Just-In-Time and Lean Production

1

• 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
• JITs 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
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

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
9
Waste in Operations
10
Waste in Operations
11
Flexible Resources

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

12
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

13
A Sample Kanban
14
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

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
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
N
3.3 kanbans or containers
Round up to 4 (to allow some slack) or down to 3
(to force improvement)
17
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

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
• 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)

20
Visual Control
In use at Harley-Davidson and at Opal Plant -
Russelsheim
21
Visual Control
22
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

23
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

24
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

25
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

26
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

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 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

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/unimportant23
• Bottom line profits

34
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

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
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.
40
Does this create a problem?
From GAO Audit Report
41
From GAO Audit Report
42
Reverse Logistics

• The Commercial Perspective

43
(No Transcript)
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 (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

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