Just-In-Time and Lean Production

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Chapter 15

• Just-In-Time and Lean Production

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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

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What is JIT ?

• Producing only what is needed, when it is needed
• A philosophy
• An integrated management system
• JITs mandate Eliminate all waste

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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

....
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Toyotas 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

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Waste in Operations
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Waste in Operations
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Waste in Operations
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Flexible Resources

• Multifunctional workers
• General purpose machines
• Study operators improve operations

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The Push System

• Pre-planned issues of supplies/merchandise
  regardless of customer demand criteria
• Creates excess and shortages
• not efficient over the long run

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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

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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

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A Sample Kanban
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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

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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

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Common Techniques for Reducing Setup Time

• Preset Buttons/settings
• Quick fasteners
• Reduce tool requirements
• Locator pins
• Guides to prevent misalignment
• Standardization
• Easier movement

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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

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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)

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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

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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

1. Better relations with suppliers
2. Simplified scheduling and control activities
3. Increased capacity
4. Better use of human resources
5. More product variety
6. Continuous Process Improvement

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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 isnt for
  everyone - JIT as a CPI program is!
• Some systems need Just-in-Case inventory

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Reverse Logistics Important or Irritant?
Estimated 100 billion industry in 2006 Survey
shows considerable spending on Returns
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In an ideal world, reverse logistics would not
exist.
Jim Whalen, In Through the Out
Door, Warehousing Management, March 2001
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Now, more than ever, reverse logistics is seen
as being important.
Dale Rogers, Going Backwards, 1999
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Reverse Logistics - What is it?The Armys
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

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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.
• Any activity that takes money from the company
  after the sale of the product

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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

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Why Reverse Logistics?

• Competitive advantage
• Customer service
• - Very Important 57
• - Important 18
• - Somewhat/unimportant23
• Bottom line profits

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Reverse Logistics - New Problem?

• Sherman
• Montgomery Wards - 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

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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

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Reverse Logistics

• A US Army Perspective

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Operation Iraqi Freedom

• The US Army moved the equivalent of 150
  Wal-Mart Supercenters to Kuwait in a matter of a
  few months

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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.

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Janes 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.
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Does this create a problem?
From GAO Audit Report
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From GAO Audit Report
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Reverse Logistics

• The Commercial Perspective

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Reverse Logistics

• Rate of returns?
• Cost to process a return?
• Time to get the item back on the shelf if
  resaleable?

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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.

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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

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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
• 2010 majority of cell phones -

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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 (gt46 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

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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

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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

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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

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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.

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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

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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
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RFID and Returns

• Visibility Tracking
• Component tracking
• Data Warehouse on what, why, when
• Altered products
• Not for every product

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Impacts of Reverse Logistics

• Forecasting
• Carrying costs
• Processing costs
• Warehousing
• Distribution
• Transportation
• Personnel
• Marketing

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Next Week

• Next Week Resource Planning, Capacity Planning,
  Quality, Supply Chain Security
• Following week final exam take home, group
  presentations