Just In Time from Heizer Book

1. © 2008 Prentice Hall, Inc. 16 – 1
Operations
Management
Chapter 16 –Chapter 16 –
JIT and LeanJIT and Lean
OperationsOperations
PowerPoint presentation to accompanyPowerPoint presentation to accompany
Heizer/RenderHeizer/Render
Principles of Operations Management, 7ePrinciples of Operations Management, 7e
Operations Management, 9eOperations Management, 9e

2. © 2008 Prentice Hall, Inc. 16 – 2
OutlineOutline
 Global Company Profile:Global Company Profile:
Toyota Motor CorporationToyota Motor Corporation
 Just-in-Time, the ToyotaJust-in-Time, the Toyota
Production System, and LeanProduction System, and Lean
OperationsOperations
 Eliminate WasteEliminate Waste
 Remove VariabilityRemove Variability
 Improve ThroughputImprove Throughput

3. © 2008 Prentice Hall, Inc. 16 – 3
Outline – ContinuedOutline – Continued
 Just-in-TimeJust-in-Time
 JIT PartnershipsJIT Partnerships
 Concerns of SuppliersConcerns of Suppliers
 JIT LayoutJIT Layout
 Distance ReductionDistance Reduction
 Increased FlexibilityIncreased Flexibility
 Impact on EmployeesImpact on Employees
 Reduced Space and InventoryReduced Space and Inventory

4. © 2008 Prentice Hall, Inc. 16 – 4
Outline – ContinuedOutline – Continued
 JIT InventoryJIT Inventory
 Reduce VariabilityReduce Variability
 Reduce InventoryReduce Inventory
 Reduce Lot SizesReduce Lot Sizes
 Reduce Setup CostsReduce Setup Costs
 JIT SchedulingJIT Scheduling
 Level SchedulesLevel Schedules
 KanbanKanban

5. © 2008 Prentice Hall, Inc. 16 – 5
Outline – ContinuedOutline – Continued
 JIT QualityJIT Quality
 Toyota Production SystemToyota Production System
 Continuous ImprovementContinuous Improvement
 Respect for PeopleRespect for People
 Standard Work PracticesStandard Work Practices
 Lean OperationsLean Operations
 Building a Lean OrganizationBuilding a Lean Organization
 Lean Operations in ServicesLean Operations in Services

6. © 2008 Prentice Hall, Inc. 16 – 6
Learning ObjectivesLearning Objectives
When you complete this chapter youWhen you complete this chapter you
should be able to:should be able to:
1.1. Define just-in-time, TPS, and leanDefine just-in-time, TPS, and lean
operationsoperations
2.2. Define the seven wastes and theDefine the seven wastes and the
5 Ss5 Ss
3.3. Explain JIT partnershipsExplain JIT partnerships
4.4. Determine optimal setup timeDetermine optimal setup time

7. © 2008 Prentice Hall, Inc. 16 – 7
Learning ObjectivesLearning Objectives
When you complete this chapter youWhen you complete this chapter you
should be able to:should be able to:
5.5. Define kanbanDefine kanban
6.6. Compute the required number ofCompute the required number of
kanbanskanbans
7.7. Explain the principles of the ToyotaExplain the principles of the Toyota
Production SystemProduction System

8. © 2008 Prentice Hall, Inc. 16 – 8
Toyota Motor CorporationToyota Motor Corporation
 Largest vehicle manufacturer in theLargest vehicle manufacturer in the
world with annual sales of over 9world with annual sales of over 9
million vehiclesmillion vehicles
 Success due to two techniques, JITSuccess due to two techniques, JIT
and TPSand TPS
 Continual problem solving is centralContinual problem solving is central
to JITto JIT
 Eliminating excess inventory makesEliminating excess inventory makes
problems immediately evidentproblems immediately evident

9. © 2008 Prentice Hall, Inc. 16 – 9
Toyota Motor CorporationToyota Motor Corporation
 Central to TPS is a continuing effortCentral to TPS is a continuing effort
to produce products under idealto produce products under ideal
conditionsconditions
 Respect for people is fundamentalRespect for people is fundamental
 Small building but high levels ofSmall building but high levels of
productionproduction
 Subassemblies are transferred to theSubassemblies are transferred to the
assembly line on a JIT basisassembly line on a JIT basis
 High quality and low assembly timeHigh quality and low assembly time
per vehicleper vehicle

