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  1. 1. Japanese contribution to production (operation) management Abstract  Japanese production management (JPM) became a dominant influence in the field of operations management when, in the early 1980s, knowledge of its main elements became known beyond Japan. Those elements – quick set-up, small lots, cells, kanban, and so on – are well known. Rather than explaining them again, this paper’s objective is to explore the sequence of events leading to JPM as a competitive force globally, as well as its impact on theory and practices in operations management. JPM’s evolution includes shifting terminologies, fusions and adulterations; limited extensions from manufacturing into services and innovative enhancements, largely of Western origin. Longitudinal research data, based on inventory trends, provide insights on JPM’s diffusions and its uneven results. Latter-day puzzling lapses and disappointments, among Japanese as well as Western companies, raise questions about JPM’s sustainability, as well as some of its changing manifestations. While the core of Japanese production management, now over three decades old, appears to have become solidly mainstream, its current and future states are problematic.  At one point of time, the quality of Japanese export goods had as poor an image as any in the developing world. The Japanese were determined to do something about it in the post World War II industrial rebuilding era. Becoming aware, getting organized, and implementing Western quality control techniques (chiefly statistical sampling) constituted the thrust of the first fifteen years of quality control emphasis in Japan. Today, Japanese quality control practices are widely respected. Japanese total quality control particularly emphasizes: 1. A goal of continual quality improvement. 2. Responsibility for quality with the line function. 3. Quality control of every process, not reliance upon inspection of lots for only selected processes. 4. Measures of quality that is visible, visual, simple, and understandable, even to the casual observer. 5. Automatic quality measurement devices. Japanese manufacturing techniques According to Japanese manufacturing system: 1. Produce what the customer wants 2. Produce products at the rate at which customer want it 3. Produce with perfect quality 4. Produce instantaneously-with zero uncertainty lead time 5. Produce with no waste of labour, material or equipment. Every move has a purpose so there is zero idle inventory 6. Produce by methods that allow people to develop
  2. 2. So Japanese people and company thought the world following  Be customer oriented  Maximum use of resources  New concepts of inventories  Be quality oriented  Cost deductions and standards  Maximum employee involvement and so on  Japanese manufacturing techniques, as an area of influential practices and philosophies, emerged in the post-World War II era and reached the height of their prominence in the 1980s. Many adaptations of Japanese methods, and indeed, Japanese manufacturing vocabulary, have made their way into U.S. and worldwide manufacturing operations. Distinguishing characteristics associated with Japanese manufacturing include an emphasis on designing processes to optimize efficiency and a strong commitment to quality.  Perhaps the most widely recognized collection of Japanese manufacturing techniques is what is known as the Toyota Production System (TPS), the core of which is just-in-time (JIT) production or so-called lean manufacturing. The pioneers of these methods were Taiichi Ohno, a former Toyota executive, and Shigeo Shingo, an eminent engineer and consultant. In his 1989 book The Study of the Toyota Production System from an Industrial Engineering Perspective, Shingo identified these basic features of TPS: 1. It achieves cost reductions by eliminating waste, be it staff time, materials, or other resources. 2. It reduces the likelihood of overproduction by maintaining low inventories ("nonstock") and keeps labor costs low by using minimal manpower. 3. It reduces production cycle time drastically with innovations like the Single-Minute Exchange of Die (SMED) system, which cuts downtime and enables small-lot production. 4. It emphasizes that product orders should guide production decisions and processes, a practice known as order-based production. These and other practices form a contrast to traditional (e.g., pre-1980s) Western manufacturing, which tended to emphasize mass production, full capacity utilization, and the economies of scale that were presumed to follow. QUALITY CIRCLES The extensive use of quality circles is another distinguishing characteristic of Japanese management. The development of quality circles in Japan in the early 1960s was inspired by the lectures of American statisticians W. Edwards Deming and J.M. Juran, in which they discussed the development of wartime industrial standards in the United States. Noting that American management had typically given line managers and engineers about 85 percent of responsibility for quality control and only 15 percent to workers, Deming and Juran argued that these proportions should be reversed. Production processes should be designed with
