9 Just-In-Time and Lean Systems
Note: This chapter is adapted from (https://pressbooks.nscc.ca/operationsmanagement2/chapter/unit-6-just-in-time-and-lean-systems/)
Would you order a delivery pizza for dinner from a restaurant advertising delivery in 6 hours? How about a restaurant that can bring you a cold, stale pizza in only 5-minutes? To meet the consumer’s needs, the pizza shop must be able to give customers the number of pizzas they want when they want it. Preparing pizzas in advance is too wasteful because most consumers are not likely to buy a stale pizza. Meanwhile, if you take too long to deliver the pizza, you will lose customers to a more responsive competitor. The concept of just-in-time focuses on making what you need to meet customer demand only when you need it. For a pizza delivery shop, that probably means a fresh pizza at the customer’s door in around 30 minutes. This philosophy can apply to a range of operations, from simply washing a car to manufacturing a complex aircraft.
Similarly, the concept of lean manufacturing refers to eliminating waste in the manufacturing process. The Toyota Product System is the model for modern manufacturers that want to control waste. In this unit, we will look at seven types of waste and processes for controlling them. In addition, we will explore the origins of the “Just-in-Time” (JIT) philosophy and the use of pull systems to control inventory.
Lean Manufacturing and Control
Activity
Please watch the following video. In this video, you come across some definitions and tools used in Lean Manufacturing, and how their application in a real company has helped the company improve their performance while making a better use of the limited space that they had available.
Lean control, or simply lean, has become an immensely popular business control and improvement methodology in recent years. Lean control is a highly refined example of nonfinancial controls in action. Lean is a system of nonfinancial controls used to improve product and service quality and decrease waste. Lean was initially focused on improving manufacturing operations but is now used to improve product development, order processing, and a variety of other nonmanufacturing processes (sometimes called “lean in the office”).
Lean’s popularity has both resulted from, and been driven by, an explosion in the volume of lean-related educational resources. Amazon offers almost 1,800 books and other materials about lean, and Yahoo! hosts over 90 online discussion groups relating to lean. Colleges and universities, industry trade associations, and private consulting firms routinely offer courses, seminars, and conferences to explain what lean is and how to use it.
Lean control is a number of things. According to James Womack, “it is a process for measuring and reducing inventory and streamlining production. It is a means for changing the way a company measures plant performance. It is a knowledge-based system. It takes years of hard work, preparation and support from upper management. Lean is so named because it purports to use much less of certain resources (space, inventory, workers, etc.) than is used by normal mass-production systems to produce comparable output.” The term came into widespread use with the 1990 publication of the book The Machine That Changed the World, by James P. Womack, Daniel T. Jones, and Daniel Roos. [1]
Lean will always be associated with Toyota Motor Corporation because most lean tools and techniques were developed by Toyota in Japan beginning in the 1950s. After World War II, Toyota’s leaders were determined to make the company a full-range car and truck manufacturing enterprise, but they faced several serious challenges. The Japanese motor vehicle market was small and yet demanded a fairly wide range of vehicle types. This meant that Toyota needed to find a way to earn a profit while manufacturing a variety of vehicles in low volumes. In addition, capital was extremely scarce, which made it impossible for Toyota to make large purchases of the latest production equipment. To succeed, or even survive, Toyota needed a way to build vehicles that would require fewer resources. To achieve this goal, Toyota’s leaders, principally Eiji Toyoda and Taiichi Ohno, began to create and implement the production techniques and tools that came to be known as lean.
To gain the most benefits from lean, managers must be able to determine what specific lean tools and techniques will be effective in their particular business. And to make that determination, they must clearly understand what lean is designed to accomplish (its primary objectives) and what core principles lean is based on. With this understanding, managers can decide which lean tools will work well in their business, which lean tools will need to be modified or adapted to work well, and which tools are simply not appropriate.