10. © 2008 Prentice Hall, Inc. 16 – 10
Just-In-Time, TPS, andJust-In-Time, TPS, and
Lean OperationsLean Operations
 JIT is a philosophy of continuous andJIT is a philosophy of continuous and
forced problem solving via a focus onforced problem solving via a focus on
throughput and reduced inventorythroughput and reduced inventory
 TPS emphasizes continuousTPS emphasizes continuous
improvement, respect for people, andimprovement, respect for people, and
standard work practicesstandard work practices
 Lean production supplies theLean production supplies the
customer with their exact wants whencustomer with their exact wants when
the customer wants it without wastethe customer wants it without waste

11. © 2008 Prentice Hall, Inc. 16 – 11
Just-In-Time, TPS, andJust-In-Time, TPS, and
Lean OperationsLean Operations
 JIT emphasizes forced problemJIT emphasizes forced problem
solvingsolving
 TPS emphasizes employeeTPS emphasizes employee
learning and empowerment in anlearning and empowerment in an
assembly-line environmentassembly-line environment
 Lean operations emphasizeLean operations emphasize
understanding the customerunderstanding the customer

12. © 2008 Prentice Hall, Inc. 16 – 12
Eliminate WasteEliminate Waste
 Waste is anything that does notWaste is anything that does not
add value from the customer pointadd value from the customer point
of viewof view
 Storage, inspection, delay, waitingStorage, inspection, delay, waiting
in queues, and defective productsin queues, and defective products
do not add value and are 100%do not add value and are 100%
wastewaste

13. © 2008 Prentice Hall, Inc. 16 – 13
Ohno’s Seven WastesOhno’s Seven Wastes
 OverproductionOverproduction
 QueuesQueues
 TransportationTransportation
 InventoryInventory
 MotionMotion
 OverprocessingOverprocessing
 Defective productsDefective products

14. © 2008 Prentice Hall, Inc. 16 – 14
Eliminate WasteEliminate Waste
 Other resources such as energy,Other resources such as energy,
water, and air are often wastedwater, and air are often wasted
 Efficient, ethical, and sociallyEfficient, ethical, and socially
responsible production minimizesresponsible production minimizes
inputs, reduces wasteinputs, reduces waste
 Traditional “housekeeping” hasTraditional “housekeeping” has
been expanded to the 5 Ssbeen expanded to the 5 Ss

15. © 2008 Prentice Hall, Inc. 16 – 15
The 5 SsThe 5 Ss
 Sort/segregateSort/segregate – when in doubt,– when in doubt,
throw it outthrow it out
 Simplify/straightenSimplify/straighten – methods– methods
analysis toolsanalysis tools
 Shine/sweepShine/sweep – clean daily– clean daily
 StandardizeStandardize – remove variations– remove variations
from processesfrom processes
 Sustain/self-disciplineSustain/self-discipline – review work– review work
and recognize progressand recognize progress

16. © 2008 Prentice Hall, Inc. 16 – 16
The 5 SsThe 5 Ss
 Sort/segregateSort/segregate – when in doubt,– when in doubt,
throw it outthrow it out
 Simplify/straightenSimplify/straighten – methods– methods
analysis toolsanalysis tools
 Shine/sweepShine/sweep – clean daily– clean daily
 StandardizeStandardize – remove variations– remove variations
from processesfrom processes
 Sustain/self-disciplineSustain/self-discipline – review work– review work
and recognize progressand recognize progress
Two additional Ss
 Safety – build in good practices
 Support/maintenance – reduce
variability and unplanned
downtime

17. © 2008 Prentice Hall, Inc. 16 – 17
Remove VariabilityRemove Variability
 JIT systems require managers toJIT systems require managers to
reduce variability caused by bothreduce variability caused by both
internal and external factorsinternal and external factors
 Variability is any deviation from theVariability is any deviation from the
optimum processoptimum process
 Inventory hides variabilityInventory hides variability
 Less variability results in lessLess variability results in less
wastewaste

18. © 2008 Prentice Hall, Inc. 16 – 18
Sources of VariabilitySources of Variability
1.1. Incomplete or inaccurate drawingsIncomplete or inaccurate drawings
or specificationsor specifications
2.2. Poor production processesPoor production processes
resulting in incorrect quantities,resulting in incorrect quantities,
late, or non-conforming unitslate, or non-conforming units
3.3. Unknown customer demandsUnknown customer demands

