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Just-In-Time (JIT) Manufacturing

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TYPICAL DECISION PROBLEM – (A Case Study of U S Filters) - Part I

TYPICAL DECISION PROBLEM – (A Case Study of U S Filters) - Part I

U.S. Filter is a major supplier of air filters for cars & trucks to the " big three” auto-makers in the United States. Recently they have received notice that Ford Motor Company, a major customer, is going to begin using a just-in-time approach to manufacturing. After meeting with Ford, Joe Franks, the president of U.S Filter, commented on the situation as follows-

They want us begin delivering filters four times a day in small quantities. Presently, we send them about one truck load a week. Are three guys crazy? The freight alone is going to cost a fortune.

Ford also wants a long-range contract with us as a sole source. I like that idea, but the catch is that we must guarantee a 2 % price reduction each year. How in the world can we do that with inflation, higher wages, and the price increases of every year?

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Ford also wants to see our cost records for the filters before negotiating prices with us. It will be a cold day before I let them go through our cost records. They also want us to ensure perfect quality and deliver directly to their assembly line without receiving or inspection. That is probably a good thing for our company; we should be producing perfect quality anyway, but how are we going to do it?

I would certainly like to know how we are going to meet these demands from Ford. What they are asking seems unreasonable to me.

Q: If you are made to occupy the chair of Mr. Joe Frank, what is your decision -

To accept the supply terms of Fords ? Or to forego the big order?

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U S Filters – Part II At this point, Dona Smith –V P (Mfg.) offered a comment :

U S Filters – Part II At this point, Dona Smith –V P (Mfg.) offered a comment :

If you can't beat them , join them. May be we should go to a JIT system too.

I have been doing some reading about JIT and have talked to several people, including Ford, and it seems to me we may be able to gain the productivity improvements and price decreases - they are asking for if we also adopt a JIT system. As a matter of fact, we could improve our ROI substantially even with these changes. Ford will stabilize their schedule, which will help us. We have to request Ford to arrange a co-operative round robin “milk-run pick-up” for all suppliers in our area to help reduce costs.

We will have to also convince our other customers to go along with a stable schedule and convince our suppliers to accept a program similar to the one Fordis shoving down our throats, I don't think we have any choice but to go along with this JIT approach. It seems like the wave of the future. Some of our other customers, like Caterpillar, Cummins Engine, and General Motors are also talking about JIT, so Ford may be only the first one to make these demands.

It will take some major changes in our company, however, to do it. We will need to revolutionize the way we manufacture our products, much greater team work and coordination since inventory is not available to cover up problems in the system

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OverviewOverview

The Just-in-Time (JIT) Manufacturing Philosophy

Prerequisites for JIT Manufacturing

Elements of JIT Manufacturing

Benefits of JIT Manufacturing

Success and JIT Manufacturing

Wrap-Up: What World-Class Producers Do

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Where is Inventory reflected ?Where is Inventory reflected ?

Liabilities

Share CapitalReserves

Loans & Borrowings

Current Liabilities

Assets

Fixed Assets – Land, Bldg., M/c

Current Assets Cash Inventory ------

Gross Sale - XXXXX

Expences – Manufacturing -

Raw Mat.Wage BillStores & SparesOther Factory Exp.

Sales & marketing – Administrative Exp.

Interest

Depreciation --------------

Gross Profit

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APICS Definition of JITAPICS Definition of JIT

“A philosophy of manufacturing based on planned

elimination of waste and continuous improvement

of productivity.…... ”

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APICS Definition of JITAPICS Definition of JIT

“The primary elements of Just-in-Time are to: have only the required inventory when needed, improve quality to zero defects, reduce lead times by reducing setup times,

queue lengths, and lot sizes, incrementally revise the operations themselves,

and accomplish these things at minimum cost”.

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JIT SynonymsJIT Synonyms

IBM - Continuous Flow Manufacturing HP - Stockless Production

Repetitive Manufacturing System GE - Management by Sight Boeing - Lean Manufacturing Motorola - Short Cycle Manufacturing Japanese - The Toyota System

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Traditional View of ManufacturingTraditional View of Manufacturing

Key objective : to fully utilize capacity, produce

more with fewer workers and machines. How? : With large queues of in-process inventory

waiting at work centers. Workers and machines never had to wait.

Result:

Products / Materials spent most time just waiting,

that is unacceptable in today’s time-based competition.