  3. 3. quality control in mind, they contended, and everyone in the firm, from entry level workers to top management, should be familiar with statistical control techniques and undergo continuing education on quality control. In general, Deming and Juran argued that quality control should focus on prevention, with the ultimate goal being to improve the production process until no defective parts or products are produced. Quality circles were one method of reaching these goals. In Japan, quality circles consist of groups of about 10 workers who meet weekly, often on their own time. The groups typically include foremen, who usually serve as circle leaders. Quality circles focus on concrete aspects of the operations in which they are directly involved, using tables and graphs to communicate the statistical details of their quality issues. In one common format, problems are categorized by materials, manpower, and machines. Quality circles provide a means for workers to participate in company affairs and for management to benefit from worker suggestions. Indeed, employee suggestions play an important role in Japanese companies. Two associations, the Japanese Association of Suggestion Systems and the Japan Human Relations Association, were developed to encourage this process. Japanese employee suggestions reportedly create billions of dollars' worth of benefits for companies. ELIMINATING WASTE The driving force behind the Japanese system of production is eliminating waste, thereby maximizing process efficiency and the returns on resources. A wide number of principles and practices can be employed to achieve this goal. As Shingo once noted, people instinctively know to eliminate waste once it is identified as such, so the task of reducing waste often centers first around identifying unnecessary uses of human, capital, or physical resources. After waste is targeted, new processes or practices can be devised to deal with it. PROCESS IMPROVEMENT An important aspect of eliminating waste is designing efficiency into production processes and methods. For example, in the Toyota system heavy emphasis was placed on lowering the time and complexity required to change a die in a manufacturing process. A time- consuming die-changing process is wasteful in two ways. First, while it is happening production is often at a standstill, increasing cycle times and all the costs associated with longer cycle times. (However, it is important to note that idle time for individual machines in a system is not always viewed as wasteful under the TPS philosophy.) Second, workers' time and effort are spent on activities that aren't directly related to production (i.e., no value is being added by changing a die). As a result of such concerns, the push at Toyota was to reduce significantly the time it took to change dies. Major process improvements often occur through a series of smaller initiatives, summarized in the Japanese word kaizen, or continuous improvement. In the classic example, Toyota dramatically reduced its die-changing time over a two-year period. In 1970 it took the company four hours to change a die for a 1,000-ton stamping press. Six months later, the
  4. 4. changing time had been cut to one and a half hours. The management then, under the leadership of Taiichi Ohno, set the formidable goal of reducing the time further to just three minutes. Shigeo Shingo, already a highly regarded manufacturing consultant, was employed to design a process that would meet this objective. He approached the problem with two guiding principles: lowering the complexity of the changeover process and standardizing the tools used in it. Shingo looked at such factors as what kinds of fasteners were used to hold dies in place and how much time and variability was involved in performing various tasks during changeover. The result of his work was that by 1971 Toyota had indeed achieved its goal of a three-minute die change. Other kinds of process improvements resulted from such philosophies as well. Whereas process improvement in many Western firms focused on training workers to master increasingly complicated tasks, the drive in Japanese manufacturing was to selectively redesign the tasks so they could be more easily and reliably mastered. One example is the concept of poka-yoke, also pioneered by Shingo in the 1960s, which involves designing a foolproof process to eliminate the chance of errors. Such a process usually consists of a simple yet definitive physical test of whether something is being done correctly. One type of poka-yoke, for instance, is when a part is designed to only be inserted into an assembly right-side up (i.e., it won't fit otherwise), removing the possibility that it can be inserted the wrong way. Three-and-a-half-inch computer diskettes contain this kind of poka-yoke. Other kinds of poka-yokes test the shape of manufactured products for defects or monitor steps in a production process to ensure all are completed and in the correct sequence. Poka-yokes have been widely developed to minimize worker error and improve quality control. VALUE ADDED TPS and similar Japanese manufacturing techniques distinguish between activities that add value to a product and those that are logistical but add no value. The primary—even the sole—value-added activity in manufacturing is the production process itself, where materials are being transformed into progressively functional work pieces. Most other activities, such as transporting materials, inspecting finished work, and most of all, idle time and delays, add no value and must be minimized. When processes are examined for potential improvements and cost cutting, reducing non-value-added activities is often the highest priority. Conversely, processes that add the most value, even if they are expensive, will usually not be compromised to achieve lower costs at the expense of quality. OVERPRODUCTION AND EXCESS INVENTORY Another area of waste that is a special concern in the Toyota system is excess inventory. The idea is to produce without accumulating inventory, a condition known as non-stock or just- in-time production. In such a process the company produces goods at the exact quantity and schedule that they are required by its customers. To produce more than customers actually need—or sooner than they need it—is considered overproduction, leading to a build-up of stock or inventory. Overproduction can also occur internally when different steps of a manufacturing process aren't synchronized and excess materials or semi-finished
