Operations Management Lean Production Ron Tibben-Lembke Operations Management

Just In Time-- What is It? Integrated set of activities designed to achieve high-volume production using minimal inventories of raw materials, WIP, and FGI. Big JIT A.k.a. “lean production” -- Eliminate waste in all aspects of production activities Little JIT – scheduling goods inventories and production, as needed Also known as Stockless Production, Toyota Production System

Toyoda Automatic Loom Sakichi Toyoda (1867-1930) – Invented a loom which stops automatically if the thread breaks. His son Kiirchiro, started the automotive department of Toyoda Loom Works.

JIT Origins in Japan Post-WWII Japanese industry in ruins “Catch up to Americans in 4 years!” Kiichirō Toyoda, 1946 Toyoda made delivery trucks and motorcycles, and not many of either

-- the early years First two Toyopet Crowns arrive U.S. 1957

Ohno – Reduce Waste If Americans are 9x as productive, we must be wasting something. (p.3) “The basis of the Toyota production system is the absolute elimination of waste.” (Ohno, p. 4)

Waste Waste is ‘anything other than the minimum amount of equipment, materials, parts, space, and workers’ time which are absolutely essential to add value to the product. --Shoichiro Toyoda President, Toyota Motor Co. If you put your mind to it, you can squeeze water from a dry towel. -- Eiji Toyoda, President 1967-1982

Elimination of Waste Knew they wouldn’t beat U.S. with product innovation, concentrated on licensing patents, and producing more efficiently Costs prevented mass-production, volume strategy of American firms. Find ways to reduce waste, cost Shigeo Shingo (at right) & Taiichi Ohno, pioneers

Two Pillars of Toyota System Just-in-Time: a flow of right parts, at the right time, in the right quantity Autonomation: ‘Automation with a human touch’ (make machine mistake-proof) Workers don’t have to baby-sit machines Stop automatically if downstream machine stops

Couldn’t Emulate GM GM huge batches in huge factories Japan’s area is 10% less than California and 70% agricultural. Put entire population of CA into 30% of state, then add 6 times as many people. (and you thought LA was crowded). Land extremely expensive Sprawling factories not an option

Small Batches GM’s large batches require large amounts of storage space. GM produces in large batches because of significant setup costs. If Toyota had the same large setup costs, it could never afford small batches. Reduce setup cost to reduce batch size. GM didn’t think of doing this.

7 Types of Waste (Ohno 1988) Overproduction Time on Hand (waiting time) Transportation Stock on Hand - Inventory Waste of Processing itself Movement Making Defective Products

Seven Elements to Eliminate Waste Focused Factories Group Technology Quality at the Source JIT production Uniform Plant Loading Kanban production control system Minimized setup times

Focused Factories Small, specialized plants No huge, vertically integrated plants 30 -1,000 workers Tom Peters

Group Technology-Layout Not enough WIP to have 1 person run 4 milling machines Don’t departmentalize, organize machines by product type Cellular layout Much less inventory sitting around Batch size of one

Cross Training To maintain the flow, workers have to be able to help out as needed Rotate workers through jobs: Keep skills sharp (managers too - prove they know what they’re doing) Reduce boredom & fatigue Expand understanding of overall picture Increase potential for new ideas

Employee Input Employee has a brain, why not use it? Quality circles look for ways to improve Emphasis on Continuous Process Improvement

Total Quality Management Not a lot of parts to sift through to find a good one Can’t afford high defect rates Since low WIP, get quick feedback on errors

Ask ‘Why’ 5 Times 5W = 1H 1. Why did the machine stop? Overload and fuse blew 2. Why the overload? Not lubricated 3. Why not lubricated? Oil pump not pumping? 4. Why not pumping? Pump shaft worn out. 5. Why worn out? No screen, scrap got in

Just-in-Time Downstream processes take parts from upstream as they need. Like an American Supermarket: Get what you want when you want it in the quantity you want.

Kanban Japanese for ‘signboard’ Method Toyota used for implementing JIT Each work station has a fixed # kanbans. In order to produce, you need both material to work on, and an available kanban.

Kanban Worker 2 finishes a part, outbound moves over Flow of work 2 3 Worker 2 finishes a part, outbound moves over 2 gets another part to work on: 2 takes off 1’s green tag giving it back to 1, and puts on her blue tag and moves it into position.

