Operations Management

Toyota Production System (TPS), Just-in-Time (JIT), and Lean ManufacturingHandout

Dr. Ahmad Syamil, CFPIM, CIRM, CSCP http://www.clt.astate.edu/asyamil/asyamil AT yahoo DOT com

APICSwww.apics.orgOld Name: The American Production and Inventory Control SocietyNew Name: The Associationfor Operations Management - Advancing Productivity, Innovation, andCompetitive Success.APICS offers four internationally recognized professional certification programs:CPIM: Certified in Production and Inventory ManagementCFPIM: Certified Fellow in Production and Inventory Management = CPIM + extensive knowledge sharing with others through presenting, teaching, publishing, and other APICS educational activities.CIRM: Certified in Integrated Resource ManagementBeginning 2006: Certified Supply Chain Professional (CSCP) designation is designed for professionals interested in increasing their knowledge of supply chain management, those currently working in the field of supply chain management (SCM), and for those individuals working with enterprise resources planning (ERP) systems.

Why Toyota?

Toyota is now the world's largest carmakerToyota sold 2.348 million vehicles in the first three months of 2007.

General Motors (GM) is estimated to have sold 2.26 million cars and small trucks during the same period.

Why Toyota?

Why Toyota?

Why not Toyota?GM lost $10.6 billion in 2005.GM's pension obligations under funded by about $31 billion GM will eliminate 30,000 jobs and close 12 North American factories by 2008 Ford earned $2 billion worldwide, but lost $1.6 billion in its North American operations.Ford is shutting 10 plants and laying off 25,000 hourly workers.Daimler paid $36 billion for Chrysler in 1998.Chrysler reported a $1.5 billion loss for the third quarter of 2006 and a $2 billion loss for the first quarter of 2007.DaimlerChysler finally sold 80.1% of Chrysler to Cerberus Capital for $7.4 billion in May of 2007.

Why Toyota?

History of Manufacturing Management

HistorySakichi Toyoda, the founder of the Toyota group of companies, started Toyota as a textile machine company.

Kiichiro Toyoda, son of Sakichi and founder of the Toyota automobile business, developed the concept of Just-in-Time in the 1930s. He decreed that Toyota operations would contain no excess inventory and that Toyota would strive to work in partnership with suppliers to level production.

Taiichi Ohno, Toyota's chief of production in the post-WWII period. He was THE main developer of Toyota Production System (TPS).

Dr. Shigeo Shingo: A consultant to Toyota.

PS: Shingo Prize is the highest manufacturing excellence award in the U.S. The prize is given both to companies and individuals who contribute to the development of manufacturing excellence.

History (cont.)Toyota Production System (TPS) drew wide attention from the industrial community because Toyota was a profitable car company in Japan during and after the oil embargo in 1970s.

Outside Japan, dissemination began in earnest with the creation of the Toyota-General Motors joint venture-NUMMI (New United Motor Manufacturing Inc.) in California in 1984.

Widespread recognition of TPS as the model production system grew rapidly with the publication in 1990 of The Machine That Changed the World: The Story of Lean Production, the result of five years of research led by the Massachusetts Institute of Technology.

The MIT researchers found that TPS was so much more effective and efficient than traditional, mass production that it represented a completely new paradigm and coined the term lean production to indicate this radically different approach to production.

The term was coined by John Krafcik, a research assistant at MIT with the International Motor Vehicle Program in the late 1980s. He then worked for General Motors and now is a Vice President of Hyundai, U.S.

Toyota Production System (TPS)Definition: The production system developed by Toyota Motor Corporation to provide best quality, lowest cost, and shortest lead time through the elimination of waste. TPS is comprised of two pillars, Just-in-Time and Jidoka (autonomation) , and is often illustrated with the "house" shown on the next slide. TPS is maintained and improved through iterations of standardized work and kaizen (continuous improvement), following PlanDo-Check-Act (PDCA Cycle from Dr. Deming), or the scientific method.