  5. 5. products accumulate. Systems like the Japanese kanban established a set of often simple visual cues in the factory (e.g., when no work-in-progress is waiting in a painted square on the floor, it is a signal to advance the next item into the process) to help coordinate and synchronize the flow of materials and work. Carrying inventory is wasteful because the company must store it or perform other additional handling that increases the total cost of its operations. By minimizing the need for such storage and handling, the company can reduce both the direct costs of holding/handling inventory as well as the indirect costs of tying up capital in the form of excess inventory. ORDER-BASED PRODUCTION. A natural and necessary extension of the non-stock goal is that manufacturers need specific customer information to drive their production decisions. Obtaining this information necessitates effective market research/forecasting and communication with customers. As much as possible, production under the Japanese system is guided by actual orders, rather than anticipated demand based on less reliable information such as past sales. The order- based system is said to provide production "pull" from the actual market, as opposed to "push" that stems only from the manufacturer's conjecture. TRANSPORTATION The Toyota Production System also recognizes waste in the excess movement of items or materials. In general, the more transportation required, the less efficient the process, since moving goods back and forth is normally not a value-adding procedure. Transport waste is usually addressed by changing the layout of a factory, its geographic location relative to its customers, and so forth. While sometimes transportation problems can be mitigated through automation, the ideal under the Japanese system is to minimize it altogether. Cell and flexible manufacturing layouts are one approach to controlling transport waste. It is important to note that reducing transportation costs may be at odds with other goals of the Japanese system, particularly small-lot, order-based production, which leads to smaller, more frequent batches of work and thus more deliveries of materials or finished goods. This can potentially increase the amount of resources devoted to the transportation function, aggravating the need for transportation efficiency. Ideally, the overall process chosen will minimize total costs by striking a balance between the wish to eliminate inventory and the wish to reduce transportation costs. QUALITY BY DESIGN Another feature thought to be defining in Japanese manufacturing is a marked attention to quality throughout the production process. Specifically, under the influence of such luminaries as W. Edwards Deming and Joseph M. Juran, Japanese manufacturers have sought to achieve quality by designing it into the production process rather than simply trying to catch all the errors at the end. As noted, poka-yokes can serve this function either by halting/correcting a faulty process or by alerting a worker to a problem as it occurs.
  6. 6. While plenty of traditional, defect-monitoring sorts of quality controls are still used, philosophies such as TPS hold that the results of quality inspections should be used to inform—and improve—the manufacturing process, not just to describe it. This means the feedback from a quality inspection is expected to be immediate and, often, to result in some change in the process so that the likelihood of similar problems in the future is reduced. MARKET-DRIVEN PRICING In contrast to the traditional practice of setting prices by marking up some percentage over the cost of manufacturing, the Japanese system attempts to identify the market-determined price for a good and then engineer the manufacturing process to produce at this price profitably. Under this principle, increases in costs are not passed on to the consumer in the form of higher prices. As a corollary, the only way for a firm to increase profitability is by lowering costs; lower costs may also allow the company to be profitable yet deliver products at the low end of the pricing spectrum, a practice central to the rise of the Japanese auto manufacturers in the U.S. market. WORKER FLEXIBILITY Maximizing returns on human capital is another goal of Japanese manufacturing practices. Driven by the theory that human time is more valuable than machine time, the Japanese system attempts to optimize labor efficiency by deploying workers in different ways as order-based production requirements fluctuate. The main two dimensions of this flexibility are skills and scheduling. More so than in the United States, for example, Japanese manufacturers have emphasized cross-training workers to perform various functions as needed, rather than tying them to a particular machine or process. This is believed not only to improve the subjective work experience, but also to create well-rounded employees who can be assigned exactly where needed in the process without creating delays or diminishing the quality of work (this also feeds into the wish to keep worker tasks simple and foolproof). In practice, this often translates into individual workers running several machines simultaneously, a