ch07 Operational Management Class Notes

Operations Management
Seventh Edition
R. Dan Reid & Nada R. Sanders
Chapter 7
Just-in-Time and Lean Systems
©2020 John Wiley & Sons, Inc. All rights reserved.

Learning Objectives 1−4
1. Explain the core beliefs of the just-in-time (JIT) philosophy.

2. Describe the elements of JIT.
3. Explain the key elements of JIT manufacturing.
4. Explain the elements of total quality management (TQM) and
their role in JIT.
©2020 John Wiley & Sons, Inc. All rights reserved. 2

Learning Objectives 5−8
5. Describe the role of people in JIT and why respect for people is so
important.
6. Describe the benefits of JIT.
7. Discuss the implementation process of a successful JIT system.
8. Describe the impact of JIT on service and manufacturing
organizations.
©2020 John Wiley & Sons, Inc. All rights reserved. 3

Learning Objective 1
Explain the core beliefs of the just-in-time (JIT) philosophy.
LO 1 ©2020 John Wiley & Sons, Inc. All rights reserved. 4

Just-in-Time (JIT)
• JIT philosophy means getting the right quantity of goods at the

right place and the right time.
• JIT exceeds the concept of inventory reduction; it is an all-
encompassing philosophy geared to eliminate waste — anything
that does not add value.
• A broad JIT view — or lean production/lean systems — is one that
encompasses the entire organization.

Philosophy of JIT
• JIT originated in Japan at Toyota Motor Co., fueled by a need to

survive the devastation following WWII.
• JIT gained worldwide prominence in the 1970s.
• Often termed lean production or lean systems.
• The central belief of the JIT philosophy is elimination of waste.

Defining Beliefs of JIT
• Everyone should have a broad view of the organization and work

toward the same goal, which is serving the customer.
• JIT is built on simplicity — simpler is better.
• Continuous improvement — often using “kaizen blitz”.
• Visibility — all waste must be visible to be identified and eliminated.
• Flexibility — an organizational strategy in which the company attempts
to offer a greater variety of product choices to its customers.

Describe the elements of JIT.

The Three Elements of JIT: Figure 7.1

Elements of JIT
• JIT manufacturing focuses on production systems to achieve

value-added manufacturing.
• TQM is an integrated effort designed to improve quality
performance at every level.
• Respect for people rests on the philosophy that human
resources are an essential part of JIT philosophy.

Role of Inventory Reduction
• Inventory reduction – lower setup times and shorter lead times

• Inventory hides problems
FIGURE 7.2
Inventory
hides
problems

Explain the key elements of JIT manufacturing.

Elements of JIT Manufacturing
• JIT Manufacturing is a philosophy of value-added manufacturing.

• Achieved by focusing on these elements:
o Kanbans and pull systems
o small lot sizes and quick setups
o uniform plant loading
o flexible resources
o efficient facility layouts

JIT Manufacturing: The Pull System
FIGURE 7.3 The

pull system
with two
kanban cards

Number of Kanbans Required
DT + S
N=
C
where
N = total number of kanbans or containers (one card per container)
D = demand rate at a using workstation
T = the time it takes to receive an order from the previous workstation (also
called the lead time)
C = size of container
S = safety stock to protect against variability or uncertainty in the system
(usually given as a percentage of demand during lead time.

Computing the Number of Kanbans
Jordan Tucker works for a production facility that makes aspirin. His job is to fill the bottles
of aspirin, and he is expected to process 200 bottles of aspirin an hour. The facility where
Jordan works uses a kanban production system in which each container holds 25 bottles. It
takes 30 minutes for Jordan to receive the bottles he needs from the previous workstation.
The factory sets safety stock at 10 percent of demand during lead time. How many kanbans
are needed for the filling process?
Solution:
D = 200 bottles per hour
T = 30 minutes = 0.5 hour
C = 25 bottles per container
S = 0.10(demand)(T) = 0.10(200)(0.5) = 10 bottles
DT + S (200)(0.5) + 10
N= = = 4.4 kanban containers
C 25
Question: round up or down?
Tip: round up = would provide additional slack

round down = need to make improvements in operations
Variations on Kanban Production
• Kanban square FIGURE 7.4 A

o kanban square
space on factory floor for storing
supplies
• Flags (signal kanban)
o used to indicate when supplies need
to be ordered
• Supplier kanbans
o bring filled containers to point of
usage in factory/pick up empty
containers
FIGURE 7.5 A
signal kanban