House of Toyota

Toyota Production System (TPS):Related Terms

Ohno System MAN (Material as Needed) - Harley DavidsonMIPS (Minimum Inventory Production Systems) - WestinghouseStockless production - Hewlett PackardZero inventory production systemLean Manufacturing/Production - MIT

How to make money?Profit equation: Sales Cost = Profit

Traditional pricing strategy: Cost + Profit = Selling price

Example:

When the cost goes up, the product selling price is raised to reflect the higher costs and maintain the desired level of profit.Some even argues that the profit added should be large enough to cover potential losses if the product does not sell well.

Toyota accepts neither this formula nor these arguments!

Toyotas philosophySelling price Cost = Profit Customers decide the selling price.Profit is what remains after subtracting the cost from it.The main way to increase profit is to reduce cost.Consequently, cost reduction through waste elimination should have the highest priority.Toyotas paradox: Reducing cost (waste), will reduce lead time while increasing quality and customer satisfaction.How? We will discuss it soon.

House of Toyota

Attacks wasteAnything not adding value to the productFrom the customers perspectiveExposes problems and bottlenecks caused by variabilityDeviation from optimumAchieves streamlined productionBy reducing inventoryWhat Does Just-in-Time Do?

Waste (muda in Japanese) is anything other than the minimum amount of equipment, materials, parts, space, and workers time, which are absolutely essential to add value to the product. Shoichiro Toyoda Founder, Toyota 1995 Corel Corp.Introductory Quotation

Variability Occurs BecauseEmployees, machines, and suppliers produce units that do not conform to standards, are late, or are not the proper quantityEngineering drawings or specifications are inaccurateProduction personnel try to produce before drawings or specifications are completeCustomer demands are unknown

Continuous FlowProducing and moving one item at a time (or a small and consistent batch of items) through a series of processing steps as continuously as possible, with each step making just what is requested by the next step. It is also called the one-piece flow, single-piece flow, and make one, move one.

Continuous Flow Production

Push versus PullPush system: material is pushed into downstream workstations regardless of whether resources are available

Pull system: material is pulled to a workstation just as it is needed

Traditional U.S. Manufacturing Firm:Push (old style MRP / Material Requirements Planning System)The production of items at times required by a given schedule planned in advance

Material Information (Production Schedule)Work Station 1WS 2WS 3

Pull (JIT) SystemThe production of items only as demanded for use or to replace those taken for use.

Material Information (via Kanban/Card)Work Station 1WS 2WS 3

Japanese word for cardPronounced kahn-bahn (not can-ban)Authorizes production from downstream operationsPulls material through plantMay be a card, flag, verbal signal etc.Used often with fixed-size containersAdd or remove containers to change production rateKanban

Triangular Kanban

Kanban

Figure S12.5

Basic Fixed-Order Quantity Model and Reorder Point Behavior

KanbanThe function of Kanban

The function of Inventory Reorder Point (ROP)

Kanban SystemSingle cardMove only containers with C (Conveyance)-kanban)e.g.: KawasakiDual cardMove only container with C- kanbanProduce only when authorized by P (Production)- kanbane.g.: ToyotaTransparency 17.5

Traditional: inventory exists in case problems ariseJIT objective: Eliminate inventoryJIT requiresSmall lot sizesLow setup timeContainers for fixed number of partsJIT inventory: Minimum inventory to keep system runningInventory

Reduce ripple effect of small variations in schedules (e.g., final assembly) Production quantities evenly distributed over time (e.g., 7/day)Build same mix of products every dayResults in many small lots1 month = 20 working daysItemMonthly QuantityDaily Quantity A402 B603Heijunka = Leveling (Smoothing) Production Schedule using Mixed Model Sequencing

AAABBBCJIT Small LotsLarge-Lot ApproachTimeTimeAABBBCAAABBBBBBCCJIT produces same amount in same time if setup times are loweredSmall versus Large LotsSmall lots also increase flexibility to meet customer demands

