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© 2008 Prentice Hall, Inc.16 – 1 Operations Management Chapter 16 – JIT and Lean Operations PowerPoint presentation to accompany Heizer/Render Principles.

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Presentation on theme: "© 2008 Prentice Hall, Inc.16 – 1 Operations Management Chapter 16 – JIT and Lean Operations PowerPoint presentation to accompany Heizer/Render Principles."— Presentation transcript:

1 © 2008 Prentice Hall, Inc.16 – 1 Operations Management Chapter 16 – JIT and Lean Operations PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7e Operations Management, 9e Some additions and deletions have been made by Ömer Yağız to this slide set.

2 © 2008 Prentice Hall, Inc.16 – 2 Outline  Global Company Profile: Toyota Motor Corporation  Just-in-Time, the Toyota Production System, and Lean Operations  Eliminate Waste  Remove Variability  Improve Throughput

3 © 2008 Prentice Hall, Inc.16 – 3 Outline – Continued  Just-in-Time  JIT Partnerships  Concerns of Suppliers  JIT Layout  Distance Reduction  Increased Flexibility  Impact on Employees  Reduced Space and Inventory

4 © 2008 Prentice Hall, Inc.16 – 4 Outline – Continued  JIT Inventory  Reduce Variability  Reduce Inventory  Reduce Lot Sizes  Reduce Setup Costs  JIT Scheduling  Level Schedules  Kanban

5 © 2008 Prentice Hall, Inc.16 – 5 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

6 © 2008 Prentice Hall, Inc.16 – 6 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

7 © 2008 Prentice Hall, Inc.16 – 7 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

8 © 2008 Prentice Hall, Inc.16 – 8 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

9 © 2008 Prentice Hall, Inc.16 – 9 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

10 © 2008 Prentice Hall, Inc.16 – 10 Toyota Prod System (TPS) became Lean Manuf System in the USAToyota Prod System (TPS) became Lean Manuf System in the USA

11 © 2008 Prentice Hall, Inc.16 – 11 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

12 © 2008 Prentice Hall, Inc.16 – 12 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

13 © 2008 Prentice Hall, Inc.16 – 13 JIT, TPS, and Lean All are basically used interchangeably We will refer to all as “Lean Operations “ ; the textbook does the same.

14 © 2008 Prentice Hall, Inc.16 – 14 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

15 © 2008 Prentice Hall, Inc.16 – 15 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 ,622 trucks, 1,008 cars American to Japanese productivity ratio ---9:1 Era of “slow growth” in 1970's

16 © 2008 Prentice Hall, Inc.16 – 16 Three major issues Effective OM means managers must also address three issues:  eliminate waste  remove variability  improve throughput

17 © 2008 Prentice Hall, Inc.16 – 17 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)

18 © 2008 Prentice Hall, Inc.16 – 18 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

19 © 2008 Prentice Hall, Inc.16 – 19 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

20 © 2008 Prentice Hall, Inc.16 – 20 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

21 © 2008 Prentice Hall, Inc.16 – 21 The 5 Ss  Sort/segregate – when in doubt, throw it out  Simplify/straighten – use methods analysis tools  Shine/sweep – clean daily  Standardize – remove variations from processes (SOP’s and checklists)  Sustain/self-discipline – review work and recognize progress

22 © 2008 Prentice Hall, Inc.16 – 22 The 5 Ss  Sort/segregate – when in doubt, throw it out  Simplify/straighten – methods analysis tools  Shine/sweep – clean daily  Standardize – remove variations from processes  Sustain/self-discipline – review work and recognize progress Two additional Ss  Safety – build in good practices  Support/maintenance – reduce variability and unplanned downtime

23 © 2008 Prentice Hall, Inc.16 – 23 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

24 © 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

25 © 2008 Prentice Hall, Inc.16 – 25 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 Both JIT and inventory reduction are effective tools in identifying causes of variability

26 © 2008 Prentice Hall, Inc.16 – 26 Improve Throughput  The time it takes to move an order 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

27 © 2008 Prentice Hall, Inc.16 – 27 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

28 © 2008 Prentice Hall, Inc.16 – 28 Just-In-Time (JIT) Powerful strategy for improving operationsPowerful strategy for improving operations Materials arrive where they are needed when they are neededMaterials arrive where they are needed when they are needed Identifying problems and driving out waste reduces costs and variability and improves throughputIdentifying problems and driving out waste reduces costs and variability and improves throughput Requires a meaningful buyer-supplier relationshipRequires a meaningful buyer-supplier relationship

29 © 2008 Prentice Hall, Inc.16 – 29 JIT and Competitive Advantage Figure 16.1

30 4 JIT Logic Customers Final Assy Sub Fab Vendor PULL….

