Operations Management (MD021)

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Operations Management(MD021)

• JIT and Lean Operations

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Agenda

• Basics of JIT
• Building Blocks
• Suppliers and Vendor Relationships
• Converting to a JIT System

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Just In Time (JIT) Lean Production
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JIT/Lean Production in Manufacturing

• Just-in-time (JIT)
• A highly coordinated processing system in which
  goods move through the system, and services are
  performed, just as they are needed
• JIT ? ? lean production
• JIT ? pull (demand) system
• JIT operates with very little fat

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JIT in Services

• The basic goal of the demand flow technology in
  the service organization is to provide optimum
  response to the customer with the highest
  quality service and lowest possible cost.
• Eliminate disruptions
• Make system flexible
• Reduce setup and lead times
• Eliminate waste
• Minimize WIP
• Simplify the process

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JIT PhilosophiesBig JIT vs. Little JIT

• Big JIT broad focus (work with suppliers)
• Vendor relations
• Human relations
• Technology management
• Materials and inventory management
• Little JIT narrow focus (within factory)
• Scheduling materials
• Scheduling services of production

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Comparison of Traditional (MRP) and JIT/Lean
Production
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Goals of JIT

• The ultimate goal of JIT is a balanced system.
• JIT philosophy attempts to achieve a smooth,
  rapid flow of materials and work through the
  system
• processing times as short as possible
• resources used the best way possible

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Goals of JIT

• Eliminate disruptions
• Make the production system flexible
• Eliminate waste, especially excess inventory
• Focus on good quality management practices,
  again, eliminating waste
• Simplify the process

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JIT attempts to eliminate sources of waste

• Overproduction
• Waiting time
• Unnecessary transportation
• Processing waste
• Inefficient work methods
• Product defects

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Benefits of JIT Systems

• Reduced inventory levels
• High quality
• Flexibility
• Reduced lead times
• Increased productivity

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Benefits of JIT Systems

• Increased equipment utilization
• Reduced scrap and rework
• Reduced space requirements
• Pressure for good vendor relationships
• Reduced need for indirect labor

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Building Blocks of JIT
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JIT Goals and Building Blocks
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JIT Building Blocks

• Product design
• Process design
• Personnel/organizationalelements
• Manufacturing planning and control

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Product Design

• Standard parts
• Modular design standard components
• Highly capable production systems
• High quality products
• Concurrent engineering
• Engineering and manufacturing must work together
  early in design phase

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Process Design

• Small lot sizes
• Setup time reduction
• Manufacturing cells
• Limited work in process
• Quality improvement
• Production flexibility
• Little inventory storage

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Small lot sizes provide more flexibility to
respond to customer demand
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Process DesignBenefits of Small Lot Sizes
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Process DesignProduction Flexibility

• Reduce downtime by reducing changeover time
• Use preventive maintenance to reduce breakdowns
• Cross-train workers to help clear bottlenecks
• Use many small units of capacity
• Use off-line buffers
• Reserve capacity for important customers

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Low inventory of JIT helps to identify quality
problems
High inventory levels hide quality problems
Remove high inventory levels and quality
problems are exposed
Reduce inventory even further to identify next
set of quality problems
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Process DesignQuality Improvement

• Autonomation (Jidoka)
• Automatic detection of defects during production
• Detect defects as they occur
• Stop production to correct the cause of the
  defects

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Personnel/Organizational Elements

• Workers viewed as assets
• We want them to be well trained and motivated to
  do well
• Cross-trained workers
• Can perform several tasks/operate several
  machines within a process
• Adds system flexibility
• Continuous improvement
• Workers have great responsibility for quality
• Cost accounting
• Leadership/project management

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Manufacturing Planning Control

• MPS provides level capacity loading
• Pull systems orientation
• Visual systems to control inventory replenishment
• Kanban cards
• Close vendor relationships
• Reduced transaction processing
• Preventive maintenance

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Manufacturing Planning ControlPull/Push Systems

• Pull system
• System for moving work where a workstation pulls
  output from the preceding station as needed.
  (e.g. Kanban)
• Push system
• System for moving work where output is pushed to
  the next station as it is completed

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Manufacturing Planning Control Kanban
Production Control

• Kanban
• Card or other device that communicates demand for
  work or materials from the preceding station
• Kanban is the Japanese word meaning signal or
  visible record
• Paperless production control system
• Authority to pull, or produce comes from a
  downstream process.

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Manufacturing Planning Control Kanban Card
Formula
N Total number of containers D Planned usage
rate of using work center T Average waiting
time for replenishment of parts plus
average production time for a container of
parts X Policy variable set by management
- possible inefficiency in the system C
Capacity of a standard container
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Example Calculation of Kanbans

• A line manager has an assembly station with the
  following characteristics
• Assemblies are used at a rate of 20 units/hour
• Each container holds 10 assemblies
• Each container has a 30 minute cycle time
• Inefficiency factor of 0.20

• D 20 units/hour
• T 0.5 hours
• X 0.2
• C 10 units
• N 20(0.5)(1.2)/(10) 1.2 (or 2 containers)

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Suppliers and Vendor Relationships
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Supplier management is critical for successful JIT

• Good relationships with suppliers are critical
  for JIT to work well
• Suppliers usually need to be located nearby
• facilitates delivery on a daily/hourly basis
• minimizes transportation distance/cost
• Suppliers need to align the capabilities of their
  production systems with the needs of
  manufacturers JIT system

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Some suppliers view the responsibilities of JIT
as a burden

• Who gets caught holding the bag?
• Suppliers must build plant nearby customers
  factory
• Suppliers have to build flexibility into their
  system aligned with customers processing needs
• Suppliers have to hold inventory to buffer
  manufacturers production
• Burden of ensuring quality shifts to supplier
• Suppliers have to conform to buyers frequent
  delivery schedule
• JIT works best if supplier works with only one
  buyer
• Risk single customer will demand cost cuts
• Risk if single customer goes out of business,
  you have 0 customers

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JIT doesnt work well in traditional supplier
network, since buyer tries to gain advantages
Buyer played suppliers against one another,
forced suppliers to compete on price
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JIT works better with long-term relationships
tiered supplier networks
First Tier Supplier
Second Tier Supplier
Third Tier Supplier
Stable relationships with a smaller set of
suppliers refocuses companies on high quality,
flexibility, delivery, and solving problems
together
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JIT II

• JIT II
• A supplier representative works right in the
  companys plant, making sure there is an
  appropriate supply on hand.

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Converting to JIT Systems
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JIT/Lean is NOT for Everyone

• JIT needs to be matched with each companys
  situation
• Mainly useful for repetitive systems
• JIT more than likely will not work well in
  companies having the following
• Uncooperative workers, management, and/or vendors
• Non-repetitive (custom) production

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Obstacles to Conversion

• Management may not be committed
• Workers/management may not be cooperative
• Suppliers may resist
• Why?

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Transitioning to a JIT System

• Get top management commitment
• Decide which parts need most effort
• Obtain support of workers
• Start by trying to reduce setup times
• Gradually convert operations
• Convert suppliers to JIT
• Prepare for obstacles