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Time-Based CompetitionTime-Based Competition

It is not enough to be high-quality and low-cost

producers.

Today, the firm must also be first in getting products

and services to the customer fast.

To compete in this new environment, the order-to-

delivery cycle must be drastically reduced.

JIT is the weapon of choice today to reduce the

elapsed time of this cycle.

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JIT Manufacturing PhilosophyJIT Manufacturing Philosophy

The main objective of JIT manufacturing is to reduce manufacturing lead times.

This is primarily achieved by drastic reductions in work-in-process (WIP).

The result is a smooth, uninterrupted flow of small lots of products throughout production.

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Successful JIT ApplicationsSuccessful JIT Applications

Most successful JIT applications have been in repetitive manufacturing, (batches of std. products, at high speeds and volumes)

Successful use of JIT is rare in large, highly complex job shops where production planning and control is extremely complicated.

Smaller, less complex job shops have used JIT, but operations have been changed so that they behave somewhat like repetitive manufacturing.

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From To

Batch production Flow production

Push Scheduling Pull Scheduling

OBJECTIVES IS ONE PIECE FLOW

FLOW PRODUCTION EXPOSES WASTE

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Changes Required for JITChanges Required for JIT

JIT requires certain changes to the factory and the way it is managed:

Stabilize production schedules Improve product quality Cross-train workers Reduce equipment breakdowns Develop long-term supplier relations

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Elements of JIT ManufacturingElements of JIT Manufacturing

Eliminating waste / Reducing inventories Enforce problem solving and cont. improvement People make JIT work : Employee Empowerment Total Quality Management (TQM) Parallel processing Kanban production control JIT purchasing Working toward repetitive manufacturing

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Shigeo (1981)7 Wastes & their elimination methods

Shigeo (1981)7 Wastes & their elimination methods

Waste Type Elimination Method

1. Overproduction Reducing set-up time, Synchronizing quantities and timing between processes, etc

2. Waiting Synchronizing workflow as much as possible, balancing uneven loads, etc.

3. Transportation Redesigning layouts to make transport and handling unnecessary.

4. Waste of processing itself

Need assessment of product and process.

5. Waste of stocks Reduce set-up times, and lead times by synchronizing workflows.

6. Waste of motion Study motion for economy and consistency.

7. Making defective parts

Prevent defects to eliminate inspection

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Problem Solving and Continuous ImprovementProblem Solving and Continuous Improvement

JIT is a system of enforced problem solving. One approach is to lower inventory gradually to

expose problems and force their solution. With no buffer inventories to offset production

interruptions, problems are highly visible and cannot be ignored.

The job of eliminating production problems is never finished.

Continuous improvement -- or kaizen -- is central to the philosophy of JIT.

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Uncovering Production ProblemsUncovering Production Problems

QualityProblems

MaterialShortages

MachineBreakdowns

WorkloadImbalances

WorkerAbsenteeism

Out-of-SpecMaterials

QualityProblems

In-ProcessInventory

ProductionProblems

We must lower the water level!

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People Make JIT WorkPeople Make JIT Work

Training and involvement of workers.

A culture of mutual trust and teamwork

An attitude of loyalty to the team and self-discipline.

Another crucial element is empowerment of workers,

- giving them the authority

to solve production problems.

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TQM and JITTQM and JIT

Long-term relationships with suppliers Certified suppliers eliminate incoming inspection Share design process for new products

Simplify design/processes Poka-yoke Process capable of meeting tolerances Operators responsible for quality of own work

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• Operations performed in series:

Op 1 Op 2 Op 3 Op 4 Op 5 Op 6 Op 7 Op 8

• Operations performed in parallel:Cycle Time for Each Operation = 1 HourTotal Product Cycle Time = 1 x 5 = 5 Hours

• Operations 2 and 4 start the

same time as Operation 1

Parallel ProcessingParallel Processing

Cycle Time for Each Operation = 1 HourTotal Product Cycle Time = 1 x 8 = 8 Hours

Op 1

Op 2

Op 3

Op 4Op 5

Op 6 Op 7 Op 8

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JIT: A Pull SystemJIT: A Pull System

In a push system, such as an MRP system, we look at the schedule/ forecast to determine what to produce next.

In a pull system, such as JIT, we look only at the next stage of production and determine what is needed there, and then we produce only that.

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Kanban Production ControlKanban Production Control

At the core of JIT manufacturing at Toyota is Kanban, an amazingly simple system of planning and controlling production.