31 © 2008 Prentice Hall, Inc.16 – 31 JIT and Competitive Advantage Figure 16.1

32 © 2008 Prentice Hall, Inc.16 – 32 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  Removal of in-plant inventory  Removal of in-transit inventory  Improved quality and reliability

33 © 2008 Prentice Hall, Inc.16 – 33 JIT Partnerships Figure 16.2

34 © 2008 Prentice Hall, Inc.16 – 34 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

35 © 2008 Prentice Hall, Inc.16 – 35 JIT Layout Table 16.1 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

36 © 2008 Prentice Hall, Inc.16 – 36 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

37 © 2008 Prentice Hall, Inc.16 – 37 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

38 © 2008 Prentice Hall, Inc.16 – 38 Manufacturing Cell With Worker Routes Enter Worker 1 Worker 2 Worker 3 Exit Key: Product route Worker route Machines

39 © 2008 Prentice Hall, Inc.16 – 39 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

40 © 2008 Prentice Hall, Inc.16 – 40 Reduced Space and Inventory  With reduced space, inventory must be in very small lots  Units are always moving because there is no storage

41 © 2008 Prentice Hall, Inc.16 – 41 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

42 © 2008 Prentice Hall, Inc.16 – 42 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

43 © 2008 Prentice Hall, Inc.16 – 43 Holding Costs Category Cost (and range) as a Percent of Inventory Valu e Housing costs (building rent or depreciation, operating costs, taxes, insurance) 6% (3 - 10%) Material handling costs (equipment lease or depreciation, power, operating cost) 3% ( %) Labor cost 3% (3 - 5%) Investment costs (borrowing costs, taxes, and insurance on inventory) 11% (6 - 24%) Pilferage, space, and obsolescence 3% (2 - 5%) Overall carrying cost 26% Table 12.1

44 © 2008 Prentice Hall, Inc.16 – 44 Holding Costs Category Cost (and range) as a Percent of Inventory Valu e Housing costs (building rent or depreciation, operating costs, taxes, insurance) 6% (3 - 10%) Material handling costs (equipment lease or depreciation, power, operating cost) 3% ( %) Labor cost 3% (3 - 5%) Investment costs (borrowing costs, taxes, and insurance on inventory) 11% (6 - 24%) Pilferage, space, and obsolescence 3% (2 - 5%) Overall carrying cost 26% Table 12.1 Holding costs vary considerably depending on the business, location, and interest rates. Generally greater than 15%, some high tech items have holding costs greater than 50%.

45 © 2008 Prentice Hall, Inc.16 – 45 Inventory Models for Independent Demand  Basic economic order quantity  Production order quantity  Quantity discount model Need to determine when and how much to order

46 © 2008 Prentice Hall, Inc.16 – 46 Basic EOQ Model 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 Important assumptions

47 © 2008 Prentice Hall, Inc.16 – 47 Inventory Usage Over Time Figure 12.3 Order quantity = Q (maximum inventory level) Usage rate Average inventory on hand Q2 Minimum inventory Inventory level Time 0

48 © 2008 Prentice Hall, Inc.16 – 48 Minimizing Costs Objective is to minimize total costs Table 11.5 Annual cost Order quantity Curve for total cost of holding and setup Holding cost curve Setup (or order) cost curve Minimum total cost Optimal order quantity (Q*)

49 © 2008 Prentice Hall, Inc.16 – 49 The EOQ Model Q= Number of pieces per order Q*= Optimal number of pieces per order (EOQ) 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 Setup or order cost per order = Annual setup cost = S DQDQ = (S) DQ

50 © 2008 Prentice Hall, Inc.16 – 50 The EOQ Model Q= Number of pieces per order Q*= Optimal number of pieces per order (EOQ) 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 2 = (Holding cost per unit per year) = (H) Q2 Annual setup cost = S DQDQ Annual holding cost = H Q2Q2

51 © 2008 Prentice Hall, Inc.16 – 51 The EOQ Model Q= Number of pieces per order Q*= Optimal number of pieces per order (EOQ) 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 Optimal order quantity is found when annual setup cost equals annual holding cost Annual setup cost = S DQDQ Annual holding cost = H Q2Q2 DQ S = H Q2 Solving for Q* 2DS = Q 2 H Q 2 = 2DS/H Q* = 2DS/H

52 © 2008 Prentice Hall, Inc.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 = 40,000 = 200 units

53 © 2008 Prentice Hall, Inc.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 = N = = Expected number of orders Demand Order quantity DQ* N = = 5 orders per year 1,000200

54 © 2008 Prentice Hall, Inc.16 – 54 An EOQ Example Determine optimal number of needles to order D = 1,000 unitsQ*= 200 units S = $10 per orderN= 5 orders per year H = $.50 per unit per year = T = Expected time between orders Number of working days per year N T = = 50 days between orders 2505