practice called jidoka, with the machines designed to eliminate both error and the need for constant supervision. Having multiple responsibilities also gives rise to the need for special safety accommodations to reduce the chance of injury in an integrated work environment. In the legendary Toyota production reforms, converting to a multi- machine worker system reportedly achieved 20 to 30 percent gains in worker productivity. In scheduling under the Japanese system, as long as a process is functioning on a just-in- time basis, the manufacturer will tend to structure the process to optimize the use of human labor, even if it means leaving machines idle. Overtime and temporary labor are used to accommodate short-term spikes in production requirements. And these concepts were established using following techniques and methods Japanese Production Management and Techniques
  7. 7.  The major contributions by Japanese to production management in which led them at the 1st position in the world is as follows; all these contributions are the greatest contributions to the world of production management which was accepted by many companies of the world and are still used even today.  Kaizen (continuous quality improvement)  Total Quality Management (TQM)  Just-in-Time Manufacturing (JIT)  Supply Chain Management(SCM)  Total productivity management (TPM)  Subcontracting  The Kanban system  The ring system  Scientific management technique Just in time manufacturing system Introduction  Just-in-time manufacturing was a concept introduced to the United States by the Ford motor company. It works on a demand-pull basis, contrary to hitherto used techniques which worked on a production-push basis.  To elaborate further, under just-in-time manufacturing (colloquially referred to as JIT production systems), actual orders dictate what should be manufactured, so that the exact quantity is produced at the exact time it is required.  Just-in-time manufacturing goes hand in hand with concepts such as Kanban, continuous improvement and total quality management (TQM).  Just-in-time production requires intricate planning, in terms of procurement policies and the manufacturing process, if its implementation is to be a success.  Highly advanced technological support systems provide the necessary back-up that Just-in-time manufacturing demands, with production scheduling software and electronic data interchange being the most sought after. Advantages Just-In-Time Systems Following are the advantages of Adopting Just-In-Time Manufacturing Systems:  Just-in-time manufacturing keeps stock holding costs to a bare minimum. The release of storage space results in better utilization of space and thereby bears a favorable impact on the rent paid and on any insurance premiums that would otherwise need to be made.  Just-in-time manufacturing eliminates waste, as out-of-date or expired products; do not enter into this equation at all.
  8. 8.  As under this technique, only essential stocks are obtained, less working capital is required, to finance procurement. Here, a minimum re-order level is set, and only once that mark is reached fresh stocks are ordered, making this a boon to inventory management too.  Due to the afore-mentioned low level of stocks held, the organizations return on investment (referred to as ROI, in management parlance) would generally be high.  As just-in-time production works on a demand-pull basis, all goods made would be sold, and thus it incorporates changes in demand with surprising ease. This makes it especially appealing today, where the market demand is volatile and somewhat unpredictable.  Just-in-time manufacturing encourages the .right first time. concept, so that inspection costs and cost of rework is minimized.  High quality products and greater efficiency can be derived from following a just-in-time production system.  Close relationships are fostered along the production chain under a just-in-time manufacturing system.  Constant communication with the customer results in high customer satisfaction.  Over production is eliminated, when just-in-time manufacturing is adopted. Disadvantages: Following are the disadvantages of Adopting Just-In-Time Manufacturing Systems:  Just-in-time manufacturing provides zero tolerance for mistakes, as it makes re-working very difficult in practice, as inventory is kept to a bare minimum.  There is a high reliance on suppliers, whose performance is generally outside the purview of the manufacturer.  Due to there being no buffers for delays, production downtime and line idling can occur, which would bear a detrimental effect on finances and on the equilibrium of the production process.  The organization would not be able to meet an unexpected increase in orders, due to the fact that there are no excess finish goods.  Transaction costs would be relatively high, as frequent transactions would be made.  Just-in-time manufacturing may have certain detrimental effects on the environment, due to the frequent deliveries that would result in increased use of transportation which in turn would consume more fossil fuels. Precautions: Following are the things to remember When Implementing a Just-In-Time Manufacturing System:  Management buy-in and support at all levels of the organization are required; if a just- in-time manufacturing system is to be successfully adopted.  Adequate resources should be allocated, so as to obtain technologically advanced software, that is generally required if a just-in-time system is to be a success.  Building a close, trusting relationship with reputed and time-tested suppliers will minimize unexpected delays in the receipt of inventory.
