots also increase flexibility to meet customer demands A A A A B B B B B B Time C C
Small lots vs Large lots
Kanban Japanese word for card Pronounced kahn-bahn (not can-ban ) Authorizes production from downstream operations Pulls material through plant May be a card, flag, verbal signal etc. Used often with fixed-size containers Add or remove containers to change production rate
Kanban TIME TO DELIVER: 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 22.00 KANBAN SYSTEM Toyota-Kioshu Assembly Plant, Inc. 1234567890123 12345678900012345678900012345678 1234567890123 Name of the supplier: SUPPLIERS CUSTOMER INVENTORY Item number: 00000001 BOX TYPE/CAPACITY: AA / 25 pieces Delivery cycle of the product: 2 6 2 Item back number: 001-001-00 Item name: To be use on product: ¼ SCREW 2 0 1 Additional information: none
Kanban
Preventive Maintenance All activities involved in keeping equipment in working order Done to prevent failure JIT requires Scheduled & daily PM Operator performs PM Knows machines Responsible for product quality
Quality JIT exposes quality problems by reducing inventory JIT limits number defects with small lots JIT requires TQM Statistical process control Worker involvement Inspect own work Quality circles Immediate feedback
JIT Quality Tactics Use statistical process control Empower employees Build failsafe methods (poka-yoke, checklists, etc.) Provide immediate feedback
Employee Empowerment Getting employees involved in product & process improvements Employees know job best! JIT requires Empowerment Cross-training Training support Few job classifications 1995 Corel Corp.
JIT in Services All the techniques used in manufacturing are used in services Suppliers Layouts Inventory Scheduling
Attributes of Lean Producers They use JIT to eliminate virtually all inventory build systems to help employees product a perfect part every time reduce space requirements develop close relationships with suppliers educate suppliers eliminate all but value-added activities develop the workforce make jobs more challenging reduce the number of job classes and build worker flexibility
MRP vs JIT How would a grocery store operate using MRP JIT Mixed MRP/JIT What factors would contribute to making the store operate better under one paradigm vs. the other?
Chain of Events Demand (predictable or unpredictable?) Forecast (accurate or inaccurate?) Production (capacity fixed or flex?) Purchases (planned?)
Issues to Consider Forecast Inventory/Backlog Lead Times Capacity constraints Supplier information Decide when to place an order and how much May choose supplier
Compare MRP with JIT Consider necessary production lead times How can JIT compress the schedule? What elements of the schedule must remain? How does JIT overcome the necessary productions schedules and lead times to deliver products JIT?
Planning Horizon Assembly Subassembly Fabrication Procurement 6 7 1 2 3 4 5 8 9 10
Assembly Time Chart Procurement of raw material D Fabrication of part E Procurement of raw material F Procurement of part C Subassembly A Final assembly and inspection Procurement of part H Subassembly B Procurement of raw material I Fabrication of part G 1 2 3 4 5 6 7 8 9 10 11
Inventory hides Problems Machine downtime Scrap Vendor Delinquencies Change orders WIP Inspection, paperwork, order entry, decision backlogs
JIT focus on eliminating Waste Over production Waiting Times Transportation Idle inventory Waste of motion Production defects
How to accomplish JIT? Design Process for JIT Total Quality Control Stable Schedule Kanban Pull System Work with Vendors Reduce Inventory Improve Product Design
Pre-conditions to work through JIT Stable Schedule Stable Design Perfect Supplier Quality and Delivery Perfect Production Quality Good Data
Concepts applied in JIT Systems Focused factory networks Group technology Quality at the source JIT production Uniform plant loading Kanban production control system Minimized set-up times
Shouldn t everyone use JIT? For any company, how will the business situation change if JIT is implemented? Can (shouldn t) Just in Time Production to meet customer needs? What do we need to do from an operational standpoint to make JIT work? What are the costs? What will be the benefits? Best to view JIT as a set of practices which can provide ideas on ways to improve production.
JIT Delivery Steady planned production schedule Can this be achieved if there are lots of changes to the mix or volume of what is delivered? Short transportation distance to customer site High supplier quality Great communications with supplier Fast and efficient movement, handling and tracking of parts coming into production. Information System
JIT Production Available JIT supply Reliable capacity (machines, labor, etc.) Special equipment, containers, and transportation Regular or known demand (Is this possible?) Quality Output Toyota Production Control System
The Production Control Difference Given the short lead times and high variation required of today s production One of the primary implementable items of JIT is as a production control system. Focus on eliminating waste where practical Queue limitation Pull system Attack quality problems at the source
What are the benefits of JIT? Radical reductions in inventory Squeeze out system variation Usefulness of supplier relationships to improve quality and flow control What is the cost to change the business to run this way? Training, new systems? If you don t, you can t compete (Walmart)
MRP vs. JIT How do we tradeoff? the needed to build in advance of an order (hold inventory) at several strategic points in the line so we can deliver on time. the need to minimize inventory to reduce costs and improve efficiency.
MRP vs. JIT Consider an IBM situation: Suppose customers will wait only 4 weeks for delivery. What length of forecasts will you need? Should you hold inventory? At what stage in production? How much? Why? How will demand or supply variability affect your decision? Should we implement JIT here?
What will you consider? Cost of parts Amount of value add at each stage Shelf life and quality issues Reduction of flexibility at each step Risk of over purchasing/producing vs. shortage Ability to hold and handle inventory Remaining lead time and needs of market place
JUST IN TIME Manuel Rincón, M.Sc. October 22nd, 2004