Kanban When 3 finishes a part, Finished parts move over one spot Flow of work 2 3 When 3 finishes a part, Finished parts move over one spot He has to have a red tag available to put on, He gets a part from 2’s outbound pile, And gives the blue back to 2

Kanban When 3 finishes a part, Flow of work 2 3 When 3 finishes a part, Finished parts move over one spot He has to have a red tag available to put on, He gets a part from 2’s outbound pile, And gives the blue back to 2 3’s production will be taken by 4, offstage right. Tag goes back into 3’s bin

Kanbans 2 3 Red finishes his part next. 2 3 But 4 hasn’t freed up any of the red kanbans, so there is nothing for 3 to work on now. 3 could maintain his machine, or see if 4 needs help 2 3

How is this Different? Processes can become idled (blocked) or starved This makes you painfully aware of problems in your system. Material moves through the system so quickly no in-process recordkeeping is needed.

Importance of Flow Ohno was very clear about this: “Kanban is a tool for realizing just-in-time. For this tool to work fairly well, the process must be managed to flow as much as possible. This is really the basic condition. Other important conditions are leveling the product as much as possible, and always working in accordance with standard work methods. -- Ohno, 1988, p. 3

Performance and WIP Level Less WIP means products go through system faster reducing the WIP makes you more sensitive to problems, helps you find problems faster Stream and Rocks analogy: Inventory (WIP) is like water in a stream It hides the rocks Rocks force you to keep a lot of water (WIP) in the stream

Lowering Inventory Reduces Waste WIP hides problems

Lowering Inventory Reduces Waste WIP hides problems

Lowering Inventory Reduces Waste Reducing WIP makes problem very visible STOP

Lowering Inventory Reduces Waste Remove problem, run With less WIP

Lowering Inventory Reduces Waste Reduce WIP again to find new problems

A contrasting opinion “Inventory is not the root of all evil, inventory is the flower of all evil. - Robert Inman, General Motors

Setup Reduction Can’t afford to do huge runs Have to produce in small batches Toyota Die Change: 3 hours down to 3 SMED: under ten minutes Techniques Make internal setups into External Eliminate Adjustments Eliminate the Setup

Capacity Buffers System is inflexible, no inventory buffers, so to respond, need excess capacity Schedule less than 24 hours per day ‘Two-Shifting’ 4-8-4-8 Cross Training

What about making several products? Each station has to keep on hand parts to satisfy anything downstream station might ask for Want to avoid many parts for each of several products This means more WIP, more inventory, more expense, unless we produce in smaller batches

Production Smoothing & Sequencing Master production schedule: 10,000 /mo. 500 day, 250 a shift 480 minutes means 1 every 1.92 minutes Sequencing: If mix is 50% A, 25% B, 25% C, produce A-B-A-C-A-B-A-C…

Suppliers Buyer & Supplier form JIT partnerships JIT partnerships eliminate: Unnecessary activities In-plant inventory In-transit inventory Poor suppliers

Characteristics of JIT Partnershps Few, nearby suppliers Supplier just like in-house upstream process Long-term contract agreements Steady supply rate Frequent deliveries in small lots Buyer helps suppliers meet quality Suppliers use process control charts Buyer schedules inbound freight

Supplier Worries Lack of flexibility Poor customer scheduling Long-term contract with 1 customer Poor customer scheduling Frequent engineering changes Strict quality assurance Small lot sizes Close physical proximity

Supplier Relationships American model: keep your nose out of my plant. Gain info to force price cuts Lack of trust between suppliers Firm encourages suppliers to share knowledge, because they don’t worry about competing Firm helps supplier increase quality, reduce costs

Preventative Maintenance Unexpected loss of production is fatal to system and must be prevented Additional maintenance can prevent downtime, or minimize length of interruptions, when they do occur

Inventory Traditionally, 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.

Lessons Learned from JIT The environment can be a control - don’t take setups for granted Operational details are very important (Ford, Carnegie) Controlling WIP is important Flexibility is an asset Quality can come first Continual improvement is necessary for survival

What is not JIT Having shipments come in just when you need them does not mean JIT goals accomplished If supplier still produces in large lots, but delivers in small, you have just forced supplier to incur the holding costs

System Requirements Runs with very little inventory Requires high quality Management philosophy of continuous and forced problem solving Elimination of waste

Lean Tools Value Stream mapping Takt time (German for pace or beat) available work time per shift = ------------------------------------------- Customer demand per shift Cycle time = how often a piece comes off of production line

Where to get more information Taiichi Ohno - Toyota Production System Schonberger - Japanese Manufacturing Techniques Factory Physics - Hopp & Spearman Shigeo Shingo - Toyota Production System

JIT Books in English 1981 –Shigeo Shingo – “Study of the Toyota Production System” 1982 – Richard Schonberger – “Japanese Manufacturing Techniques” 1983 – Richard Hall “Zero Inventories” 1988 – Taiichi Ohno – “Toyota Production System” 1989 – Shigeo Shingo – “Study of the Toyota Production System”