  9. 9.  Just-in-time manufacturing cannot be adopted overnight. It requires commitment in terms of time and adjustments to corporate culture would be required, as it is starkly different to traditional production processes.  The design flow process needs to be redesigned and layouts need to be re-formatted, so as to incorporate just-in-time manufacturing.  Lot sizes need to be minimized.  Work station capacity should be balanced whenever possible.  Preventive maintenance should be carried out, so as to minimize machine breakdowns.  Set up times should be reduced wherever possible.  Quality enhancement programs should be adopted, so that total quality control practices can be adopted.  Reduction in lead times and frequent deliveries should be incorporated.  Motion waste should be minimized, so the incorporation of conveyor belts might prove to be a good idea when implementing a just-in-time manufacturing system. Conclusion Just-in-time manufacturing is a philosophy that has been successfully implemented in many manufacturing organizations. It is an optimal system that reduces inventory whilst being increasingly responsive to customer needs; This is not to say that it is not without its pitfalls. However, these disadvantages can be overcome, with a little forethought and a lot of commitment at all levels of the organization Kaizen (continuous quality improvement)  Kaizen is a Japanese word which means continuous and never ending improvement involving everyone in the organization. The important message of Kaizen is that not a single day should go without some kind of improvement being made somewhere in an organization. The Kaizen umbrella includes all such terms aim at improving labor management relationship marketing practices, supplier relations, and in-house systems and processes.  The program can be broadly divided into three parts: 1. Management oriented Kaizen: A manager must constantly try to improve his job through teams, task forces, and committee assignments and to improve problem solving abilities. 2. Group oriented Kaizen: Through quality circles, other small group activities and statistical tools, team members identify problem areas and its causes and try to attempt to implement and taste new measures, new procedures and set new standards. 3. Individual oriented Kaizen:
  10. 10. The suggestion system should include improvement in one’s own work, work environment, machines, processes, office work, product quality and customer services which are likely to find favor with management, if the suggestions make the job easier remove drudgery from the job, make the job safer, more productive, improve quality and save time and cost. FEATURES KAIZEN Effect Long term but not dramatic. Pace Small steps; built around existing facilities and technology. Time frame Continuous and incremental. Involvement An ongoing and never ending process involving everyone in the organization. Approach Collectivism, group efforts and the system approach. Need Needs very little investment but huge effort to keep it going. Orientation People oriented and cross functional approach. Feedback Comprehensive feedback offered to all at regular interval. 5-S movement Seiri: to straighten up work in progress, eliminate unnecessary tools and machinery, defective products, papers and documents. Seiton: to put things in order so that they are readily available whenever needed. Seiso: to keep the work place clean before starting and after finishing work. Seiketsu: to maintain personal cleanliness and a healthy mind. Shitsuke:to follow procedures and observe discipline strictly. Total quality management  The history of total quality management (TQM) began initially as a term coined by the Naval Air Systems Command to describe its Japanese-style management approach to quality improvement. An umbrella methodology for continually improving the quality of all processes, it draws on knowledge of the principles and practices of:  The behavioral sciences  The analysis of quantitative and no quantitative data
  11. 11.  Economics theories  Process analysis Basic Principles of TQM: In TQM, the processes and initiatives that produce products or services are thoroughly managed. By this way of managing, process variations are minimized, so the end product or the service will have a predictable quality level. Following are the key principles used in TQM.  Top management. The upper management is the driving force behind TQM. The upper management bears the responsibility of creating an environment to rollout TQM concepts and practices.  Training needs. When a TQM rollout is due, all the employees of the company need to go through a proper cycle of training. Once the TQM implementation starts, the employees should go through regular trainings and certification process.  Customer orientation. The quality improvements should ultimately target improving the customer satisfaction. For this, the company can conduct surveys and feedback forums for gathering customer satisfaction and feedback information.  Involvement of employees. Pro-activeness of employees is the main contribution from the staff. The TQM environment should make sure that the employees who are proactive are rewarded appropriately.  Techniques and tools. Use of techniques and tools suitable for the company is one of the main factors of TQM.  Corporate culture. The corporate culture should be such that it facilitates the employees with the tools and techniques where the employees can work towards achieving higher quality.  Continues improvements