19. © 2008 Prentice Hall, Inc. 16 – 19
Sources of VariabilitySources of Variability
1.1. Incomplete or inaccurate drawingsIncomplete or inaccurate drawings
or specificationsor specifications
2.2. Poor production processesPoor production processes
resulting in incorrect quantities,resulting in incorrect quantities,
late, or non-conforming unitslate, or non-conforming units
3.3. Unknown customer demandsUnknown customer demandsBoth JIT and inventory
reduction are effective tools
in identifying causes of
variability

20. © 2008 Prentice Hall, Inc. 16 – 20
Improve ThroughputImprove Throughput
 The time it takes to move anThe time it takes to move an
order from receipt to deliveryorder from receipt to delivery
 The time between the arrival ofThe time between the arrival of
raw materials and the shippingraw materials and the shipping
of the finished order is calledof the finished order is called
manufacturing cycle timemanufacturing cycle time
 A pull system increasesA pull system increases
throughputthroughput

21. © 2008 Prentice Hall, Inc. 16 – 21
Improve ThroughputImprove Throughput
 By pulling material in small lots,By pulling material in small lots,
inventory cushions are removed,inventory cushions are removed,
exposing problems and emphasizingexposing problems and emphasizing
continual improvementcontinual improvement
 Manufacturing cycle time is reducedManufacturing cycle time is reduced
 Push systems dump orders on thePush systems dump orders on the
downstream stations regardless ofdownstream stations regardless of
the needthe need

22. © 2008 Prentice Hall, Inc. 16 – 22
Just-In-Time (JIT)Just-In-Time (JIT)
• Powerful strategy for improving operationsPowerful strategy for improving operations
• Materials arrive where theyMaterials arrive where they
are needed when they areare needed when they are
neededneeded
• Identifying problems andIdentifying problems and
driving out waste reducesdriving out waste reduces
costs and variability andcosts and variability and
improves throughputimproves throughput
• Requires a meaningfulRequires a meaningful
buyer-supplier relationshipbuyer-supplier relationship

23. © 2008 Prentice Hall, Inc. 16 – 23
JIT and CompetitiveJIT and Competitive
AdvantageAdvantage
Figure 16.1Figure 16.1

24. © 2008 Prentice Hall, Inc. 16 – 24
JIT and CompetitiveJIT and Competitive
AdvantageAdvantage
Figure 16.1Figure 16.1

25. © 2008 Prentice Hall, Inc. 16 – 25
JIT PartnershipsJIT Partnerships
 JIT partnerships exist when aJIT partnerships exist when a
supplier and purchaser worksupplier and purchaser work
together to remove waste and drivetogether to remove waste and drive
down costsdown costs
 Four goals of JIT partnerships are:Four goals of JIT partnerships are:
 Removal of unnecessary activitiesRemoval of unnecessary activities
 Removal of in-plant inventoryRemoval of in-plant inventory
 Removal of in-transit inventoryRemoval of in-transit inventory
 Improved quality and reliabilityImproved quality and reliability

26. © 2008 Prentice Hall, Inc. 16 – 26
JIT PartnershipsJIT Partnerships
Figure 16.2Figure 16.2

27. © 2008 Prentice Hall, Inc. 16 – 27
Concerns of SuppliersConcerns of Suppliers
 DiversificationDiversification – ties to only one customer– ties to only one customer
increases riskincreases risk
 SchedulingScheduling – don’t believe customers can– don’t believe customers can
create a smooth schedulecreate a smooth schedule
 ChangesChanges – short lead times mean– short lead times mean
engineering or specification changes canengineering or specification changes can
create problemscreate problems
 QualityQuality – limited by capital budgets,– limited by capital budgets,
processes, or technologyprocesses, or technology
 Lot sizesLot sizes – small lot sizes may transfer– small lot sizes may transfer
costs to supplierscosts to suppliers

28. © 2008 Prentice Hall, Inc. 16 – 28
JIT LayoutJIT Layout
Table 16.1Table 16.1
Reduce waste due to movementReduce waste due to movement
JIT Layout TacticsJIT Layout Tactics
Build work cells for families of productsBuild work cells for families of products
Include a large number operations in a small areaInclude a large number operations in a small area
Minimize distanceMinimize distance
Design little space for inventoryDesign little space for inventory
Improve employee communicationImprove employee communication
Use poka-yoke devicesUse poka-yoke devices
Build flexible or movable equipmentBuild flexible or movable equipment
Cross-train workers to add flexibilityCross-train workers to add flexibility

