1. Just-In-Time and Lean Production
Chapter 15
Just-In-Time and Lean Production

2. JIT In Services Competition on speed & quality
Multifunctional department store workers
Work cells at fast-food restaurants
Just-in-time publishing for textbooks - on demand publishing a growing industry
Construction firms receiving material just as needed

3. What is JIT ? Producing only what is needed, when it is needed
A philosophy
An integrated management system
JIT’s mandate: Eliminate all waste

4. Lean Operations: Best Implementation is Toyota Production System
TPS is a production management system that aims for the “ideal” through continuous improvement
Includes, but goes way beyond JIT. Pillars:
Synchronization
Reduce transfer batch sizes
Level load production
Pull production control systems (vs. push): Kanban
Quality at source
Layout: Cellular operations
Continuous Improvement (Kaizen): through visibility & empowerment
....

5. Basic Elements of JIT Flexible resources Cellular layouts
Pull production system
Kanban production control
Small-lot production
Quick setups
Uniform production levels
Quality at the source
Total productive maintenance
Supplier networks

6. Toyota’s waste elimination in Operations
1. Overproduction
2. Waiting
3. Inessential handling
4. Non-value adding processing
5. Inventory in excess of immediate needs
6. Inessential motion
7. Correction necessitated by defects

7. Other Important Points
Only make what you need
only buy what you need,when you need it
SMED – single minute exchange of dies
continuous process improvement
as the level of the water lowers, new problems or inefficiencies are identified

8. Reducing waste: Increase Problem Visibility
Reducing waste: Increase Problem Visibility Lower the Water to Expose the Rocks
Scrap &
Rework
Missed Due Dates
Too Much Space
Late Deliveries
Poor Quality
Machine Downtime
Engineering Change Orders
Long queues
Too much paperwork
100% inspection
Inventory

9. Waste in Operations

10. Waste in Operations

11. Waste in Operations

12. Flexible Resources Multifunctional workers General purpose machines
Study operators & improve operations

13. The Push System
Pre-planned issues of supplies/merchandise regardless of customer demand criteria
Creates excess and shortages
not efficient over the long run

14. The Pull System Material is pulled through the system when needed
Reversal of traditional push system where material is pushed according to a schedule
Forces cooperation
Prevent over and underproduction

15. Kanban Production Control System
Kanban card indicates standard quantity of production
Derived from two-bin inventory system
Kanban maintains discipline of pull production
Production kanban authorizes production
Withdrawal kanban authorizes movement of goods

16. A Sample Kanban

17. The Origin of Kanban
a) Two-bin inventory system b) Kanban inventory system
Reorder
card
Bin 1
Bin 2
Q - R
Kanban R
Q = order quantity
R = reorder point - demand during lead time

18. Types of Kanbans

19. Types of Kanbans

20. Types of Kanbans Bin Kanban - when bin is empty replenish
Kanban Square
Marked area designed to hold items
Signal Kanban
Triangular kanban used to signal production at the previous workstation
Material Kanban
Used to order material in advance of a process
Supplier Kanbans
Rotate between the factory and suppliers

21. Determining Number of Kanbans
No. of Kanbans =
average demand during lead time + safety stock
container size
N =
dL + S C
where
N = number of kanbans or containers
d = average demand over some time period
L = lead time to replenish an order
S = safety stock
C = container size

22. Determining the Number of Kanbans
d = 150 bottles per hour
L = 30 minutes = 0.5 hours
S = 0.10(150 x 0.5) = 7.5
C = 25 bottles
(150 x 0.5) + 7.5 25
dL + S C
N = =
= = 3.3 kanbans or containers 25
Round up to 4 (to allow some slack) or down to 3 (to force improvement)

23. Small-Lot Production Requires less space & capital investment
In theory:
Requires less space & capital investment
Moves processes closer together
Makes quality problems easier to detect
Makes processes more dependent on each other

24. Components of Lead Time
Processing time
Reduce number of items or improve efficiency
Move time
Reduce distances, simplify movements, standardize routings
Waiting time
Better scheduling, sufficient capacity
Setup time
Generally the biggest bottleneck

25. SMED Principles Separate internal setup from external setup
Convert internal setup to external setup
Streamline all aspects of setup
Perform setup activities in parallel or eliminate them entirely

26. Common Techniques for Reducing Setup Time
Preset Buttons/settings
Quick fasteners
Reduce tool requirements
Locator pins
Guides to prevent misalignment
Standardization
Easier movement

27. Uniform Production Results from smoothing production requirements
Kanban systems can handle +/- 10% demand changes
Smooths demand across planning horizon
Mixed-model assembly steadies component production