  12. 12. TQM implementation is not a onetime exercise. As long as the company practices TQM, the TQM process should be improved continuously. Subcontracting  Large companies, particularly in manufacturing sector, rely heavily on a regular subcontracting system. To secure punctual and regular supply of quality parts and semi finished products from subcontractors at various levels, large companies provide smaller ones with technical, managerial and financial assistance in various forms. This way, the large and small companies need not compete and contract for every supply and purchase. Mutual trust is the basis of their long-term transactions.  A general format of subcontracting can be as following: TOTAL PRODUCTIVITY MANAGEMENT (TPM): A TOP-DOWN APPROACH The general procedure of TPM is summarized as follows: Step 1. Corporate goal setting: master schedule. Select companywide numerical goals and targets. Step 2. Top-down explosion process. Explode the master schedule (corporate-level goals and targets) systematically into actions by specific departments (or by specific product lines) and select numerical goals and targets for individual departments (or specific product lines). large manufacturer first level sub contracter second level sub contracter second level sub contracter 3rd level sub contractors 4th level 4th level 4th level 4th level first level sub contracter second level sub contracter second level sub contracter
  13. 13. Repeat Step 2 until goals and targets are selected or assigned to all layers of relevant organizational units and individuals. Step 3. Implementation and assessment. Implement the overall plans. Compare the corporate performance with the originally set goals. Use the empirical information obtained in previous rounds of TPM in Step 2 of the next round.  It is clear that a successful implementation of TPM implies improvement in the immediately observable financial performance measures for which the original numerical goals and targets were set. The latter follows because of the direct (or definitional) connections that exist between the tasks to be implemented and the original company-wide goals and targets. (This is not to say that bottom-up procedures provide no direct financial benefits to the firm.  It is also clear that an effective implementation of this top-down approach requires the full cooperation of all the employees involved. Yet it is often the lack of clearly defined incentive mechanisms for inducing such full cooperation from workers on the shop floor and other stakeholders that has caused the failures of some implementations of Materials Requirements  Planning (MRP).A substantial similarity between the formal procedures of TPM and MRP suggests that similar incentive issues exist for the implementation of TPM. The incentive mechanisms associated with the TPM procedure are not as well understood as the incentive mechanisms for Japanese bottom-up approaches such as JIT and TQM.The TPM implementation process may also be interpreted as a process of organizational change(Fruin, 1997). For example, Etzioni’s (1965, 1975)model of organizational change is based on cycles of compliance which refers to the conforming or nonconforming behavior of those who are in the midst of organizational change, measured against the expectations and performance goals of those in charge of planning and managing change. The model predicts that large-scale change activities move through predictable sequence of four phases: education and promotion; commitment; performance; decline and withdrawal. The model does not, however, predict the duration, and hence timing by which phase succeeds one another. In the context of the corporate productivity enhancement movement in Japan the above cycle of compliance will be referred to as a strategy cycle of affirm. The strategy cycle describes the process of firm’s formation of strategic intent, followed by strategic implementation and strategic withdrawal. Successful strategy cycle requires a good balance between the various stages of identifying and setting goals, and then moving ahead to realize them, and to monitor progress along the way. Such balancing is made possible by a careful rollout of target and goals at every level of a firm, employing bottom-up approaches. Japanese firms that have successfully implemented. The Kanban System
  14. 14.  A push system in reality is simply a schedule-based system. A multi-period schedule of future demands for the company’s products is prepared. The computer breaks that schedule down into detailed schedules for making or buying the component parts. It is a push system in that the schedule pushes the production people into making the required parts and then pushing the parts out and onward. The name given to this push system is commonly referred to as material requirements planning (MRP).  A weakness of MRP is that the company needs to guess what customer demand will be in order to prepare the schedule. The company also needs to guess how long it will take the production department to make the needed parts. The system allows corrections to be made daily (called shop-floor control). Nevertheless, bad guesses result in excess inventories of some parts, though not nearly so much total inventory as in the old pull/expedite system.  Kanban is feasible in just about any plant that makes goods in whole (discrete) units (but not in the process industries). It is beneficial only in certain circumstances:  Kanban should be an element of a JIT system. It makes little sense to use a pull system if it takes interminably long to pull the necessary parts from the producing work center, as it would if setup times took hours and lot sizes were large.  The parts included in the kanban system should be used every day.  Very expensive or large items should not be included in kanban. Such items are costly to store and carry. Therefore their ordering and delivery should be regulated very closely under the watchful eye of a planner or buyer.  The oldest and most widely used inventory system in the world is the reorder-point system (ROP). The simple reorder-point rule is: When stocks get low, order more. But ROP results in high inventories. More parts and raw materials are ordered for the sake of the rule rather than because of need. Manufacturers that use ROP do so because of a difficulty in associating parts requirements with the schedule of end products.  