Photo S12.4

Heijunka = Leveling (Smoothing) Production Schedule using Mixed Model Sequencing = Uniform Plant LoadingProduct Demand RequirementsMonthly DailyABCLargest integer that divides into all daily requirements evenly is 10Product Daily Requirements Divided by 10ABCMixed-model sequenceA-B-A-B-A-B-A-B-C Repeat 10 times per dayTransparency 17.7Determining Production Sequence

Cycle TimesWorking time per day = 480 minutesDaily requirements: A = 40 units; B = 40 units; C = 10 units The system cycle time = 480/(40+40+10) = 5.33 min/unitProduct Requirements Cycle TimeA 40B 40C 10Transparency 17.8

Lowering Inventory Reduces Waste

Lowering Inventory Reduces Waste

Lowering Inventory Reduces Waste

To Lower Inventory, Reduce Lot Sizes

Customer orders 10Lot size = 5Lot 1Lot 2Lot size = 2Lot 1Lot 2Lot 3Lot 4Lot 5Reducing Lot Sizes Increases the Number of Lots

Which Increases Inventory Costs

Unless Setup Costs are Reduced

Quick setup = Quick changeoverReducing setup cost reducing setup timeSetup reduction time is a prerequisite to lot size reductionSMED (Single Minute Exchange of Dies) methodThe method has been developed by Toyota and then expanded by Dr. Shigeo Shingo (a consultant to Toyota), and has proven its effectiveness in many companies by reducing changeover times (non-value added times) from hours to a less than 10 minutes

Setup Components Internal Setup: consists of setup activities that must be performed while the machine is stopped. External Setup: consists of setup activities that can be carried out while the machine is still operating.It is desirable to:Convert as much internal setup to external setupImprove the setup procedure

Systematic Setup Reduction

Setup Reduction

Setup Reduction:Standardizing die holder heights reduces the need to exchange fastening bolts

Setup Reduction Techniques

Quality At The SourceDoing it right at the first time. Jidoka allows workers to stop production lineAndon lights signal quality problemsUnder capacity scheduling allows for planning, problem solving & maintenanceVisual control makes problems visiblePoka-yoke prevents defects

House of Toyota

Jidoka

Toyota Production System (TPS) is supported by two pillars: Just-in-Time and Jidoka

Jidoka = Autonomation = Automation with human intelligence.

Sakichi Toyoda, founder of the Toyota group of companies, invented the concept of Jidoka in the early 20th Century by incorporating a device on his automatic looms that would stop the loom from operating whenever a thread broke. Dr. Shigeo Shingo then developed his idea further.

This enabled great improvements in quality and freed people up to do more value creating work than simply monitoring machines for quality (separating peoples work and machines work).

Eventually, this simple concept found its way into every machine, every production line, and every Toyota operation.

Jidoka TechniquesPoka-yoke (mistake or error proofing)

A form of device for building-in quality at each production process.

This device may take many shapes and designs.

Typical types of Pokayoke are sensors, proximity switches, stencils, light guards and alignment pins. Simple circuitry is usually used to operate these electrical error proof devices as they should be of low cost and simple design.

Goal: Finding defects before they occur = Zero Defects

Statistical Quality Control (SQC): Finding defects after they occur

Visual management including using Andon Lamp

Poka-Yoke ExampleExhibit 7.10

Visual ManagementAndon LampRed - line stoppage Yellow - call for helpGreen - normal operation

KaizenChange for better = continuous improvementKaizen workshop or Kaizen event:A group of Kaizen activity, commonly lasting five days, in which a team identifies and implements a significant improvement in a process, e.g., creating a manufacturing cell.

GEMBAGEMBA" is a Japanese word meaning "real place", where the real action takes place. In business, GEMBA is where the value-adding activities to satisfy the client are carried out. Manufacturing companies have three main activities in relation to creating money: developing (designing), producing and selling products. In a broad sense, GEMBA means the sites of these three major activities.In a narrower context, however, GEMBA means the place where the products are made. The term is often used to stress the that real improvement can only take place when there is a shop-floor focus on direct observation of current conditions where work is done, e.g., not only in the engineering office.