29. © 2008 Prentice Hall, Inc. 16 – 29
Distance ReductionDistance Reduction
 Large lots and long productionLarge lots and long production
lines with single-purposelines with single-purpose
machinery are being replaced bymachinery are being replaced by
smaller flexible cellssmaller flexible cells
 Often U-shaped for shorter pathsOften U-shaped for shorter paths
and improved communicationand improved communication
 Often using group technologyOften using group technology
conceptsconcepts

30. © 2008 Prentice Hall, Inc. 16 – 30
Increased FlexibilityIncreased Flexibility
 Cells designed to be rearrangedCells designed to be rearranged
as volume or designs changeas volume or designs change
 Applicable in office environmentsApplicable in office environments
as well as production settingsas well as production settings
 Facilitates both product andFacilitates both product and
process improvementprocess improvement

31. © 2008 Prentice Hall, Inc. 16 – 31
Impact on EmployeesImpact on Employees
 Employees are cross trainedEmployees are cross trained
for flexibility and efficiencyfor flexibility and efficiency
 Improved communicationsImproved communications
facilitate the passing on offacilitate the passing on of
important information aboutimportant information about
the processthe process
 With little or no inventoryWith little or no inventory
buffer, getting it right the firstbuffer, getting it right the first
time is criticaltime is critical

32. © 2008 Prentice Hall, Inc. 16 – 32
Reduced Space andReduced Space and
InventoryInventory
 With reduced space, inventoryWith reduced space, inventory
must be in very small lotsmust be in very small lots
 Units are always moving becauseUnits are always moving because
there is no storagethere is no storage

33. © 2008 Prentice Hall, Inc. 16 – 33
InventoryInventory
Inventory is at the minimum levelInventory is at the minimum level
necessary to keep operations runningnecessary to keep operations running
JIT Inventory TacticsJIT Inventory Tactics
Use a pull system to move inventoryUse a pull system to move inventory
Reduce lot sizesReduce lot sizes
Develop just-in-time delivery systems with suppliersDevelop just-in-time delivery systems with suppliers
Deliver directly to point of useDeliver directly to point of use
Perform to schedulePerform to schedule
Reduce setup timeReduce setup time
Use group technologyUse group technology
Table 16.2Table 16.2

34. © 2008 Prentice Hall, Inc. 16 – 34
Reduce VariabilityReduce Variability
Inventory levelInventory level
Process
downtimeScrap
Setup
time
Late deliveries
Quality
problems
Figure 16.3Figure 16.3

35. © 2008 Prentice Hall, Inc. 16 – 35
InventoryInventory
levellevel
Reduce VariabilityReduce Variability
Scrap
Setup
time
Late deliveries
Quality
problems
Process
downtime
Figure 16.3Figure 16.3

36. © 2008 Prentice Hall, Inc. 16 – 36
Reduce Lot SizesReduce Lot Sizes
Figure 16.4Figure 16.4
200200 –
100100 –
InventoryInventory
TimeTime
QQ22 When average order sizeWhen average order size = 100= 100
average inventory isaverage inventory is 5050
QQ11 When average order sizeWhen average order size = 200= 200
average inventory isaverage inventory is 100100

37. © 2008 Prentice Hall, Inc. 16 – 37
Reduce Lot SizesReduce Lot Sizes
 Ideal situation is to have lot sizesIdeal situation is to have lot sizes
of one pulled from one process toof one pulled from one process to
the nextthe next
 Often not feasibleOften not feasible
 Can use EOQ analysis to calculateCan use EOQ analysis to calculate
desired setup timedesired setup time
 Two key changes necessaryTwo key changes necessary
 Improve material handlingImprove material handling
 Reduce setup timeReduce setup time