28. Quality at the Source Jidoka is authority to stop production line
Andon lights signal quality problems
Undercapacity scheduling allows for planning, problem solving & maintenance
Visual control makes problems visible
Poka-yoke prevents defects (mistake proof the system)

29. Visual Control

30. Visual Control In use at Harley-Davidson
and at Opal Plant - Russelsheim

31. Visual Control

32. Kaizen Continuous improvement Requires total employment involvement
Essence of JIT is willingness of workers to
Spot quality problems
Halt production when necessary
Generate ideas for improvement
Analyze problems
Perform different functions

33. Total Productive Maintenance (TPM)
Commercial industry answer to PMCS
Breakdown maintenance
Repairs to make failed machine operational
Preventive maintenance
System of periodic inspection & maintenance to keep machines operating
TPM combines preventive maintenance & total quality concepts

34. TPM Requires Management to:
Design products that can be easily produced on existing machines
Design machines for easier operation, changeover, maintenance
Train & retrain workers to operate machines
Purchase machines that maximize productive potential
Design preventive maintenance plan spanning life of machine

35. Supplier Policies Locate near to the customer
Use small, side loaded trucks and ship mixed loads
Consider establishing small warehouses near to the customer or consolidating warehouses with other suppliers
Use standardized containers and make deliveries according to a precise delivery schedule (preferably reusable, standard size containers)
Become a certified supplier and accept payment at regular intervals rather than upon delivery

36. Goals of JIT Reduced inventory - where? Improved quality Lower costs
Reduced space requirements
Shorter lead time
Increased productivity
Greater flexibility
Better relations with suppliers
Simplified scheduling and control activities
Increased capacity
Better use of human resources
More product variety
Continuous Process Improvement

37. JIT Implementation Use JIT to finely tune an operating system
Somewhat different in USA than Japan
JIT is still evolving
JIT as an inventory reduction program isn’t for everyone - JIT as a CPI program is!
Some systems need Just-in- Case inventory

38. Reverse Logistics: Important or Irritant?
Estimated $100 billion industry in 2006

39. reverse logistics would not exist.”
“In an ideal world,
reverse logistics would not exist.”
Jim Whalen, “In Through the Out Door,”
Warehousing Management, March 2001

40. reverse logistics is seen
“Now, more than ever,
reverse logistics is seen
as being important.”
Dale Rogers, Going Backwards, 1999

41. Reverse Logistics - What is it? The Army’s Definition
The return of serviceable supplies that are surplus to the needs of the unit or are unserviceable and in need of rebuild or remanufacturing to return the item to a serviceable status

42. Reverse Logistics - What is it? The Commercial Perspective
Reverse Logistics is the process of moving products from their typical final destination to another point, for the purpose of capturing value otherwise unavailable, or for the proper disposal of the products.

43. Typical Reverse Logistics Activities
Processing returned merchandise - damaged, seasonal, restock, salvage, recall, or excess inventory
Recycling packaging materials/containers
Reconditioning, refurbishing, remanufacturing
Disposition of obsolete stuff
Hazmat recovery

44. Why Reverse Logistics?
Competitive advantage
Customer service
- Very Important: 57%
- Important: 18%
- Somewhat/unimportant:23%
Bottom line profits

45. Reverse Logistics - New Problem?
Sherman
Montgomery Ward’s
Recycling/remanufacturing in 1940s
World War II - 77,000,000 square feet of storage across Europe with over $6.3 billion in excess stuff
Salvage and reuse of clothing and shoes in the Pacific Theater World War II

46. Key Dates in Reverse Logistics
World War II – the advent of refurbished automobile parts due to shortages
Tylenol Scare - Johnson and Johnson
German ordinance that put teeth in environmental reverse pipeline
Summer 1996 – UK Packaging and Packaging Waste Legislation
first real study of reverse logistics in the US - University of Nevada, Reno
2001 – EU goal of 50-65% recovering or recycling of packaging waste

47. Reverse Logistics
A US Army Perspective

48. Operation Iraqi Freedom
The US Army moved the equivalent of 150 Wal-Mart Supercenters to Kuwait in a matter of a few months

49. Military Operations and Excess
“In battle, troops get temperamental and ask for things which they really do not need. However, where humanly possible, their requests, no matter how unreasonable, should be answered.” George S. Patton, Jr.

50. Jane’s Defence Weekly “Recent report (Aug 2003):
There is a 40 hectare (~100 acres)
area in Kuwait with items waiting
to be retrograded back to the US.”