Small Lot Sizes and Quick Setups
• Small lots mean less average inventory and shorten manufacturing lead time.
• Small lots with shorter setup times increase flexibility to respond to demand
changes.
• Strive for single digit setups — < 10 minutes.
• Setup reduction process is well-documented.
o External setup: do as much preparation as possible while present job is still
running.
o Internal setup: simplify, eliminate, shorten steps involved with location,
clamping, and adjustments; requires the machine to be stopped.
• Ultimate goal is single-unit lot sizes.

Uniform Plant Loading
• A “level” schedule is developed so that the same mix of products is made

every day in small quantities.
• Leveling the schedule can have big impact along the whole supply chain.
Traditional Traditional Traditional Traditional Traditional
Production Plan Production Plan Production Plan Production Plan Production Plan
Monday Tuesday Wednesday Thursday Friday
TABLE 7.1 Contrasting Level versus AAAAA BBBBB BBBBB DDDDD EEEEE
Traditional Production AAAAA BBBBB BBBBB CCCCC EEEEE
Weekly Production Requirements JIT Production JIT Production JIT Production JIT Production JIT Production
by Product with Level with Level with Level with Level with Level
Scheduling Scheduling Scheduling Scheduling Scheduling
A: 10 units/week Monday Tuesday Wednesday Thursday Friday
B: 20 units/week AABBBB AABBBB AABBBB AABBBB AABBBB
C: 5 units/week CDEE CDEE CDEE CDEE CDEE
Time Time Time Time Time
D: 5 units/week
E: 10 units/week

Flexible Resources
• Moveable, general-purpose equipment:

o portable equipment with plug-in power/air
o drills, lathes, printer-fax-copiers, etc.
o capable of being set up to do many different things with minimal setup
time
• Multifunction workers:
o workers assume considerable responsibility
o cross-trained to perform several different duties
o trained to also be problem solvers

Facility Layouts
• Workstations in close physical proximity to reduce transport and

movement.
• Streamlined flow of material.
• Often use:
o Cell manufacturing
• Placement of dissimilar machines and equipment together to produce a
family of products with similar processing requirements.
o U-shaped lines
• Allow material handler to quickly drop off materials and pick up finished
work; flexibility.

Facility Layouts: Figures
FIGURE 7.6 Traditional
versus cell manufacturing

Explain the elements of total quality management (TQM) and their

role in JIT.

TQM
• Product versus process • Preventative maintenance

o Quality in JIT is centered on o Regular inspections and
building quality into the maintenance to keep
machines operational
process. • Costly, but less expensive than
• Quality at the source: unexpected machine
breakage
sequential inspection
o Jidoka — authority to stop • Work environment
line o Perform maintenance as
part of regular work
o Poka-yoke — foolproof o Care of equipment and well-
devices or mechanisms trained workers are very
important
LO4 ©2020 John Wiley & Sons, Inc. All rights reserved. 24
TQM, Table 7.2
TABLE 7.2 Strategy for Quality Improvement

Step 1: Define quality as seen by the customer.
Step 2: Translate customer needs into measurable terms.
Step 3: Measure quality on an ongoing basis.
Step 4: Set improvement targets and deadlines.
Step 5: Develop a systematic method for improvement.

Describe the role of people in JIT and why respect for people is
so important.

Respect for People: The Role of Production Employees
• Genuine and meaningful respect for employees.

• Willingness to develop cross-functional skills.
• Associates gather performance data; make production and quality
decisions.
• Bottom-round management
o Consensus management by committees or teams.
• Quality circles
o Small volunteer teams that solve quality problems.
• Everyone is responsible for quality and preventive maintenance.

Role of Production Employees in JIT
TABLE 7.3 Role of Production Employees in JIT
• Workers have cross-functional skills.

• Workers are actively engaged in solving production and quality problems.
• Workers are empowered to make production and quality decisions.
• Quality is everyone’s responsibility.
• Workers are responsible for recording and visually displaying performance data.
• Workers work in teams to solve problems.
• Decisions are made through bottom-round management.
• Workers are responsible for preventive maintenance.