55 © 2008 Prentice Hall, Inc.16 – 55 An EOQ Example Determine optimal number of needles to order D = 1,000 unitsQ*= 200 units S = $10 per orderN= 5 orders per year H = $.50 per unit per yearT= 50 days Total annual cost = Setup cost + Holding cost TC = S + H DQQ2 TC = ($10) + ($.50) 1, TC = (5)($10) + (100)($.50) = $50 + $50 = $100

56 © 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

57 © 2008 Prentice Hall, Inc.16 – 57 An EOQ Example Management underestimated demand by 50% D = 1,000 units Q*= 200 units S = $10 per orderN= 5 orders per year H = $.50 per unit per yearT= 50 days TC = S + H DQQ2 TC = ($10) + ($.50) = $75 + $50 = $125 1, ,500 units Total annual cost increases by only 25%

58 © 2008 Prentice Hall, Inc.16 – 58 An EOQ Example Actual EOQ for new demand is units D = 1,000 units Q*= units S = $10 per orderN= 5 orders per year H = $.50 per unit per yearT= 50 days TC = S + H DQQ2 TC = ($10) + ($.50) 1, ,500 units TC = $ $61.24 = $ Only 2% less than the total cost of $125 when the order quantity was 200

59 © 2008 Prentice Hall, Inc.16 – 59 Reorder Points  EOQ answers the “how much” question  The reorder point (ROP) tells when to order ROP = Lead time for a new order in days Demand per day = d x L d = D Number of working days in a year

60 © 2008 Prentice Hall, Inc.16 – 60 Reorder Point Curve Q* ROP (units) Inventory level (units) Time (days) Figure 12.5 Lead time = L Slope = units/day = d

61 © 2008 Prentice Hall, Inc.16 – 61 Reorder Point Example Demand = 8,000 iPods per year 250 working day year Lead time for orders is 3 working days ROP = d x L d = D Number of working days in a year = 8,000/250 = 32 units = 32 units per day x 3 days = 96 units

62 © 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

63 © 2008 Prentice Hall, Inc.16 – 63 Production Order Quantity Model Inventory level Time Demand part of cycle with no production Part of inventory cycle during which production (and usage) is taking place t Maximum inventory Figure 12.6

64 © 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 = (Average inventory level) x Annual inventory holding cost Holding cost per unit per year = (Maximum inventory level)/2 Annual inventory level = – Maximum inventory level Total produced during the production run Total used during the production run = pt – dt

65 © 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 inventory level Total produced during the production run Total used during the production run = pt – dt However, Q = total produced = pt ; thus t = Q/p Maximum inventory level = p – d = Q 1 – QpQpdp Holding cost = (H) = 1 – H dpQ2 Maximum inventory level 2

66 © 2008 Prentice Hall, Inc.16 – 66 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 D =Annual demand Q2 =Q2 =Q2 =Q2 = 2DS H[1 - (d/p)] Q* = 2DS H[1 - (d/p)] p Setup cost =(D/Q)S Holding cost = HQ[1 - (d/p)] 12 (D/Q)S = HQ[1 - (d/p)] 12

67 © 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 Q* = 2DS H[1 - (d/p)] = or 283 hubcaps Q* = = 80,000 2(1,000)(10) 0.50[1 - (4/8)]

68 © 2008 Prentice Hall, Inc.16 – 68 Production Order Quantity Model When annual data are used the equation becomes Q* = 2DS annual demand rate annual production rate H 1 – Note: d = 4 = = D Number of days the plant is in operation 1,000250

69 © 2008 Prentice Hall, Inc.16 – 69 Reduce Variability Inventory level Process downtime Scrap Setup time Late deliveries Quality problems Figure 16.3

70 © 2008 Prentice Hall, Inc.16 – 70 Inventory level Reduce Variability Scrap Setup time Late deliveries Quality problems Process downtime Figure 16.3

71 © 2008 Prentice Hall, Inc.16 – 71 Reduce Lot Sizes Figure – –Inventory Time Q 2 When average order size = 100 average inventory is 50 Q 1 When average order size = 200 average inventory is 100

72 © 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

73 © 2008 Prentice Hall, Inc.16 – 73 Lot Size Example D=Annual demand = 400,000 units d=Daily demand = 400,000/250 = 1,600 per day p=Daily production rate = 4,000 units Q=EOQ desired = 400 H=Holding cost = $20 per unit S=Setup cost (to be determined) Q = 2DS H(1 - d/p) Q2 =Q2 =Q2 =Q2 =2DS S = = = $2.40 (Q 2 )(H)(1 - d/p) 2D (3,200,000)(0.6)800,000 Setup time = $2.40/($30/hour) = 0.08 hr = 4.8 minutes