38. © 2008 Prentice Hall, Inc. 16 – 38
Lot Size ExampleLot Size Example
DD == Annual demandAnnual demand = 400,000= 400,000 unitsunits
dd == Daily demandDaily demand = 400,000/250 = 1,600= 400,000/250 = 1,600 per dayper day
pp == Daily production rateDaily production rate = 4,000= 4,000 unitsunits
QQ == EOQ desiredEOQ desired = 400= 400
HH == Holding costHolding cost = $20= $20 per unitper unit
SS == Setup cost (to be determined)Setup cost (to be determined)
Q =Q = 2DS2DS
HH(1 -(1 - d/pd/p))
QQ22
== 2DS2DS
HH(1 -(1 - d/pd/p))
SS = = = $2.40= = = $2.40
((QQ22
)()(HH)(1 -)(1 - d/pd/p))
22DD
(3,200,000)(0.6)(3,200,000)(0.6)
800,000800,000
Setup timeSetup time = $2.40/($30/= $2.40/($30/hourhour) = 0.08) = 0.08 hrhr = 4.8= 4.8 minutesminutes

39. © 2008 Prentice Hall, Inc. 16 – 39
Reduce Setup CostsReduce Setup Costs
 High setup costs encourage largeHigh setup costs encourage large
lot sizeslot sizes
 Reducing setup costs reduces lotReducing setup costs reduces lot
size and reduces averagesize and reduces average
inventoryinventory
 Setup time can be reduced throughSetup time can be reduced through
preparation prior to shutdown andpreparation prior to shutdown and
changeoverchangeover

40. © 2008 Prentice Hall, Inc. 16 – 40
Lower Setup CostsLower Setup Costs
Figure 16.5Figure 16.5
Sum of orderingSum of ordering
and holding costsand holding costs
Holding costHolding cost
Setup cost curvesSetup cost curves ((SS11, S, S22))
TT11
SS11
TT22
SS22
CostCost
Lot sizeLot size

41. © 2008 Prentice Hall, Inc. 16 – 41
Reduce Setup TimesReduce Setup Times
Figure 16.6Figure 16.6
Use one-touch system to eliminateUse one-touch system to eliminate
adjustments (save 10 minutes)adjustments (save 10 minutes)Step 4Step 4
Step 5Step 5
Training operators and standardizingTraining operators and standardizing
work procedures (save 2 minutes)work procedures (save 2 minutes)
Initial Setup Time
Step 2Step 2
Move material closer and
improve material handling
(save 20 minutes)
Step 1Step 1
Separate setup into preparation and actual
setup, doing as much as possible while the
machine/process is operating
(save 30 minutes)
Step 3Step 3
Standardize and
improve tooling
(save 15 minutes)
90 min —90 min —
60 min —60 min —
45 min —45 min —
25 min —25 min —
15 min —15 min —
13 min —13 min —
——Repeat cycle until subminuteRepeat cycle until subminute
setup is achievedsetup is achieved
Step 6Step 6

42. © 2008 Prentice Hall, Inc. 16 – 42
JIT SchedulingJIT Scheduling
 Schedules must be communicatedSchedules must be communicated
inside and outside the organizationinside and outside the organization
 Level schedulesLevel schedules
 Process frequent small batchesProcess frequent small batches
 Freezing the schedule helpsFreezing the schedule helps
stabilitystability
 KanbanKanban
 Signals used in a pull systemSignals used in a pull system

43. © 2008 Prentice Hall, Inc. 16 – 43
Table 16.3Table 16.3
Better scheduling improves performanceBetter scheduling improves performance
JIT Scheduling TacticsJIT Scheduling Tactics
Communicate schedules to suppliersCommunicate schedules to suppliers
Make level schedulesMake level schedules
Freeze part of the scheduleFreeze part of the schedule
Perform to schedulePerform to schedule
Seek one-piece-make and one-piece moveSeek one-piece-make and one-piece move
Eliminate wasteEliminate waste
Produce in small lotsProduce in small lots
Use kanbansUse kanbans
Make each operation produce a perfect partMake each operation produce a perfect part
JIT SchedulingJIT Scheduling

44. © 2008 Prentice Hall, Inc. 16 – 44
Level SchedulesLevel Schedules
 Process frequent small batchesProcess frequent small batches
rather than a few large batchesrather than a few large batches
 Make and move small lots so theMake and move small lots so the
level schedule is economicallevel schedule is economical
 ““Jelly bean” schedulingJelly bean” scheduling
 Freezing the schedule closest to theFreezing the schedule closest to the
due dates can improve performancedue dates can improve performance