Five Golden Rules of GembaMasaaki Imai promoted Kaizen to people outside Japan through his two highly acclaimed books:

1. Kaizen: The Key To Japan's Competitive Success. 2. Gemba Kaizen: A Commonsense, Low-Cost Approach to Management

He preaches the Five Golden Rules of Gemba, the first of which is 'When a problem (abnormality) arises, go to gemba first'. So what's gemba? It's the shop floor, or equivalent. Once there, you apply Golden Rule Two: check with gembutsu (relevant objects). Three: take temporary counter-measures on the spot. Four: find the root cause. Five: standardize to prevent recurrence. Standardization is the managing part of getting good gemba. You also need good housekeeping (Imai is very keen on cleaning machines) and muda, the elimination of waste. But all hinges on getting away from your desk. Obey the master Imai. GO TO GEMBA!

5Whys: Finding the root cause of a problem. 5 Whys analysis as an effective problem-solving technique. It is also used in Six Sigma. Example:

Why is our client, Hinson Corp., unhappy? Because we did not deliver our services when we said we would. Why were we unable to meet the agreed-upon timeline or schedule for delivery? The job took much longer than we thought it would. Why did it take so much longer? Because we underestimated the complexity of the job. Why did we underestimate the complexity of the job? Because we made a quick estimate of the time needed to complete it, and did not list the individual stages needed to complete the project. Why didn't we do this? Because we were running behind on other projects. We clearly need to review our time estimation and specification procedures.

Plan-Do-Check-Act(PDCA/Shewart /Deming Cycle)Plan: Go to the real place/factory flow (gemba), obverse the real thing/product (gembutsu), get the real fact (genjitsu). Focus on reducing response time, lead times, exposing wastes in your processDo: Conduct Kaizen. Create models of excellence so others can aspire to. Flow everything: product, information material replenishment, services.Check for direction by aligning activities with long-term business directionAct: Take actions to sustain and accelerate improvement activities

Source: www.leanbreakthru.com

Similarity between 3 Gs and MBWAThe 3 G's (Gemba, Gembutsu, and Genjitsu, which translate into actual place, actual thing, and actual situation). In the early days of Hewlett-Packard (H-P), Dave Packard and Bill Hewlett devised an active management style that they called Management By Walking Around (MBWA). Senior H-P managers were seldom at their desks. They spent most of their days visiting employees, customers, and suppliers. This direct contact with key people provided them with a solid grounding from which viable strategies could be crafted.

5S: Workplace organization/Housekeeping5s: Important part of Kaizen/Lean ManufacturingThe S's stand for: Seiri - keep only what is absolutely necessary, get rid of things that you don't need, i.e. simplify or sort.Seiton - create a location for everything, i.e. organize or straighten.Seiso - clean everything and keep it clean, i.e. cleanliness or sweep.Seiketsu - implement Seiri, Seiton and Seiso plant wide, i.e. standardize.Shitsuke - assure that everyone continues to follow the rules of 5S, i.e. stick to it or self discipline.

5S in the US: Sort, Straighten, Sweep, Standardize, Self Disciple

5S + 1S (Safety) = 6S (Hytrol, etc)5S + 2S (Safety and Security) = 7 S (Agilent Technology that was part of Hewlett Packard)

5S5S is simple to begin and gives good benefits.

Each individual in an organization is asked to get rid of overburdening items.

Red tag attack: A red tag attack is the strategy of a group of people going through the plant and putting red tags on everything that has not been used within the last 30 days. The items that people feel are necessary to "hold on to" must be justified to their superior, or the item is taken out of the plant!

5S in a Factory

Factory tour: Toyota vs. others.

5S in OfficeBefore 5 S

After 5 S

Standard WorkWhen manpower, equipment, and materials are used in the most efficient combination, this is called Standard Work.There are three elements to Standard Work:1) Takt Time2) Work Sequence3) Standard Work-in-Process

Once a Standard Work is set, performance is measured and continuously improved.

The Importance of Standardized Work:

Without it, all improvement efforts using Kaizen to eliminate waste (muda) are not sustainable. You will go back to the original position before Kaizen.