Respect for People: Lifetime Employment
• Everyone feels secure/is empowered.

• Everyone is responsible for quality: understand both internal and
external customer needs.

Respect for People: The Role of Management
• Responsible for culture of mutual trust.

• Serve as coaches and facilitators:
o responsible for developing workers
o provide multi-functional training
o facilitate teamwork
• Support culture with appropriate incentive system, including
nonmonetary rewards.

Respect for People: Supplier Relationships
• Suppliers are viewed as the external factory.

• Single-source suppliers:
o can supply entire family of parts
• Build long-term relationships with small number of suppliers:
o suppliers locate near customer
o fewer contracts
o cost and information sharing
o work together to certify processes

Describe the benefits of JIT.

Benefits of JIT
• Reduction in inventories
• Improved quality
• Reduced space requirements
• Shorter lead times
• Lower production costs
• Increased productivity
• Increased machine utilization
• Greater flexibility

Discuss the implementation process of a successful JIT system.

Implementing JIT
• Starts with a company’s shared vision of where it is and where

it wants to go.
• Management needs to create the right atmosphere.
• Implementation needs a designated “champion”.

Implementing JIT: Sequence of Steps
Implement the sequence of seven steps:

1. Make quality improvements.
2. Reorganize workplace.
3. Reduce setup times.
4. Reduce lot sizes and lead times.
5. Implement layout changes.
6. Switch to pull production.
7. Develop relationship with suppliers.

Describe the impact of JIT on service and manufacturing

organizations.

JIT in Services
Many JIT concepts also apply to service companies:

• improved quality such as timeliness, service consistency, and
courtesy
• uniform facility loading to provide better service responsiveness
• use of multifunction workers
• reduction in cycle time
• minimizing setup times and parallel processing
• workplace organization

JIT and Lean Systems: How It All Fits Together
JIT: an overriding philosophy that affects all other business

decisions.
• Quality improvements (Chapters 5 and 6)
• Partnering with suppliers (Chapter 4)
• Changing job designs (Chapter 11)
• Facility layout (Chapter 10)
• Changes in production process (Chapter 3)
• Changes in inventory (Chapter 12)

JIT across the Organization
JIT eliminates organizational barriers and improves communications.

• JIT requires accounting to use activity-based costing rather than more
traditional methods to allocate overhead.
• Marketing plays a large role in JIT, as the interface with customers
becomes more important.
• Finance approves and evaluates financial investments.
• Information systems create the network of information necessary
for JIT to function.

Chapter 7 Highlights (LO 1–2)
• JIT is a philosophy that was developed by the Toyota Motor

Company in the mid-1970s. It has become the standard for many
industries by focusing on simplicity, eliminating waste, taking a
broad view of operations, visibility, and flexibility. Three key
elements of this philosophy are JIT manufacturing, total quality
management, and respect for people.
o JIT views waste as anything that does not add value.
• Three key elements of this philosophy are JIT manufacturing, total
quality management, and respect for people.

Chapter 7 Highlights (LO 3)
• Traditional manufacturing systems use “push” production; JIT uses

“pull” production. Push systems anticipate future demand and
produce in advance in order to have products in place when
demand occurs. Pull systems work backwards. The last workstation
in the production line requests the precise amounts of materials
required.
o JIT manufacturing is a coordinated production system that enables
the right quantities of parts to arrive when/where they are needed.
Key elements of JIT manufacturing are the pull system and kanban
production, small lot sizes and quick setups, uniform plant loading,
flexible resources, and streamlined layout.
• TQM creates an organizational culture that defines quality as seen

by the customer. The concepts of continuous improvement and
quality at the source are integral to allowing for continual growth
and the goal of identifying the causes of quality problems.
• JIT considers people to be the organization’s most important
resource. All employees are highly valued members of the
organization. Workers are empowered to make decisions and are
rewarded for their efforts. Team efforts make possible cross-
functional and multilayer coordination.

Chapter 7 Highlights (LO 6)
• Implementing JIT can bring numerous benefits to companies. They

include reductions in inventory, improvements in quality, reducing
space requirements, shorter lead times, lower production costs,
increases in productivity, better machine utilization, and greater
flexibility.

