1. Just-In-Time and Lean Production

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

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

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 1.Flexible resources 2.Cellular layouts 3.Pull production system 4.Kanban production control 5.Small-lot production 6.Quick setups 7.Uniform production levels 8.Quality at the source 9.Total productive maintenance 10.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 continuous process improvement as the level of the water lowers, new problems or inefficiencies are identified

8. Waste in Operations

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

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

13. A Sample Kanban

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

15. Determining Number of Kanbans 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 No. of Kanbans = average demand during lead time + safety stock container size N = dL + S C

16. 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 Round up to 4 (to allow some slack) or down to 3 (to force improvement) N= = = = 3.3 kanbans or containers dL + S C (150 x 0.5) + 7.5 25 75 + 7.5 25

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

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

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

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

21. Visual Control

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

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

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

25. Goals of JIT 1.Reduced inventory - where? 2.Improved quality 3.Lower costs 4.Reduced space requirements 5.Shorter lead time 6.Increased productivity 7.Greater flexibility 8.Better relations with suppliers 9.Simplified scheduling and control activities 10.Increased capacity 11.Better use of human resources 12.More product variety 13.Continuous Process Improvement

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

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

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

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

30. 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

31. 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.

32. 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

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

34. Reverse Logistics - New Problem? Sherman Montgomery Ward’s - 1894 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

35. Key Dates in Reverse Logistics World War II – the advent of refurbished automobile parts due to shortages 1984 - Tylenol Scare - Johnson and Johnson 1991 - German ordinance that put teeth in environmental reverse pipeline Summer 1996 – UK Packaging and Packaging Waste Legislation 1998 - 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

36. Reverse Logistics A US Army Perspective

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

38. 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.

39. 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.”

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

41. From GAO Audit Report

42. Reverse Logistics The Commercial Perspective

44. Commercial Definition  Anytime money is taken from a company reserves to support a product that has already shipped is a reverse logistics operation. - Reverse Logistics Association  Apparel and Catalog sales - ~35 %  Nokia call center operations - $1.3 bn

45. Recalls and Reverse Logistics Brand Damage – Toyota resale value 4+ million vehicles recalled by Toyota Mattel recall PCA recall

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

47. 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.

48. 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 2003 - returns = 4 Days of Supply for all of Wal-Mart = 2000 Containers PalmOne - 25% return rate on PDAs

49. More Costs Hoover - $40 Million per year Cost of processing $85 per item Unnamed Distribution Company - $700K items on reverse auction 2001 - over $60 billion in returns; $52 billion excess to systems; $40 billion to process

50. Is it a problem? Estimate of 2004 holiday returns: $13.2 billion % of estimated 2004/2005 holiday returns: 25% At 25% - returns for 2009 ~ $117 billion 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

51. 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

52. 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

53. 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

54. 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.

55. 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 200-300%. Typically, as many as 8-12 more steps per item in the reverse pipeline than items in the forward pipeline

56. “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”

57. Wireless Industry Returns 1.1 billion handsets produced in 2009 4.4 bn subscribers worldwide 4% of handsets fail – average cost per phone to OEMs = $90 176 mm failed phones in 2009 – Less than ½ insured

58. Returns importance 85% of customers will not buy 95% will return

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

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

61. Next Week No class – 22 Jul 29 Jul: Resource Planning, Scheduling, Quality Take Home Final Exam to be posted by this weekend – due by Friday, 30 Jul Harley paper due by Friday, 30 Jul