Material requirements planning (MRP) provides a better way. MRP harnesses the computer to perform thousands of simple calculations in transforming a master schedule of end products into parts requirements. But MRP shares one weakness with ROP. It is lot-oriented. The computer collects all demands for a given part number in a given time period, and recommends production or purchase of the part number in one sizeable lot. MRP companies order in lots, rather than piece-for-piece.  MRP is a very expensive undertaking. Its approach is to attack problems with complex solutions, i.e., computer systems. Where there are many stages of production, MRP or synchrony-MRP may be necessary. In most cases, however, money is better spent on JIT/TQC than on computer-based planning and control. The main lesson from the Japanese is that simplification is generally the safest path to improvement.  Kanban is the visible record that triggers an order for more parts. If a Kanban arrives at a work center signaling the need for more of a given part, that part is needed right away. It must be possible to set up the part fast enough to economically make the very small quantity required. Other work centers will send more kanban to signal the need for other parts, and numerous new setups will be required each day as the kanban arrive.  An assembler whose production has been slowed by some problem or who is not able to keep up with the speed of the line turns on the yellow light, which is the signal for a roving master assembler to come and help. If the problem is severe enough, the line
  15. 15. comes to a halt. Then master assemblers, supervisors, foremen, and all idled line workers help get the line going again.  The red light brings frowns, but plant management is pleased when many of the yellow lights are on. The main reason for the yellow light is too few workers on the line to handle the rate of output. If no yellow lights are on, management knows that the line is moving too slowly or there are too many workers. Usually, the response is to pull workers off the line and assign them elsewhere so that it becomes hard for the remaining workers to keep up. So yellow lights begin to come on.  Mixed-model sequencing is used to make close to the same mix of products that is sold that day. This avoids the usual cycle of a large buildup of inventory of a given model, followed by depletion to the point of potential lost sales as the next model builds up. Moreover, when mixed models are run in final assembly, the same mixed-model schedule may govern the making and delivering of component parts, ideally even from outside suppliers. Planning and control are simplified, capacity requirements are reduced, and buffer inventories are slashed – with all of the attendant quality and other just-in-time benefits.  Color-coding, is widely used in Japan. The ideal is zero time for a worker to hunt for the part needed – and also for the materials control people to hunt for the right location when restocking. Precise placement and identification of parts for assembly-line workers may save them some motions and make the work less tiring.  The Japanese were upbeat on conveyors about ten years ago; now they try to avoid them. This is because conveyors hold inventory. Quality control is not precise when inventories are on moving conveyors. Conveyors push inventory forward, whether needed or not. Conveyors are also subject to breakdown, a serious concern in a JIT factory, in which there is little or no buffer inventory. Conveyors are expensive to buy, install, maintain, and relocate.  The just-in-time system enables manufacturing to react quickly to changes in the mix of products and models sold in the market-place. This of course assumes that the company has labor flexibility so that employees may be reassigned as necessary to produce the products and models demanded. Such labor flexibility also provides limited protection against worker layoffs. Supply chain management  The Institute for Supply Management describes supply chain management as "the design and management of seamless, value added processes across organizational boundaries to meet the real needs of the end customer. The development and integration of people and technologies cal resources are critical to successful supply chain integration".  " What is Supply Chain Management? " can be as Supply Chain Management is the process of planning , implementing and controlling the operations of the supply chain with the purpose of satisfying the customer's requirement as efficiently as possible. Supply Chain spans all movement and storage of raw materials , Work-in-process , inventory and finished goods from the point of origin to the point of consumption.  Supply chain management flows can be divided into three parts.:
  16. 16. A. The Product flow: It includes the movement of goods from supplier to a customer, as well as any customer return or services needs. B. The information flow: It involves transmitting orders and updating the status of delivery. C. The finance flow: It consist of credit terms, payment schedule and consignment and title ownership arrangement. Major objectives of supply management :  To provide an uninterrupted flow of materials, supplies and services required to operate the organization  Minimize inventory investment and loss  Maintain and improve quality  Create relationships with competent suppliers  Set standards for supplies  Get supplies and services at lowest cost  Achieve harmonious, productive working relationships with other departments  Keep purchasing administrative costs low  Improve the organization's competitive position Key elements to a supply chain 1. Production Element of Supply Chain  Focus on what customer & market demand  Resource Management  Internal sourcing (what and which plants)  Outsourcing to capable suppliers  Capacity Management  Workload schedules  Equipment plans (acquisition/maintenance)  Order Management  Quality control 2. Supply Element of Supply Chain  Partners in the Supply Chain  Assessing core/strategic competencies  Identifying capable suppliers  Making sourcing decisions  Relationship management  General procurement 3. Inventory Element of Supply Chain  How Much Inventory and Where to Store It