Kanban, in Japanese, means card or marquee.

Kanban is the means of signaling to the upstream workstation that the downstream workstation is ready for the upstream workstation to produce another batch of parts.

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Kanbans and Other SignalsKanbans and Other Signals

There are two types of Kanban cards: a conveyance card (C-Kanban) a production card (P-Kanban)

Signals come in many forms other than cards, including:

an empty crate an empty designated location on the floor

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Conveyance KanbanConveyance Kanban

Conveyance Kanban Card

Part number to produce: M471-36 Part description: Valve Housing

Lot size needed: 40 Container type: RED Crate

Card number: 2 of 5 Retrieval storage location: NW53D

From work center: 22 To work center: 35

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Production KanbanProduction Kanban

Production Kanban Card

Part number to produce: M471-36 Part description: Valve Housing

Lot size needed: 40 Container type: RED crate

Card number: 4 of 5 Completed storage location: NW53D

From work center: 22 To work center: 35

Materials required:Material no. 744B Storage location: NW48CPart no. B238-5 Storage location: NW47B

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How Kanban OperatesHow Kanban Operates

When a worker at downstream Work Center #2 needs a

container of parts, she does the following: She takes the C-Kanban from the container she just

emptied. She finds a full container of the needed part in

storage. She places the C-Kanban in the full container and

removes the P-Kanban from the full container and places it on a post at Work Center #1.

She takes the full container of parts with its C-Kanban back to Work Center #2.

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Containers in a Kanban SystemContainers in a Kanban System

Kanban is based on the simple idea of replacement of containers of parts, one at a time.

Containers are reserved for specific parts, are purposely kept small, and always contain the same standard number of parts for each part number.

At Toyota the containers must not hold more than about 10% of a day’s requirements.

There is a minimum of two containers for each part number, one at the upstream “producing” work center and one at the downstream “using” work center.

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N = Total number of containers between 2 stationsU = Usage rate of downstream operationT = Average elapsed time for container to make entire cycleP = Policy variable indicating efficiency... 0 - 1C = Capacity (number of parts) of standard container

NUT P

C

( )1

Calculating the Number of Containersbetween Work Centers

Calculating the Number of Containersbetween Work Centers

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Example: Number of ContainersExample: Number of Containers

There are two adjacent work centers, one of which is fed parts from the other. The production rate of the using work center is 165 parts per hour. Each standard Kanban container holds 24 parts.

It takes an average of 0.6 hour for a container to make the entire cycle from the time it leaves the upstream center until it is returned, filled with parts, and leaves again. The efficiency of the system is observed to be 0.2.

How many containers are needed?

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Example: Number of ContainersExample: Number of Containers

Number of Containers, N

N = UT(1 + P) / C

= 165(0.6)(1 + 0.2) / 24

= 99(1.2) / 24

= 118.8 / 24

= 4.95 or 5 containers

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Essential Elements of JIT PurchasingEssential Elements of JIT Purchasing

Cooperative and long-term relationship between customer and supplier.

Supplier selection based not only on price, but also delivery schedules, product quality, and mutual trust.

Suppliers are usually located near the buyer’s factory. Shipments are delivered directly to the customer’s

production line. Parts are delivered in small, standard-size containers

with a minimum of paperwork and in exact quantities.

Delivered material is of near-perfect quality.

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Working Toward Repetitive ManufacturingWorking Toward Repetitive Manufacturing

Reduce setup times and lot sizes to reduce inventories Change factory layout to allow streamlined flows Convert process-focused layout to cellular

manufacturing (CM) centers Install flexible manufacturing systems (FMS) …..more

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Working Toward Repetitive ManufacturingWorking Toward Repetitive Manufacturing

Standardize parts designs Train workers for several jobs Implement preventive maintenance (PM) programs Install effective quality control programs Develop an effective subcontractor network

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Benefits of JITBenefits of JIT

Inventory levels are drastically reduced: frees up working capital for other projects less space is needed customer responsiveness increases

Total product cycle time drops Product quality is improved Scrap and rework costs go down Forces managers to fix problems and eliminate

waste .... or it won’t work!

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Wrap-Up: World-Class PracticeWrap-Up: World-Class Practice

Focus on time-based competition to capture market share

JIT method to reduce order-to-delivery cycle Prerequisites required to successfully implement JIT:

behave like repetitive manufacturing stable schedules