Homework 2

Chapter 3: JIT, Value Added and Waste

Elimination

Part1- What is Just-In-Time (JIT)?

Continuous Improvement is a basic and important concept in modern manufacturing, and it is a cornerstone of JIT and TOM. However, it is a very general and open- ended concept. Another important element of the modern manufacturing and service operations is the concept of VALUE_ADDED

Just-in-time (JIT) is an approach to manufacturing which aims to increase “value-

add” activity and eliminate waste by providing the environment to simplify and

perfect processes within an organization. Just-in-time manufacturing means

producing the necessary items, in the required quantities at the appropriate time.

JIT can deliver significant improvements in operating efficiency. Having raw

materials arrive at a manufacturing facility, just in time to enter the production

process allows an organization to minimize the amount of inventory it must hold

and store. It also minimizes the potential cost of obsolescence, which can arise due

to change in product specifications, customer demands, etc..

Putting the JIT concept into practice means a reversal of traditional thinking with

regard to managing a manufacturing process flow. In conventional production

processes, units are transported to the next production stage as soon as they are

ready. In JIT, each stage in the production process looks back to the previous stage

to pick up the exact number of units needed. Product (and services) are pulled

through the process driven by demand from customers, rather than the traditional

approach where product and services are pushed forward based on planned

schedules.

A)-The benefits associated with Just In Time Manufacturing

While the prevailing view of JIT is that of an inventory control system, it is much

more. JIT is an operational philosophy which can deliver a broad range of benefits.

Examples of the benefits associated with implementing a JIT process:

– The production of high quality, high reliability products that customers want,

resulting is satisfied and loyal customers.

– The delivery of products which match the rate that the customers require.

– Optimized manufacturing process lead-times.

– Minimized and eliminated waste of labor, material and equipment.

– All activity having a defined purpose towards meeting customer needs.

– Continuous reductions in process and equipment set-up and change-over times.

– The elimination of unnecessary inventory and improved inventory management

and control.

– Continuous reductions in supplier lead times.

– Ongoing significant improvements in organizational productivity and efficiency.

B)-IS JIT applicable only to Manufacturing?

The concepts of Just In Time are applied to all value creating organizations. While JIT originated in manufacturing in Toyota and Ford, the concepts, principles, approaches and benefits are equally applicable to all industries. In fact, many of the JIT benefits achieved in manufacturing environments, arise due to JIT implementation, in the support and back-off services, purchasing, human resources, customer services, etc..

2) Value-Added

This principal state that, if an operation does not add value to the product, it should be considered waste. Value added Waste Elimination

3)- What are JIT elements

1)-Simplification

2)-Clearness & Organization

3)-Visibility

Components of JIT

4)- Cycle timing

5)- Variability Reduction

6)- measurement Principle

1)Simplification: Eliminate unnecessary elements of a system. If possible, try to simplify/shorten the operations (cut # of steps)

2)- Clearness & Organization. Pay attention to details and take all variables into

account

3)- Visibility. Provide ease of data collection, analysis and reporting to ensure the

shop floor workers get the right information at the right time

4)- Cycle Timing. Cycle times of different components of the says must be as

Close/equal as possible. The cycle time of the system must closely

coincide with customer demand. A flexible cycle time is essential

because of variations in customer demand.

Examples for Element # 4 The Product

Op. 1

Op. 3

Demand 185 units/week OP. 2 (5 days/week)

Based on the Cycle Timing requirement of JIT manufacturing system, cycle times

must be changed as follows

Process

Current Cycle time

Minutes/unit

Change cycle times TO

(Different Alternatives) **

1 2 3 Others

Production of table Legs

5 3.75 3 5 ….

Production of Tabletop

12 15 12 20 ….

Assembly Operations

# of Tables can produce/hr.

15

4

15 12 20 ….

4 5 3

** These times are calculated using the equation that for producing one unit out of assembly, we

need one unit of output from Op/2 and 4 units of output from Op. 1

NOTE: Through application of JIT principles, we can have almost uniform speed

and produce flexible volume of output to meet variable demand.

Assembly 4 units/he

Produce Legs 12 units/hr.

Produce. Tabletop 5 units/hr.

5) Variability Reduction. This principle requires a continuous effort to reduce

process variability (speed, quality, setup, man-hours, …) . Process

variability is one of the largest sources of waste which results in bad

quality and higher cost.