What, then, are the major objectives and core principles of lean? Despite the arguments and debates that often surround attempts to define and describe lean, it is clear that the ultimate objective of lean is the avoidance of muda, or wasteful activity, in all business operations. Muda comprises seven deadly wastes. In the lean world, waste means any activity or condition that consumes resources but creates no value for customers. Therefore, seven deadly wastes include the following:
- Defects prevent the customer from accepting the product produced. The effort to create these defects is wasted. New waste management processes must be added in an effort to reclaim some value for the otherwise scrap product.
- Over-production is the production or acquisition of items before they are actually required. It is the most dangerous waste of the company because it hides the production problems. Over-production must be stored, managed, and protected.
- Transportation is a cost with no added value. In addition, each time a product is moved it stands the risk of being damaged, lost, and delayed. Transportation does not transform the product in any way that the consumer is willing to pay for.
- Waiting refers to both the time spent by the workers waiting for resources to arrive, the queue for their products to empty as well as the capital sunk in goods and services that are not yet delivered to the customer. It is often the case that there are processes to manage this waiting.
- Inventory in the form of raw materials, work-in-progress, or finished goods represents a capital outlay that has not yet produced an income either by the producer or for the consumer. Any of these three items not being actively processed to add value is waste.
- Motion refers to the actions performed by the producer, worker, or equipment. Motion has significance to damage, wear, and safety. It also includes the fixed assets and expenses incurred in the production process.
- Over-processing is defined as using a more expensive or otherwise valuable resource than is needed for the task or adding features that are designed for but unneeded by the customer. There is a particular problem with this item regarding people. People may need to perform tasks that they are overqualified for to maintain their competency. This training cost can be used to offset the waste associated with over-processing.
The Five Core Principles of Lean
Lean methodologies are lean because they enable a business to do more with less. A lean organization uses less human effort, less equipment, less facilities space, less time, and less capital—while always coming closer to meeting customers’ exact needs. Therefore, lean is not just another cost-cutting program of the kind we often see in business organizations. Lean is much more about the conservation of valuable resources than it is about cost cutting.
In their best-selling book, Lean Thinking, James Womack and Daniel Jones identified five core principles of lean.[2]
Let’s examine them one by one:
Define Value from the Customer’s Perspective
The first core principle in the Womack/Jones lean framework is that value must be defined and specified from the customer’s perspective. While this seems simple enough, it requires much more than high-sounding, generic statements. To be meaningful, value must be defined in terms of specific products. This means that managers must understand how each specific product meets the needs of specific customers at a specific price and at a specific time.
Describe the Value Stream for Each Product or Service
The second core principle of lean is to describe the value stream for each product or service (or, in some cases, for groups or families of similar products). The value stream is the set of activities that the business is performing to bring a finished product to a customer. It includes both direct manufacturing activities and indirect activities such as order processing, purchasing, and materials management. Developing a detailed description or map of each value stream usually reveals huge amounts of waste. It enables managers to identify which value stream activities add value to the product, which activities add no value but cannot be immediately eliminated for various reasons, and which activities create no value and can be immediately eliminated (or at least reduced substantially).
Create Flow in Each Value Stream
The third essential principle of lean is embodied in the word flow. When a value stream has been completely described as unnecessary, non-value-adding activities have been eliminated, the basic idea of flow is to arrange the remaining activities sequentially, so that products will move smoothly and continuously from one activity to the next. However, flow means more than ease of movement. Flow is the lean principle that directly challenges the traditional “batch-and-queue” model of manufacturing, where people and equipment are organized and located by function, and products (and component parts) are manufactured in large batches. Lean organizations strive to improve flow by reducing the size of production batches, and in the process, they increase flexibility and lower costs.
Produce at the Pace (Pull) of Actual Customer Demand
Producing at the pace or pull of actual customer demand is the fourth key principle of lean. One of the greatest benefits of moving from traditional batch-and-queue manufacturing to continuous flow production is that lead times fall dramatically. Reduced lead times and increased flexibility mean that lean organizations can respond to actual customer demand rather than attempt to predict in advance what that level of demand will be. This allows lean organizations to substantially lower both finished goods and work-in-process inventories.
