Published on

JIT training

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide


  1. 1. Supply Chain Inventory Management & JIT 2009-04-23, Hebei Mill
  2. 2. Understanding Supply Chain Inventory <ul><li>Types of Inventory </li></ul><ul><ul><li>Raw material and semi-finished Items </li></ul></ul><ul><ul><li>Work-in-Process </li></ul></ul><ul><ul><li>Finished Goods </li></ul></ul><ul><ul><li>Maintenance,Repair,and Operating Supplies </li></ul></ul><ul><ul><li>Pipeline/In-Transit </li></ul></ul>
  3. 3. Understanding Supply Chain Inventory <ul><li>Inventory-related costs </li></ul><ul><ul><li>Unit costs </li></ul></ul><ul><ul><li>Ordering costs </li></ul></ul><ul><ul><li>Carrying costs </li></ul></ul>
  4. 4. Understanding Supply Chain Inventory <ul><li>Inventory-related costs </li></ul><ul><ul><li>Quality costs </li></ul></ul><ul><li>How to look at inventory investment </li></ul><ul><ul><ul><li>Asset ? </li></ul></ul></ul><ul><ul><ul><li>Liability? </li></ul></ul></ul><ul><ul><ul><li>Both? </li></ul></ul></ul>? ? ?
  5. 5. Understanding Supply Chain Inventory
  6. 6. Understanding Supply Chain Inventory
  7. 7. The Right Reasons for Inventory Investment <ul><li>Support Production Requirements </li></ul><ul><li>Support Operational Requirements </li></ul><ul><li>Support Customer Service Requirements </li></ul><ul><li>Hedge Against Marketplace Uncertainty </li></ul><ul><li>Take Advantage of Order Quantity Discounts </li></ul>
  8. 8. The Wrong Reasons for Inventory Investment <ul><ul><li>Poor Quality and Material Yield </li></ul></ul><ul><ul><li>Unreliable Supplier Delivery </li></ul></ul><ul><ul><li>Extended Order-Cycle Times </li></ul></ul><ul><ul><li>Inaccurate or Uncertain Demand Forecasts </li></ul></ul><ul><ul><li>Specify Custom Items for Standard Applications </li></ul></ul><ul><ul><li>Extended Material Pipelines </li></ul></ul><ul><ul><li>Inefficient Manufacturing Processes </li></ul></ul><ul><ul><li>So, what is the right viewpoint </li></ul></ul><ul><ul><li>for inventory investment? </li></ul></ul>
  9. 9. Coffee Time!
  10. 10. Managing Inventory Investment Volume Value Velocity Volume pertains to the amount of physical inventory a firm owns at any given time across the supply chain Key Question: How much and what types of inventory do we own? Key Measures: Total units, total pounds Activities Affecting Volume: Improved forecasting techniques; supplier-provided consignment inventory Value pertains to the unit cost and total value of inventory; Key Question: What’s the unit cost/total value of the different types of inventory we own? Key Measures: Total dollars; period-by-period unit value changes; ratio of sales to working capital? Activities Affecting Volume: Product simplification/standardization Velocity pertains to how quickly raw material/WIP become finished goods that accepted and paid by customer; Key Question: How fast do me move inventory to the customer? Key Measures: Inventory turns, order to cash cycle, Activities Affecting Volume: Made-to-order production, Lean supply chain practices;
  11. 11. Powerful Ways to Manage Inventory <ul><li>Achieve Perfect Record Integrity </li></ul><ul><li>Improve Product Forecasting </li></ul><ul><li>Leverage companywide Purchase Volumes </li></ul><ul><li>Use Suppliers for On-Site Inventory Management </li></ul><ul><li>Reduce Supplier-Buyer Cycle Times </li></ul><ul><ul><li>Expanded electronic capability </li></ul></ul><ul><ul><li>Supplier development support </li></ul></ul><ul><ul><li>Order-cycle time measurement </li></ul></ul><ul><ul><li>Focus on second and third-tier suppliers </li></ul></ul>
  12. 12. Creating the Lean Supply Chain <ul><li>What is lean? </li></ul><ul><ul><li>“ A philosophy that seeks to shorten the time between the customer order and the shipment to customer by eliminating waste” </li></ul></ul><ul><li>Three primary elements </li></ul><ul><ul><li>Just-in-time Purchasing </li></ul></ul><ul><ul><li>Just-in-time Transportation </li></ul></ul><ul><ul><li>Just-in-time Production </li></ul></ul><ul><li>“ Just-in-time” is a management philosophy, not technique, </li></ul><ul><li>and the philosophy is simple - inventory is defined to be waste </li></ul>
  13. 13. JIT Purchasing <ul><li>Characteristics of JIT Purchasing— </li></ul><ul><ul><li>Purchase in small lots with frequent deliveries </li></ul></ul><ul><ul><li>Mutual, consistent improvement by the buyer and supplier </li></ul></ul><ul><ul><li>Collaborative efforts between buyer and supplier </li></ul></ul><ul><ul><li>Efficient point-to-point communication linkages </li></ul></ul><ul><ul><li>The “rights”-- </li></ul></ul><ul><ul><ul><li>right quantity </li></ul></ul></ul><ul><ul><ul><li>right time </li></ul></ul></ul><ul><ul><ul><li>right quality </li></ul></ul></ul>
  14. 14. Differences between JIT & Traditional Purchasing JIT Purchasing Smaller lot sizes More frequent deliveries No rejection from the supplier Long-term contracts Buyer decides delivery schedule Innovation encouraged Minimal paper work Less formal communication Traditional Relatively large lot sizes Less deliveries at higher quantities 2% rejection from supplier Lowest price is main objective Time consuming, formal paperwork Formal communication
  15. 15. Point-to-Point Communication Linkages Engineering Quality Control Production Planning Transportation Engineering Quality Control Production Planning Transportation Purchasing Sales