45. © 2008 Prentice Hall, Inc. 16 – 45
Scheduling Small LotsScheduling Small Lots
AA BB CCAA AAAABB BB BB BB BB CC
JIT Level Material-Use ApproachJIT Level Material-Use Approach
AA CCAA AAAA BB BB BB BB BB CC CCBB BB BB BBAA AA
Large-Lot ApproachLarge-Lot Approach
TimeTime
Figure 16.7Figure 16.7

46. © 2008 Prentice Hall, Inc. 16 – 46
KanbanKanban
 Kanban is the Japanese word for cardKanban is the Japanese word for card
 The card is an authorization for the nextThe card is an authorization for the next
container of material to be producedcontainer of material to be produced
 A sequence of kanbansA sequence of kanbans
pulls material throughpulls material through
the processthe process
 Many different sorts ofMany different sorts of
signals are used, butsignals are used, but
the system is still calledthe system is still called
a kanbana kanban

47. © 2008 Prentice Hall, Inc. 16 – 47
KanbanKanban
1.1. User removes aUser removes a
standard sizedstandard sized
containercontainer
2.2. Signal is seen bySignal is seen by
the producingthe producing
department asdepartment as
authorization toauthorization to
replenishreplenish
Part numbersPart numbers
mark locationmark location
Signal markerSignal marker
on boxeson boxes
Figure 16.8Figure 16.8

48. © 2008 Prentice Hall, Inc. 16 – 48
KanbanKanban
Figure 16.9Figure 16.9
WorkWork
cellcell
RawRaw
MaterialMaterial
SupplierSupplier
KanbanKanban
PurchasedPurchased
PartsParts
SupplierSupplier
Sub-Sub-
assemblyassembly
ShipShip
KanbanKanban
KanbanKanban
KanbanKanban
KanbanKanban
FinishedFinished
goodsgoods
CustomerCustomer
orderorder
FinalFinal
assemblyassembly
KanbanKanban

49. © 2008 Prentice Hall, Inc. 16 – 49
More KanbanMore Kanban
 When the producer and user are not inWhen the producer and user are not in
visual contact, a card can be usedvisual contact, a card can be used
 When the producer and user are in visualWhen the producer and user are in visual
contact, a light or flag or empty spot oncontact, a light or flag or empty spot on
the floor may be adequatethe floor may be adequate
 Since severalSince several
components maycomponents may
be required,be required,
several differentseveral different
kanban techniqueskanban techniques
may be employedmay be employed

50. © 2008 Prentice Hall, Inc. 16 – 50
More KanbanMore Kanban
 Usually each card controls a specificUsually each card controls a specific
quantity or partsquantity or parts
 Multiple card systems may be used ifMultiple card systems may be used if
there are several components orthere are several components or
different lot sizesdifferent lot sizes
 In an MRP system, the schedule canIn an MRP system, the schedule can
be thought of as a build authorizationbe thought of as a build authorization
and the kanban a type of pull systemand the kanban a type of pull system
that initiates actual productionthat initiates actual production

51. © 2008 Prentice Hall, Inc. 16 – 51
More KanbanMore Kanban
 Kanban cards provide a direct controlKanban cards provide a direct control
and limit on the amount of work-in-and limit on the amount of work-in-
process between cellsprocess between cells
 If there is an immediate storage area, aIf there is an immediate storage area, a
two-card system can be used with onetwo-card system can be used with one
card circulating between the user andcard circulating between the user and
storage area and the other between thestorage area and the other between the
storage area and the producerstorage area and the producer

52. © 2008 Prentice Hall, Inc. 16 – 52
The Number of Kanban CardsThe Number of Kanban Cards
or Containersor Containers
 Need to know the lead time needed to
produce a container of parts
 Need to know the amount of safety
stock needed
Number of kanbansNumber of kanbans
(containers)(containers)
Demand duringDemand during SafetySafety
lead timelead time ++ stockstock
Size of containerSize of container
==

53. © 2008 Prentice Hall, Inc. 16 – 53
Number of Kanbans ExampleNumber of Kanbans Example
Daily demandDaily demand == 500500 cakescakes
Production lead timeProduction lead time == 22 daysdays
(Wait time +(Wait time +
Material handling time +Material handling time +
Processing time)Processing time)
Safety stockSafety stock == 1/21/2 dayday
Container sizeContainer size == 250250 cakescakes
Demand during lead timeDemand during lead time = 2= 2 daysdays x 500x 500 cakescakes = 1,000= 1,000
Number of kanbansNumber of kanbans = = 5= = 5
1,000 + 2501,000 + 250
250250