Strive to Continuously Improve All Business Operations
The fifth core principle of lean is continuous improvement, expressed in Japanese by the word kaizen. Companies that implement lean adopt the mind-set that it is always possible to improve any business activity, and they regularly conduct kaizen events throughout their organizations to improve specific processes or operations. Today, Toyota is recognized as one of the most “lean” business enterprises in the world. Even more daunting, and humbling, is the fact that Toyota is still striving to improve.
Just-In-Time (JIT) Systems
Just-in-time (JIT) is a management philosophy that originated in the 1970s. Taiichi Ohno is credited with developing JIT and perfecting it for Toyota’s manufacturing plants in Japan. The main goal of JIT is to eliminate anything that does not add value from the customer’s perspective. Non-value-added activities are referred to as “waste” in JIT. Examples of waste include:
- overproduction beyond what is needed to satisfy immediate demand
- waiting time (work-in-process, customer waiting)
- unnecessary transportation (material handling, customer travel through a facility, etc.)
- processing waste (yield rates, start-up costs)
- inventory storage waste (space, deterioration, obsolescence, etc.)
- unnecessary motion and activity (waste in work techniques, etc.)
- waste from product and service defects (rework, scrap, warranty, etc.)
There are three essential elements that contribute to the successful practice of JIT:
- JIT manufacturing principles
- Total Quality Management (TQM)
- employee empowerment
JIT manufacturing principles
There are several JIT principles that are applied in a manufacturing setting. The following are some of these main principles:
- Inventory reduction to expose waste
- Use of a “demand-pull” production system
- Quick setups to reduce lot sizes
- Flexible resources
- Cellular layouts
Inventory reduction to expose waste
Inventory covers up a lot of wasteful practices (poor equipment, weak vendors, bad quality, long setup times, etc.). By gradually lowering inventory, the weaknesses of the production system can be revealed and addressed one by one. Machines can be replaced or better maintained, vendors quality and delivery can be improved, machine setup procedures can be streamlined, quality practices can be implemented, and labor and equipment can be laid out more efficiently. These improvements allow the organization to operate with less inventory, less costs, and faster response times in meeting customer needs.
Demand-pull production system
The traditional approach to manufacturing management promotes a strong focus on machine and labor utilization. The view was that if managers make sure that workers and machines are always busy, then surely, the factory will be productive and efficient. This approach is called the “push” system of manufacturing, where raw material and work-in-process are continuously pushed through the factory in the pursuit of high utilization. The problem with this approach is that it usually produces high levels of inventories, long lead times, overtime costs, high levels of potential rework, and workers who are competing with one another rather than working cooperatively.
In contrast to the push system, JIT applies a “demand-pull” system that operates on the rule that work should flow to a work center only if that work center needs more work. If a work center is already occupied with work activity, the upstream work center should stop production until the downstream work center communicates a need for more material. The emphasis on maintaining high utilization is removed in a JIT environment. The focus of a JIT environment is on addressing the challenges that affect the overall effectiveness of the factory in meeting its strategic goals (setup time reduction, quality improvement, enhanced production techniques, waste elimination, etc.), rather than allowing excess inventory to cover up inefficiencies that reduce the factory’s competitiveness.
One of the tools that is used in JIT systems to facilitate the pull system and coordinate activities (such as picking up a new raw material or work-in-process or the production itself) between different workstations is called Kanban. Kanban is a ticket or signal that is given from one part of the process to another part to let them know that they are allowed to start their next activity. This supports the very concept of pull production and avoiding the waste by not doing things at the time that they are not needed. Kanban is also a signboard which is used to organize what needs to be done, what is under progress and what is done. This aspect of Kanban has been used in Agile workflow management systems. Watch the following videos to get a better sense of how the Kanban system works:
Quick setups to reduce lot sizes
The longer it takes, and the more expensive it is to setup equipment and labor to produce an item, the greater the quantity of items that have to be produced in a given production run. Traditional production management philosophy promoted the notion that long production runs of the same item were the key to driving down unit costs. The problem was that large production runs created large quantities of WIP and finished goods inventory that far exceeded the demand. These items would consequently cause high levels of inventory costs, long lead times, high potential rework, low flexibility in responding to customer needs, etc.