• JIT success is dependent on interfunctional coordination and

effort.
• JIT is equally applicable in service organizations, particularly with
the push toward time-based competition and the need to cut
costs.

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©2020 John Wiley & Sons, Inc. All rights reserved.

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Operations Management

Just-in-Time and Lean Systems

©2020 John Wiley & Sons, Inc. All rights reserved.

1. Explain the core beliefs of the just-in-time (JIT) philosophy.

©2020 John Wiley & Sons, Inc. All rights reserved. 2

©2020 John Wiley & Sons, Inc. All rights reserved. 3

Explain the core beliefs of the just-in-time (JIT) philosophy.

LO 1 ©2020 John Wiley & Sons, Inc. All rights reserved. 4

• JIT philosophy means getting the right quantity of goods at the

LO 1 ©2020 John Wiley & Sons, Inc. All rights reserved. 5

• JIT originated in Japan at Toyota Motor Co., fueled by a need to

LO 1 ©2020 John Wiley & Sons, Inc. All rights reserved. 6

• Everyone should have a broad view of the organization and work

LO 1 ©2020 John Wiley & Sons, Inc. All rights reserved. 7

Describe the elements of JIT.

LO 2 ©2020 John Wiley & Sons, Inc. All rights reserved. 8

LO 2 ©2020 John Wiley & Sons, Inc. All rights reserved. 9

• JIT manufacturing focuses on production systems to achieve

LO 2 ©2020 John Wiley & Sons, Inc. All rights reserved. 10

• Inventory reduction – lower setup times and shorter lead times

LO 2 ©2020 John Wiley & Sons, Inc. All rights reserved. 11

Explain the key elements of JIT manufacturing.

LO 3 ©2020 John Wiley & Sons, Inc. All rights reserved. 12

• JIT Manufacturing is a philosophy of value-added manufacturing.

LO 3 ©2020 John Wiley & Sons, Inc. All rights reserved. 13

FIGURE 7.3 The

LO 3 ©2020 John Wiley & Sons, Inc. All rights reserved. 14

LO 3 ©2020 John Wiley & Sons, Inc. All rights reserved. 15

Tip: round up = would provide additional slack

• Kanban square FIGURE 7.4 A

LO 3 ©2020 John Wiley & Sons, Inc. All rights reserved. 17

LO 3 ©2020 John Wiley & Sons, Inc. All rights reserved. 18

• A “level” schedule is developed so that the same mix of products is made

LO 3 ©2020 John Wiley & Sons, Inc. All rights reserved. 19

• Moveable, general-purpose equipment:

LO 3 ©2020 John Wiley & Sons, Inc. All rights reserved. 20

• Workstations in close physical proximity to reduce transport and

LO 3 ©2020 John Wiley & Sons, Inc. All rights reserved. 21

LO 3 ©2020 John Wiley & Sons, Inc. All rights reserved. 22

Explain the elements of total quality management (TQM) and their

LO 4 ©2020 John Wiley & Sons, Inc. All rights reserved. 23

• Product versus process • Preventative maintenance

TABLE 7.2 Strategy for Quality Improvement

LO 4 ©2020 John Wiley & Sons, Inc. All rights reserved. 25

LO 5 ©2020 John Wiley & Sons, Inc. All rights reserved. 26

• Genuine and meaningful respect for employees.

LO 5 ©2020 John Wiley & Sons, Inc. All rights reserved. 27

TABLE 7.3 Role of Production Employees in JIT

• Workers have cross-functional skills.

LO 5 ©2020 John Wiley & Sons, Inc. All rights reserved. 28

• Everyone feels secure/is empowered.

LO 5 ©2020 John Wiley & Sons, Inc. All rights reserved. 29

• Responsible for culture of mutual trust.

LO 5 ©2020 John Wiley & Sons, Inc. All rights reserved. 30

• Suppliers are viewed as the external factory.

LO 5 ©2020 John Wiley & Sons, Inc. All rights reserved. 31

Describe the benefits of JIT.

LO 6 ©2020 John Wiley & Sons, Inc. All rights reserved. 32