74 © 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

75 © 2008 Prentice Hall, Inc.16 – 75 Lower Setup Costs Figure 16.5 Sum of ordering and holding costs Holding cost Setup cost curves (S 1, S 2 ) T1T1T1T1 S1S1S1S1 T2T2T2T2 S2S2S2S2 Cost Lot size

76 © 2008 Prentice Hall, Inc.16 – 76 Reduce Setup Times Figure 16.6 Use one-touch system to eliminate adjustments (save 10 minutes) Step 4 Step 5 Training operators and standardizing work procedures (save 2 minutes) Initial Setup Time Step 2 Move material closer and improve material handling (save 20 minutes) Step 1 Separate setup into preparation and actual setup, doing as much as possible while the machine/process is operating (save 30 minutes) Step 3 Standardize and improve tooling (save 15 minutes) 90 min — 60 min — 45 min — 25 min — 15 min — 13 min — — Repeat cycle until subminute setup is achieved Step 6

77 © 2008 Prentice Hall, Inc.16 – 77 JIT Scheduling  Schedules must be communicated inside and outside the organization  Level schedules  Process frequent small batches  Freezing the schedule helps stability  Kanban  Signals used in a pull system

78 © 2008 Prentice Hall, Inc.16 – 78 Table 16.3 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 JIT Scheduling

79 © 2008 Prentice Hall, Inc.16 – 79 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

80 © 2008 Prentice Hall, Inc.16 – 80 Scheduling Small Lots ABCAAABBBBBC JIT Level Material-Use Approach ACAAABBBBBCCBBBBAA Large-Lot Approach Time Figure 16.7

81 © 2008 Prentice Hall, Inc.16 – 81 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

82 © 2008 Prentice Hall, Inc.16 – 82 Kanban 1.User removes a standard sized container 2.Signal is seen by the producing department as authorization to replenish Part numbers mark location Signal marker on boxes Figure 16.8

83 © 2008 Prentice Hall, Inc.16 – 83 A REAL KANBAN

84 Kanban Production Control System A B Machine CenterAssembly Line Storage Production Kanban Withdrawal Kanban

85 © 2008 Prentice Hall, Inc.16 – 85 Dual Kanbans Process A Process B P P P W W Container with withdrawal kanban Container with production kanban XXXXXX X X Flow of work Flow of kanban A’s Input A’s Output B’s Input B’s Output

86 Dual Kanbans Process A Process B P P P W W Container with withdrawal kanban Container with production kanban XXXXXX X X Flow of work Flow of kanban A’s Input A’s Output B’s Input B’s Output

87 © 2008 Prentice Hall, Inc.16 – 87 Kanban Figure 16.9 Work cell Raw Material Supplier Kanban Purchased Parts Supplier Sub- assembly Ship Kanban Kanban Kanban Kanban Finished goods Customer order Final assembly Kanban

88 © 2008 Prentice Hall, Inc.16 – 88 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

89 © 2008 Prentice Hall, Inc.16 – 89 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

90 © 2008 Prentice Hall, Inc.16 – 90 More Kanban  Kanban cards provide a direct control and limit on the amount of work-in- process 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

91 © 2008 Prentice Hall, Inc.16 – 91 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 Number of kanbans (containers) Demand during Safety lead time+stock Size of container =

92 © 2008 Prentice Hall, Inc.16 – 92 Number of Kanbans Example Daily demand=500 cakes Production lead time=2 days (Wait time + Material handling time + Processing time) Safety stock=1/2 day Container size=250 cakes Demand during lead time = 2 days x 500 cakes = 1,000 Number of kanbans = = 5 1,

93 © 2008 Prentice Hall, Inc.16 – 93 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

94 © 2008 Prentice Hall, Inc.16 – 94 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

95 © 2008 Prentice Hall, Inc.16 – 95 JIT Quality Tactics Use statistical process control Empower employees Build fail-safe methods (poka- yoke, checklists, etc.) Expose poor quality with small lot JIT Provide immediate feedback Table 16.4

96 © 2008 Prentice Hall, Inc.16 – 96 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

97 © 2008 Prentice Hall, Inc.16 – 97 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

98 © 2008 Prentice Hall, Inc.16 – 98 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

99 © 2008 Prentice Hall, Inc.16 – 99 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

100 © 2008 Prentice Hall, Inc.16 – 100 Building a Lean Organization  Develop partnerships with suppliers  Educate suppliers  Eliminate all but value-added activities  Develop employees  Make jobs challenging  Build worker flexibility

101 © 2008 Prentice Hall, Inc.16 – 101 JIT in Services  The JIT techniques used in manufacturing are used in services  Suppliers  Layouts  Inventory  Scheduling


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