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JIT In Services
Competition on speed & quality Multifunctional department store workers Work cells at fast-food restaurants Just-in-time publishing for textbooks - on demand publishing a growing industry Construction firms receiving material just as needed
What is JIT ?
Producing only what is needed, when it is needed A philosophy An integrated management system JITs mandate: Eliminate all waste
....
Reducing waste: Increase Problem Visibility Lower the Water to Expose the Rocks
Inventory
Machine Downtime
Waste in Operations
Waste in Operations
Waste in Operations
Flexible Resources
Multifunctional workers General purpose machines Study operators & improve operations
A Sample Kanban
b) Kanban inventory
Kanban
Q-R
R R
Types of Kanbans
Bin Kanban - when bin is empty replenish Kanban Square
Marked area designed to hold items
Signal Kanban
Triangular kanban used to signal production at the previous workstation
Material Kanban
Used to order material in advance of a process
Supplier Kanbans
Rotate between the factory and suppliers
Small-Lot Production
In theory:
Requires less space & capital investment Moves processes closer together Makes quality problems easier to detect Makes processes more dependent on each other
Move time
Reduce distances, simplify movements, standardize routings
Waiting time
Better scheduling, sufficient capacity
Setup time
Generally the biggest bottleneck
SMED Principles
1. Separate internal setup from external setup 2. Convert internal setup to external setup 3. Streamline all aspects of setup 4. Perform setup activities in parallel or eliminate them entirely
Uniform Production
Results from smoothing production requirements Kanban systems can handle +/- 10% demand changes Smooths demand across planning horizon Mixed-model assembly steadies component production
Visual Control
Visual Control
Kaizen
Continuous improvement Requires total employment involvement Essence of JIT is willingness of workers to
Spot quality problems Halt production when necessary Generate ideas for improvement Analyze problems Perform different functions
Breakdown maintenance
Repairs to make failed machine operational
Preventive maintenance
System of periodic inspection & maintenance to keep machines operating
Goals of JIT
1. 2. 3. 4. 5. 6. 7. Reduced inventory where? Improved quality Lower costs Reduced space requirements Shorter lead time Increased productivity Greater flexibility 8. 9. 10. 11. 12. 13. Better relations with suppliers Simplified scheduling and control activities Increased capacity Better use of human resources More product variety Continuous Process Improvement
JIT Implementation
Use JIT to finely tune an operating system Somewhat different in USA than Japan JIT is still evolving JIT as an inventory reduction program isnt for everyone - JIT as a CPI program is! Some systems need Just-inCase inventory
The return of serviceable supplies that are surplus to the needs of the unit or are unserviceable and in need of rebuild or remanufacturing to return the item to a serviceable status
Reverse Logistics is the process of moving products from their typical final destination to another point, for the purpose of capturing value otherwise unavailable, or for the proper disposal of the products.
Reverse Logistics
A US Army Perspective
The US Army moved the equivalent of 150 Wal-Mart Supercenters to Kuwait in a matter of a few months
Recent report (Aug 2003): There is a 40 hectare (~100 acres) area in Kuwait with items waiting to be retrograded back to the US.
Reverse Logistics
The Commercial Perspective
Reverse Logistics
Rate of returns? Cost to process a return? Time to get the item back on the shelf if resaleable?
The transportation costs of moving the items from the retail stores to the central returns distribution center. The repackaging of the serviceable items for resale.
The cost of warehousing the items awaiting disposition. The cost of disposing of items that are unserviceable, damaged, or obsolete.
Costs
Process inbound shipment at a major distribution center = 1.1 days Process inbound return shipment = 8.5 days Cost of lost sales Wal-Mart: Christmas 2003 returns = 4 Days of Supply for all of Wal-Mart = 2000 Containers PalmOne - 25% return rate on PDAs
More Costs
Hoover - $40 Million per year Cost of processing $85 per item Unnamed Distribution Company $700K items on reverse auction 2001 - over $60 billion in returns; $52 billion excess to systems; $40 billion to process
Is it a problem?
Estimate of 2004 holiday returns: $13.2 billion % of estimated 2004/2005 holiday returns: 25% Wal-Mart: $6 Billion in annual returns = 17,000 truck loads (>46 trucks a day) Electronics: $10 Billion annually in returns Personal Computers: $1.5 Billion annually = approximately $95 per PC sold 79% of returned PCs have no defects Home Depot ~ $10 million in returns in the stores alone Local Wal-Mart ~ $1 million a month in returns
Is it a Problem?
European influence spread to US - Green Laws Estee Lauder - $60 million a year into land fills FORTUNE 500 Company - $200 million over their $300 million budget for returns Same Provider - 40,000 products returned per month; 55% no faults noted K-Mart - $980 million in returns 1999 Warranty vice paid repairs
More consequences
Increased Customer Wait Times Loss of Confidence in the Supply System Multiple orders for the same items Excess supplies in the forward pipeline Increase in stuff in the reverse pipeline Constipated supply chain
Impact?
Every resaleable item that is in the reverse supply chain results in a potential stock out or zero balance at the next level of supply. Creates a stockout do-loop
Results?
This potential for a stock out results in additional parts on the shelves at each location to prevent a stock out from occurring. More stocks = larger logistics footprint = the need for larger distribution centers and returns centers.
Reverse Logistics
According to the Reverse Logistics Executive Council, the percent increase in costs for processing a return, as compared to a forward sale, is an astounding 200-300%. In the U.S. alone, the cost is an annual $100 billion. Forbes, March 2005 Typically, as many as 8-12 more steps per item in the reverse pipeline than items in the forward pipeline
The truth is, for one reason or another, materials do come back and it is up to those involved in the warehouse to effectively recover as much of the cost for these items as possible.
- Whalen, In Through the Out Door
Next Week
Final Exam Due by Next Saturday Harley Papers Next Week: Resource Planning, Capacity Planning, Quality