54. © 2008 Prentice Hall, Inc. 16 – 54
Advantages of KanbanAdvantages of Kanban
 Allow only limited amount of faulty orAllow only limited amount of faulty or
delayed materialdelayed material
 Problems are immediately evidentProblems are immediately evident
 Puts downward pressure on badPuts downward pressure on bad
aspects of inventoryaspects of inventory
 Standardized containers reduceStandardized containers reduce
weight, disposal costs, wasted space,weight, disposal costs, wasted space,
and laborand labor

55. © 2008 Prentice Hall, Inc. 16 – 55
QualityQuality
 Strong relationshipStrong relationship
 JIT cuts the cost of obtaining goodJIT cuts the cost of obtaining good
quality because JIT exposes poorquality because JIT exposes poor
qualityquality
 Because lead times are shorter,Because lead times are shorter,
quality problems are exposed soonerquality problems are exposed sooner
 Better quality means fewer buffersBetter quality means fewer buffers
and allows simpler JIT systems to beand allows simpler JIT systems to be
usedused

56. © 2008 Prentice Hall, Inc. 16 – 56
JIT Quality TacticsJIT Quality Tactics
Use statistical process controlUse statistical process control
Empower employeesEmpower employees
Build fail-safe methods (poka-Build fail-safe methods (poka-
yoke, checklists, etc.)yoke, checklists, etc.)
Expose poor quality with smallExpose poor quality with small
lot JITlot JIT
Provide immediate feedbackProvide immediate feedback
Table 16.4Table 16.4

57. © 2008 Prentice Hall, Inc. 16 – 57
Toyota Production SystemToyota Production System
 Continuous improvementContinuous improvement
 Build an organizational culture and valueBuild an organizational culture and value
system that stresses improvement of allsystem that stresses improvement of all
processesprocesses
 Part of everyone’s jobPart of everyone’s job
 Respect for peopleRespect for people
 People are treated asPeople are treated as
knowledge workersknowledge workers
 Engage mental andEngage mental and
physical capabilitiesphysical capabilities
 Empower employeesEmpower employees

58. © 2008 Prentice Hall, Inc. 16 – 58
Toyota Production SystemToyota Production System
 Standard work practiceStandard work practice
 Work shall be completely specified as toWork shall be completely specified as to
content, sequence, timing, and outcomecontent, sequence, timing, and outcome
 Internal and external customer-supplierInternal and external customer-supplier
connection are directconnection are direct
 Product and service flows must be simpleProduct and service flows must be simple
and directand direct
 Any improvement must be made inAny improvement must be made in
accordance with the scientific method at theaccordance with the scientific method at the
lowest possible level of the organizationlowest possible level of the organization

59. © 2008 Prentice Hall, Inc. 16 – 59
Lean OperationsLean Operations
 Different from JIT in that it isDifferent from JIT in that it is
externally focused on the customerexternally focused on the customer
 Starts with understanding what theStarts with understanding what the
customer wantscustomer wants
 Optimize the entire process fromOptimize the entire process from
the customer’s perspectivethe customer’s perspective

60. © 2008 Prentice Hall, Inc. 16 – 60
Building a Lean OrganizationBuilding a Lean Organization
 Transitioning to a lean system canTransitioning to a lean system can
be difficultbe difficult
 Lean systems tend to have theLean systems tend to have the
following attributesfollowing attributes
Use JIT techniquesUse JIT techniques
Build systems that help employeesBuild systems that help employees
produce perfect partsproduce perfect parts
Reduce space requirementsReduce space requirements

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Building a Lean OrganizationBuilding a Lean Organization
 Develop partnerships withDevelop partnerships with
supplierssuppliers
 Educate suppliersEducate suppliers
 Eliminate all but value-addedEliminate all but value-added
activitiesactivities
 Develop employeesDevelop employees
 Make jobs challengingMake jobs challenging
 Build worker flexibilityBuild worker flexibility

62. © 2008 Prentice Hall, Inc. 16 – 62
JIT in ServicesJIT in Services
 The JIT techniques used inThe JIT techniques used in
manufacturing are used in servicesmanufacturing are used in services
 SuppliersSuppliers
 LayoutsLayouts
 InventoryInventory
 SchedulingScheduling