Transcript Chapter 15
Just-In-Time and
Lean Production
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
What is JIT ?
Producing only what is needed,
when it is needed
A philosophy
An integrated management system
JIT’s mandate:
Eliminate all waste
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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Basic Elements of JIT
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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
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
Other Important Points
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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
Waste in Operations
Waste in Operations
Waste in Operations
Flexible Resources
Multifunctional workers
General purpose machines
Study operators & improve
operations
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
A Sample Kanban
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
Determining Number of Kanbans
average demand during lead time + safety stock
No. of Kanbans =
container size
dL + S
N =
C
where
N
d
L
S
C
= number of kanbans or containers
= average demand over some time period
= lead time to replenish an order
= safety stock
= container size
Determining the Number of
Kanbans
d
L
S
C
= 150 bottles per hour
= 30 minutes = 0.5 hours
= 0.10(150 x 0.5) = 7.5
= 25 bottles
(150 x 0.5) + 7.5
dL + S
N=
=
25
C
75 + 7.5
=
= 3.3 kanbans or containers
25
Round up to 4 (to allow some slack) or
down to 3 (to force improvement)
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
Common Techniques for Reducing
Setup Time
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Preset Buttons/settings
Quick fasteners
Reduce tool requirements
Locator pins
Guides to prevent misalignment
Standardization
Easier movement
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)
Visual Control
In use at Harley-Davidson
and at Opal Plant - Russelsheim
Visual Control
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
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
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
Goals of JIT
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Reduced inventory where?
Improved quality
Lower costs
Reduced space
requirements
Shorter lead time
Increased
productivity
Greater flexibility
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Better relations with
suppliers
Simplified scheduling
and control activities
Increased capacity
Better use of human
resources
More product variety
Continuous Process
Improvement
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-inCase inventory
Reverse Logistics:
Important or Irritant?
Estimated $100 billion industry in 2006
“In an ideal world,
reverse logistics would not exist.”
Jim Whalen, “In Through the Out Door,”
Warehousing Management, March 2001
“Now, more than ever,
reverse logistics is seen
as being important.”
Dale Rogers, Going Backwards, 1999
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
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.
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
Why Reverse Logistics?
• Competitive advantage
• Customer service
- Very Important: 57%
- Important: 18%
- Somewhat/unimportant:23%
• Bottom line profits
Reverse Logistics - New Problem?
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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
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
Reverse Logistics
A US Army Perspective
Operation Iraqi Freedom
The US Army moved the equivalent of
150 Wal-Mart Supercenters to Kuwait in
a matter of a few months
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.
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.”
Does this create a problem?
From GAO Audit Report
From GAO Audit Report
Reverse Logistics
The Commercial Perspective
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
Recalls and Reverse Logistics
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Brand Damage – Toyota resale value
4+ million vehicles recalled by Toyota
Mattel recall
PCA recall
Reverse Logistics
• Rate of returns?
• Cost to process a return?
• Time to get the item back on the shelf if
resaleable?
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.
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
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
Is it a problem?
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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
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
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
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
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.
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
“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”
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
Returns importance
• 85% of customers will not buy
• 95% will return
RFID and Returns
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Visibility Tracking
Component tracking
Data Warehouse on what, why, when
Altered products
Not for every product
Impacts of Reverse Logistics
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Forecasting
Carrying costs
Processing costs
Warehousing
Distribution
Transportation
Personnel
Marketing
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