6)-Principle of Measurement. The measurement of impact of each element must

be precise. This will enable us to determine the sources of waste and

inefficiency in each part of the systems. A system of standard metrics

to be used in accurate evaluation of each system or sub-system must be

stablished

NOTE: Although the 6 elements listed above are called principals od JIT, they

are also considered the principals of competitive manufacturing

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PART II: Implementing JIT

a)- Value Added Focus (for details, see Part III)

Every activity or element of a system (machine, labor, time, space, energy, ..)

Should add value to the output of the system. It should be noted that all

Improvements in a system are not necessarily VALUE-ADDED. For example,

in the table assembly operation, we may spend a lot of resources (time and

money) to reduce % reject to say 2%. But the benefit of improvement may be

much less that the additional profit we will realize. That improvement may

also complicates the assembly process or lower the quality, or increase labor

hours, and so on

2)- Necessary and unnecessary Activities Focus.

Elements of each operations are divided into two distinct group

Value Added

Elements of an operation Necessary

Non-Value added (services)

Unnecessary

We already covered the concept of value-added activities (called LINE operators)

Those providing services (do not add value to product in a direct way) are called

STAFF. The activities performed by the second group (STAFF) may be necessary

or unnecessary. ==============================

PART III: Value Analysis, an overview

What is a Value-Added operation? Value analysis is a systematic effort to improve upon cost and/or performance of

products (services), either purchased or produced.

It examines the materials, processes, information systems, and the flow of materials involved, and determines ways to improve quality and reduce product cost.

Why is it important Implemented diligently, value analysis can result in

1)- Reduced material use and cos

2)- Reduced distribution costs

3)- Reduced waste

4)- Improved profit margins

5)- Increased customer satisfaction

. 6)- Increased employee morale

When to use it?

1- What is the function of the item?

2- Is the function Necessary?

3- Can a lower cost standard part that serve the purpose be

identified?

4- To achieve a lower price, can the item be simplified, or its

specifications be relaxed?

5- Can the item be designed/re-designed so it can be produced more

efficiently or more quickly?

6- Can the features that customer values highly, be added to the item?

Note: Value analysis should be part of all the continuous Improvement effort

Application Example: Among all components of a product:

1)- A metal part can be substituted by plastic part. The substitution will

save $0.15 per unit in material cost.

2)- One of the drilled holes in the frame of the product can be eliminated.

(quality Improvement). Not drilling the hole will save $1.1 labor cost per unit.

3)- 20 hours of labor is required for the changes.

4)- Because of improved quality, sale price could be increased by $1/unit

If current sales price, cost/unit, and demand are $45, #22, and 50000 units/month respectively. Is the proposed changes economically “valuable”?

Assume that the VA team will spend 100 hours to run the project and the total average salary for the team is $60/hr.

Solution:

The per unit cost saving and value-added improvement:

=$15+$1.10+$1.00 = $2.25

Monthly profit w/o improvements = 50000($45-$22) = $1,150,000

Monthly profit with improvements =5000 [($45-$22) +$2.25] =$1,262,500

Net result of the project = 1262500-1150000 –($60 * 1000) = $52500

Conclusion: ➔ The project is valuable

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PART IV: Lean & Just-In-Time Manufacturing.

JIT versus a more traditional approach to organizational management

Every day, in every organization there is a need to manage:

1)-The levels of WIP (work in progress),

2)-To implement work arounds due to defective deliveries,

3)-Manage machine downtime,

4)-Manage unstable demand,

5)-Schedule unplanned rework,

6)-Respond to inaccurate quantities,

7)-Train staff where errors are identified,

8)-Schedule production flows,

Etc., etc..

The presence of inventory through the process allows managers to work around the

daily tasks and problems, while decisions can be made, and problems addressed.

When a problem arises, e.g. a process or equipment failure, the problem is addressed,

and work continues till the next problem. Most of the problem are not seen as major

issues, as they become part of daily work life. Many times, the solutions implemented

are just short-term fixes.

In a JIT environment, the process “STOPS”, when problems arise. JIT exposes any

productivity problems, delays, process failures, etc. and as there is no buffer

inventory, forces immediate and permanent solutions so that the problems do not re-

appear.

Under JIT, a process or equipment failure becomes a major failure. The result is an

immediate focus by technical, supervisory and management staff to identify and

implement a solution. Due to the major organizational focus on the problem, a permanent

solution is demanded, in order to ensure there is no repeat. As JIT gets implemented

throughout an organization, problems are permanently addressed and disappear.