Manufacturing Cell

Worker Routes Lengthened as Volume DecreasesFigure 11.4

Workload balancing

Aims at maximizing operator utilization based on the given takt time.Is the key to adjust JIT lines to demand fluctuationsRequires flexible operators

Production Line Balancing

Improving Lead Time:

Sheet1

1234567891011121314151617181920

Current Situation

Percent of Lead Time

5101520253035404550556065707580859095100

VANVA (Non Value Added)

Approach # 1: Reducing Value Added (VA) Time by 50%

VANVA

Approach # 2: Reducing Non Value Added (VA) Time by 50%

VANVA

Sheet2

Sheet3

Value Stream MappingSMWhat? Why?Who?When?Where?How?A visual tool for identifying all activities of the planning, and manufacturing process to identify waste.

Provides a tool to visualize what is otherwise usually invisible.

The leaders of each product family need to have a primary role in developing the maps for their own area.

Develop a current-state map before improvements are made so that the efforts and benefits can be quantified.

On the shop floor, not from your office. You need the real information, not opinion or old data.

Next page

Value Stream Map Symbols Spot weldABCplatingC/T = 30 secC/O = 10 min3 shifts2% scrap rateProcessFinishedgoodsVendorData box3,000 units= 1 dayInventoryPushSupermarket: the location of a predetermined standard inventoryPhysical pullMonandWedShipmentC/T = Cycle TimeC/O = Change over or setup time

Current Value Stream Map

Future Value Stream Map

Attributes of Lean Producers - theyuse JIT to eliminate inventorybuild systems to help employees product a perfect part every timereduce space requirementsdevelop close relationships with supplierseducate supplierseliminate all but value-added activitiesdevelop the workforcemake jobs more challengingreduce the number of job classes and build worker flexibilityapply Total Productive Maintenance (TPM)

The Five Steps of Lean Production/Toyota Production System Implementation

Step 1: Specify Value Define value from the perspective of the final customer. Express value in terms of a specific product, which meets the customer's needs at a specific price and at a specific time. Step 2: Value Stream Mapping.Identify the value stream, the set of all specific actions required to bring a specific product through the three critical management tasks of any business: the problem-solving task, the information management task, and the physical transformation task. Create a map of the Current State and the Future State of the value stream. Identify and categorize waste in the Current State, and eliminate it! Step 3: Create Continuous Flow Make the remaining steps in the value stream flow. Eliminate functional barriers and develop a product-focused organization that dramatically improves lead-time. Step 4: Create Pull Production Let the customer pull products as needed. Step 5: Perfection There is no end to the process of reducing effort, time, space, cost, and mistakes. Return to the first step and begin the next lean transformation, offering a product which is ever more nearly what the customer wants.

Comparison ofMRP (Material Requirements Planning), JIT, and TOC (Theory of Constraints)Loading of operations

Batch sizes

Importance of dataaccuracySpeed of scheduleddevelopmentFlexibilityCostGoals

Planning focusProduction basisChecked by capacityrequirementsPlanning afterwardOne week or more

Critical

Slow

LowestHighestMeet demandHave doable planMaster schedulePlanControlled by kanbansystem

Small as possible

Unnecessary

Very fast

HighestLowestMeet demandEliminate wasteFinal assembly scheduleNeedControlled bybottleneck operation

Variable to exploitconstraintCritical for bottleneckand feeder operations

Fast

ModerateModerateMeet demandMaximize profitsBottleneckNeed and planMRPJITTOC

***********************It would also be useful if you could have students develop a similar list for services.**************Students should be asked to draw their own connection between inventory and problems. Given that inventory exists in case of problems, if we wish to eliminate inventory, we also must eliminate problems. Again the notion that JIT is not simply an inventory methodology.**In discussing this slide, it is helpful to stress the caveat that JIT works given that other problems are solved. JIT not only requires the solution of other problems, it also helps in diagnosis.****The analogy presented in this and the next four slides may help to illustrate the action of inventory in hiding problems.***The next several slides look at the process and consequences of reducing inventory.***********************************************