  17. 17.  Analysis of fluctuations in demand  Identification of optimal storage locations in support of *Customer demand  Identification of optimal stock levels by location  Establishing inventory ordering policies 4. Location Element of Supply Chain  Strategic placement of production plants, distribution and stocking facilities  Understand customer markets  Perform Locating decisions for production and stocking facilities  Lightweight/market driven near the end-user  Heavy industries near raw material source  Evaluation of tax and tariff issues and transportation accessibility 5. Transportation Element of Supply Chain  Supporting inventory decisions and customer demand requirements (transportation is up to 30% of Product Cost!)  Identify customer service levels  Identify modal forms Air ,Ship, Rail, Ground  Establish strategic transportation partnerships 6. Information Element of Supply Chain  Obtaining, linking and leveraging information across the Supply Chain Organization of information linking computers through networks and the internet Streamlining information flow Consolidating information warehousing Decision support tools. THE RINGI SYSTEM  The traditional decision-making process in Japanese firms is referred to as the ringi system. The system involves circulating proposals to all managers in the firm who are affected by an impending decision. Proposals are generally initiated by middle managers, though they may also come from top executives. In the latter case, an executive will generally give his idea to his subordinates and let them introduce it. Managers from different departments hold meetings and try to reach an informal consensus on the matter. Only after this consensus is reached will the formal document, or ringi-sho, be circulated for approval by the responsible managers.  The ringi system requires long lead times, and thus is problematic in a crisis. In recent years the focus on speeding up decision making has made this approach unpopular at many firms. Nonetheless, one of its underlying principles remains prevalent. That is, when a decision proves beneficial, the middle-level managers who initially advocated it receive credit; when a decision proves unsuccessful, responsibility is taken by top- level executives. This practice is intended to promote aggressiveness in younger managers.
  18. 18. SCIENTIFIC MANAGEMENT  Japanese management techniques have been strongly influenced by the tenets of scientific management. Like quality circles, scientific management originated in the United States, only to be more systematically adopted in Japan. The pioneering figure of scientific management is Frederick Jackson Taylor (1856-1915). Taylor is best known for his time and motion studies of workers as part of an effort to optimize and standardize work efforts, but he also argued for a system of bonuses to reward workers based on productivity. These ideas were implemented by Japanese firms as early as 1908, and a translation of his Principles of Scientific Management sold 2 million copies in Japan.  In the post-World War II years, carefully codified work standards and the use of semiannual bonuses for workers became common practices in Japan. Consistent with the Japanese emphasis on teamwork, bonuses are generally allotted to a work group rather than an individual worker. Scientific management emphasizes the role of management in the production process. This is reflected in the more hands-on approach in Japanese management training, as well as the relatively high share of managers directly involved in the production process. IMPACT OF JAPANESE MANUFACTURING TECHNIQUES  Many of these practices and principles began to attract a serious following outside Japan in the late 1970s, although their implementation continues to the present. During the 1980s many large U.S. manufacturers began to adopt just-in-time practices to improve efficiency. By the late 1980s and early 1990s this and related practices were commonly termed "lean manufacturing," highlighting the role of reducing waste in the production process. In many cases hybrid approaches were developed that embodied some of the principles of the Japanese techniques but also maintained some of the historical differences. More recently, methods like JIT have been increasingly influential in non-manufacturing industries such as retailing and services.  Although critics have rued the wholesale adoption of Japanese manufacturing techniques in the United States on grounds that some aspects are particular to the Japanese culture and economy, the Japanese system is widely recognized as delivering many of the efficiencies and cost reductions it sets out to. Indeed, evaluating the success of attempts to transplant Japanese methods can be difficult for U.S. firms at first, as some companies have found that their traditional accounting concepts obscure some of the economic benefits these methods
  19. 19. Bibliography: Books: 1. Production and operations management by Everett E. Adam, Jr. Ronald j. Ebert, PHI 2. Management: text and cases by V.S.P Rao, excel publications. Internet : 1. http://www.tutorialspoint.com/management_concepts.htm 2. Google scholar 3. Wikipedia : free internet dictionary 4. http://www.referenceforbusiness.com/encyclopedia/Int-Jun/Japanese- Manufacturing-Techniques.html