1. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-1 Operations Management Just-in-Time and Lean Production Systems Chapter 16

2. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-2 Outline  JUST-IN-TIME AND LEAN PRODUCTION  GLOBAL COMPANY PROFILE: GREEN GEAR CYCLING  SUPPLIERS  Goals of JIT Partnerships  Concerns of Suppliers  JIT LAYOUT  Distance Reduction  Increased Flexibility  Impact on Employees  Reduced Space and Inventory

3. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-3 Outline - Continued  INVENTORY  Reduce Variability  Reduce Inventory  Reduce Lot Sizes  Reduce Setup Costs  SCHEDULING  Level Schedules  Kanban  QUALITY  EMPLOYEE EMPOWERMENT  LEAN PRODUCTION  JIT IN SERVICES

4. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-4 Learning Objectives When you complete this supplement, you should be able to : Identify or Define:  Types of waste  Variability  Kanban Describe or Explain :  Just-in-Time (JIT) philosophy  Pull systems  Push systems  The goals of JIT partnerships  Lean Production

5. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-5 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. Introductory Quotation

6. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-6 Green Gear Cycling  Designs and manufacturers high performance travel bicycles (bike-in-a-suitcase!)  Strategy is mass customization with low inventory, work cells, and elimination of machine setups.  Major focus on JIT and supply-chain management.  Two lines with seven work cells  One day throughput time  Focus on quality

7. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-7 Supplier – Production – Distribution System Supplier Distribution Inventories Raw material in-transit Sub-assembly parts in-transit Maintenance, repair, and ordering supplies in-transit Raw Material Inventory Work-in-process Inventory Factory Finished Goods Inventory Component Inventory MRO Inventory Purchasing Production and Inventory Control Shipping and Traffic Retailer Inventory Orders Warehouse Inventory Productions Inventories Customer Distribution Inventories Orders

8. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-8  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 is Just-in-Time?

9. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-9 Lean Production  Lean Production supplies customers with exactly what the customer wants, when the customer wants, without waste, through continuous improvement.

10. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-10  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 What Does Just-in-Time Do?

11. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-11  Overproduction  Waiting  Transportation  Inefficient processing  Inventory  Unnecessary motion  Product defects © 1995 Corel Corp. Types of Waste

12. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-12 Waste Reduction (%) 82% 50% 30% 20% 40% 0%20%40%60%80%100% Work-in-Process Inventory Raw Material Inventory Lead Time Space Finished Goods Inventory Scrap Setup Time JIT Reduced Waste at Hewlett-Packard

13. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-13 Push versus Pull  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

14. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-14  Suppliers  reduced number of vendors  supportive supplier relationships  quality deliveries on time  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

15. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-15  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 - Continued

16. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-16 JIT Contribution to Competitive Advantage - Continued  Preventive Maintenance  scheduled  daily routine  operator involvement  Quality Production  statistical process control  quality by suppliers  quality within firm

17. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-17 JIT Contribution to Competitive Advantage - Continued  Employee Empowerment  empowered and cross-trained employees  few job classifications to ensure flexibility of employees  training support  Commitment  support of management, employees, and suppliers

18. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-18 Results  Queue and delay reduction, speedier throughput, freed assets, and winning orders  Quality improvement, reduces waste and wins orders  Cost reduction increases margin or reduces selling price  Variability reductions in the workplace reduces waste and wins orders  Rework reduction, reduces waste and wins orders

19. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-19 Yielding Faster response to the customer at lower cost and higher quality A competitive advantage!

20. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-20 Suppliers Preventive Maintenance Layout Inventory Scheduling Quality Employee Empowerment JIT Just-in-Time Success Factors

21. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-21  Few  Nearby  Repeat business  Analysis and support 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 (2 nd and 3 rd tier suppliers) Characteristics of JIT Partnerships Characteristics of JIT Partnerships Suppliers

22. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-22 Characteristics of JIT Partnerships Characteristics of JIT Partnerships Quantities  Steady output rate  Frequent deliveries in small-lot quantities  Long-term contract agreements  Minimal or no paperwork (use EDI or internet)  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

23. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-23  Minimal product specifications imposed on suppliers  Help suppliers meet quality requirements  Close relationship between buyers’ and suppliers quality assurance people  Suppliers use poka-yoke and process control charts instead of lot-sampling techniques Characteristics of JIT Partnerships Characteristics of JIT Partnerships Quality

24. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-24 Characteristics of JIT Partnerships Characteristics of JIT Partnerships Shipping  Scheduling of inbound freight  Gain control by use of company-owned or contract shipping and warehousing  Use of Advanced Shipping Notice (ASN)

25. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-25 Goals of JIT partnerships ¬Elimination of unnecessary activities ·Elimination of in-plant inventory ®Elimination of in-transit inventory ÍElimination of poor suppliers

26. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-26  Diversification  Poor customer scheduling  Frequent engineering changes  Quality assurance  Small lot sizes  Physical proximity Concerns of Suppliers

27. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-27 Streamlined Production Flow with JIT Traditional Flow Customers Suppliers Customers Suppliers Production Process (stream of water) Inventory (stagnant ponds) Material (water in stream)

28. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-28  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 Layout

29. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-29 Process LayoutWork Cell Saw Lathe Grinder Heat Treat Lathe Saw Heat Treat Grinder Press 1 1 2 3 4 5 2 6 Saw Press Work Cell versus Process Layout

30. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-30 Inventory Hides Problems Just as Water in a Lake Hides Rocks Scrap Setup time Late deliveries Quality problems Process downtime Scrap Setup time Late deliveries Quality problems Process downtime Inventory level

31. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-31 Scrap Work in process inventory level (hides problems) Unreliable Vendors Capacity Imbalances Lowering Inventory Reduces Waste

32. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-32 Scrap Reducing inventory reveals problems so they can be solved. Unreliable Vendors Capacity Imbalances WIP Lowering Inventory Reduces Waste

33. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-33 Scrap Reducing inventory reveals problems so they can be solved. Unreliable Vendors Capacity Imbalances WIP Lowering Inventory Reduces Waste

34. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-34 Customer orders 10 Lot size = 5 Lot 1 Lot 2 Lot size = 2 Lot 1Lot 2Lot 3Lot 4Lot 5 Reducing Lot Sizes Increases the Number of Lots

35. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-35 Unless Setup Costs are Reduced Lot Size Cost Holding Cost Total Cost Setup Cost Original optimal lot size New optimal lot size

36. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-36 Steps to Reduce Setup Time Initial Setup Time Separate setup into preparation, and actual setup, doing as much as possible while the machine/process is running (save 30 minutes) Move material closer and improve material handling (save 20 minutes) Standardize and improve tooling (save 15 minutes) 90 min 60 min 45 min 25 min 15 min Use one-touch system to eliminate adjustments (save 10 minutes) Training operators and standardizing work procedures (save 2 minutes) Step 1 Step 2 Step 3 Step 5 13 min Step 4

37. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-37 A AABBBC JIT Small Lots Large-Lot Approach Time A A BB B C AAABBB B BB C C JIT produces same amount in same time if setup times are lowered Small versus Large Lots Small lots also increase flexibility to meet customer demands

38. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-38  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

39. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-39 Diagram of Outbound Stockpoint with Warning-Signal Marker

40. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-40 Kanban Signals “Pull” Material Through the Process

41. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-41 JIT in Services All the techniques used in manufacturing are used in services SuppliersLayoutsInventoryScheduling

42. Transparency Masters to accompany Heizer/Render – Principles of Operations Management, 5e, and Operations Management, 7e © 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458 16-42 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