Driving down setup costs and setup times are key to dramatically improving factory competitiveness in a JIT environment. In the 1980s, the 3M company converted a factory that made a few adhesive products in long production runs into a factory that made over 500 adhesive products in small production runs. To keep unit production costs under control, 3M studied the setups on its coating machines. Since the cost of chemical waste disposal was a major part of the cost of changing over a coating machine to make another product, 3M shortened the length of hoses that needed purging and redesigned the shape of the adhesive solution holding pan on the coating machine to be shallower. 3M also used quick-connect devices, disposable filters, and work teams to speed up setups. The result was that 3M could maintain low unit costs on its coating machines while producing small lots of hundreds of products to meet market demand quickly.
Flexible resources
The enemy of JIT is uncertainty. A JIT environment thrives on predictability in customer demand, production processes, suppliers, and workers. Of course, uncertainty cannot be completely eliminated in most organizational environments.
The defense against uncertainty that cannot be driven out is to implement flexible resources that can adapt easily to changing circumstances. General-purpose, moveable equipment that can fulfill a wide variety of production requirements is one way to improve flexibility. For example, drilling machines with quick-change bits which can be wheeled into position to form new work cells allow the factory to maximize efficiency while producing exactly what is needed to satisfy immediate demand. Another example is Toyota’s use of paint canisters that attach to paint sprayers. Any car can be painted any color without having to purge hoses in switching from one color to another.
Multifunctional workers are another way to bring flexibility to the work environment. At Honeywell’s heating and cooling controls plant, workers are trained to operate all the machines on their work line. The flexibility that comes from multifunctional workers changes the nature of how work gets done. Instead of workers being trained on one machine and working independently of one another, multifunctional workers have a “big picture” view of the production line, where every worker understands all aspects of the line and how to work together to meet quality and schedule goals regardless of the circumstances.
Cellular flow layouts
Cellular layouts promote JIT goals by featuring unidirectional product flows, high visibility, and fast throughput times. Workers with multifunctional skills are assigned to individual cells and have responsibility and control of the products they produce. Workers in a cell environment tend to have a greater sense of ownership and pride in their work because they have a “big picture” view of the product as it is converted from raw material to a finished good. This deeper understanding of the production process increases the opportunities for workers to contribute ideas for process improvements.
Total Quality Management
TQM was discussed in detail earlier. TQM goes hand in hand with the JIT philosophy because quality is a major source of uncertainty and non-value-added activities in an organization with poor quality practices. TQM promotes continuous improvement, doing it right the first time, designing quality into products and processes, and establishing an overall focus on prevention as the primary quality activity.
Employee empowerment
Front-line employees play a critical role in successful JIT practices. They work in partnership with management and each other in the continuous pursuit of excellence. There are several ways in which front-line employees contribute to JIT success:
- Employees work together in problem-solving teams to gather data and build consensus on how to improve work processes.
- Employees are responsible for understanding the quality measures of their work and what they need to do to meet the needs of internal and external customers.
- Each employee is empowered to take action to correct problems.
- Employees have cross-functional skill sets that allow them to be assigned to areas which need help, and to help them adopt a broader (“big picture”) view of the production process.
- Unlike a traditional “push” environment where line workers are relatively independent of one another in their work activities, JIT employees are connected by the “demand pull” discipline, where work is not produced unless the downstream work center needs it. Demand-pull promotes the inter-connectedness of workers.
- Front-line employees are responsible for the basic maintenance of their machines. This helps employees have a better understanding of the condition of their equipment and its ability to meet quality and production requirements.
Management works with employees by being coaches and facilitators rather than authoritative supervisors. Managers are charged with hiring employees who can work in a proactive team environment, and provide the training and incentives to build a work culture that is focused on continuous improvement.
