just-in-time and lean production...
TRANSCRIPT
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Supply Chain Management
Just-in-Time and Lean Production Systems
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Ultimate goal = minimize waste
Waste is ‘anything other than
the minimum amount of
equipment, materials, parts,
space, and worker’s time,
which are absolutely essential
to add value to the product.’
— Shoichiro Toyoda
President, Toyota © 1995 Corel Corp.
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What is Just-in-Time?
• Management philosophy of continuous and forced problem solving
• Supplies and components are ‘pulled’ through system to arrive where they are needed when they are needed.
• Push 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
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Lean Production
• Lean Production supplies customers with exactly what the customer wants, when the customer wants, without waste, through continuous improvement.
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What Does Just-in-Time Do? • Attacks waste
– Anything not adding value to the product • From the customer’s perspective
• Exposes problems and bottlenecks caused by variability – Deviation from optimum
• Achieves streamlined production – By reducing inventory
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Types of Waste
• Overproduction
• Waiting
• Transportation
• Inefficient processing
• Inventory
• Unnecessary motion
• Product defects © 1995
Corel
Corp.
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Waste Reduction (%)
82%
50%
50%
30%
30%
20%
40%
0% 20% 40% 60% 80% 100%
Work-in-Process
Inventory
Raw Material
Inventory
Lead Time
Space
Finished Goods
Inventory
Scrap
Setup Time
JIT Reduced Waste at Hewlett-Packard
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Variability Occurs Because...
• Employees, machines, and suppliers produce units that do not conform to standards, are late, or are not the proper quantity
• Engineering drawings or specifications are inaccurate
• Production personnel try to produce before drawings or specifications are complete
• Customer demands are unknown
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Suppliers
Preventive
Maintenance
Layout
Inventory
Scheduling
Quality
Employee
Empowerment
JIT
Just-in-Time Success Factors
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Streamlined Production
Flow with JIT
Traditional Flow
Customers Suppliers
Customers
Suppliers
Production Process (stream of water)
Inventory (stagnant ponds) Material
(water in
stream)
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Inventory
• Traditional: inventory exists in case problems arise
• JIT objective: eliminate inventory
• JIT requires – Small lot sizes – Low setup time – Containers for fixed number of parts
• JIT inventory: Minimum inventory to keep system running
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Scrap
Work in process inventory level
(hides problems)
Unreliable
Vendors
Capacity
Imbalances
Lowering Inventory Reduces Waste
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Scrap
Reducing inventory reveals
problems so they can be solved.
Unreliable
Vendors
Capacity
Imbalances
WIP
Lowering Inventory Reduces Waste
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Scrap
Reducing inventory reveals
problems so they can be solved.
Unreliable
Vendors
Capacity
Imbalances
WIP
Lowering Inventory Reduces Waste
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Customer
orders 10
Lot size = 5
Lot 1 Lot 2
Lot size = 2
Lot 1 Lot 2 Lot 3 Lot 4 Lot 5
Reducing Lot Sizes Increases the Number of Lots
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…Which Increases Inventory Costs
Lot Size
Cost
Setup Cost
Optimal
Lot Size
Smaller
Lot Size
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Unless Setup Costs are Reduced
Lot Size
Cost
Setup Cost
Original optimal lot size
New optimal
lot size
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Frequent Orders can Reduce Average Inventory
Time
Inve
ntor
y 10
0 20
0 Q1 When average order size = 200,
average inventory is 100
Q2 When average order size = 100,
average inventory is 50
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Lower Total Cost Requires Small Lot Sizes and Lower Setup Costs
Lot size
Sum of ordering
and holding cost
T1
T2
S2
S1
Cos
t