51. Does this create a problem?
From GAO Audit Report

52. From GAO Audit Report

53. The Commercial Perspective
Reverse Logistics
The Commercial Perspective

57. Reverse Logistics Rate of returns? Cost to process a return?
Time to get the item back on the shelf if resaleable?

58. Costs - above the cost of the item
Merchandise credits to the customers.
The transportation costs of moving the items from the retail stores to the central returns distribution center.
The repackaging of the serviceable items for resale.
The cost of warehousing the items awaiting disposition.
The cost of disposing of items that are unserviceable, damaged, or obsolete.

59. Process inbound shipment at a major distribution center = 1.1 days
Costs
Process inbound shipment at a major distribution center = 1.1 days
Process inbound return shipment = 8.5 days
Cost of lost sales
Wal-Mart: Christmas returns = 4 Days of Supply for all of Wal-Mart = 2000 Containers
PalmOne - 25% return rate on PDAs

60. More Costs
Hoover - $40 Million per year
Cost of processing $85 per item
Unnamed Distribution Company - $700K items on reverse auction
over $60 billion in returns; $52 billion excess to systems; $40 billion to process

61. Is it a problem? Estimate of 2004 holiday returns: $13.2 billion
% of estimated 2004/2005 holiday returns: 25%
Wal-Mart: $6 Billion in annual returns = 17,000 truck loads (>46 trucks a day)
Electronics: $10 Billion annually in returns
Personal Computers: $1.5 Billion annually = approximately $95 per PC sold
79% of returned PCs have no defects
Home Depot ~ $10 million in returns in the stores alone
Local Wal-Mart ~ $1 million a month in returns

62. Is it a Problem? European influence – spread to US - Green Laws
Estee Lauder - $60 million a year into land fills
FORTUNE 500 Company - $200 million over their $300 million budget for returns
Same Provider - 40,000 products returned per month; 55% no faults noted
K-Mart - $980 million in returns 1999
Warranty vice paid repairs

63. More consequences
Increased Customer Wait Times
Loss of Confidence in the Supply System
Multiple orders for the same items
Excess supplies in the forward pipeline
Increase in “stuff” in the reverse pipeline
Constipated supply chain

64. Impact?
Every resaleable item that is in the reverse supply chain results in a potential stock out or “zero balance” at the next level of supply.
Creates a “stockout” do-loop

65. Results?
This potential for a stock out results in additional parts on the shelves at each location to prevent a stock out from occurring.
More stocks = “larger logistics footprint” = the need for larger distribution centers and returns centers.

66. Dawes’ Six Symptoms of a Problem
Dr. Richard Dawes, University of San Francisco
1. Returned merchandise or supplies arrive faster than they are processed or disposed of.
2. There are large amounts of returned inventory held in the distribution center or warehouse.
3. There are unidentified or unauthorized returns.
4. There is a lengthy processing cycle time for returned goods.

67. Six Symptoms (Continued)
5. The total cost of the returns process is unknown.
6. Customers lose confidence in the repair activities.

68. Reverse Logistics
reverse logistics is: The process of planning, implementing, and controlling
the efficient, cost effective flow of raw materials, in-process inventory,
finished goods and related information from the point of consumption to the point
of origin for the purpose of recapturing value or proper disposal. More precisely,
reverse logistics is the process of moving goods from their typical final destination
for the purpose of capturing value, or proper disposal. Remanufacturing and
refurbishing activities also may be included in the definition of reverse logistics.
Reverse logistics is more than reusing containers and recycling packaging
materials. It includes redesigning packaging to use less material, or reducing
the energy and pollution from transportation are important activities.

69. Reverse Logistics
For "industrial equipment" the return rate is over 8% and the total revenue impacted by returns is $105.6 billion in 2005, in just the U.S. alone.
For computers and network equipment, the return rate reaches as high as 20%, for a 2005 total of $65.8 billion, up from $61.4 billion in 2004.

70. Reverse Logistics
According to the Reverse Logistics Executive Council, the percent increase in costs for processing a return, as compared to a forward sale, is an astounding %.
“In the U.S. alone, the cost is an annual $100 billion.” Forbes, March 2005
Typically, as many as 8-12 more steps per item in the reverse pipeline than items in the forward pipeline

71. “The truth is, for one reason or another,
materials do come back and it is up to
those involved in the warehouse to
effectively recover as much of the cost for
these items as possible.”
- Whalen, “In Through the Out Door”

72. RFID and Returns
Visibility Tracking
Component tracking
Data Warehouse on what, why, when
Altered products
Not for every product

73. Impacts of Reverse Logistics
Forecasting
Carrying costs
Processing costs
Warehousing
Distribution
Transportation
Personnel
Marketing

74. Upcoming
Chapters 14, 16, 4
4 May – no class