MGMT 90032

OPERATIONS & PROCESS MANAGEMENT

Topic 3
Operating Model – LEAN / ‘JUST-IN-TIME’
SYSTEM
 Syllabus
Topic

Part I: Operations within Organisations – Building Blocks

Topic 1: What is Operations Management & why is it important?
Key decisions in Operations Management
Topic 2: Operating model – ‘Planned’ system

Topic 3: Operating model – Just-in-time/Lean system

Part II: Analysing and Designing the Operating Model

Topic 4: Strategic perspective – Operations strategy

Topic 5: Process perspective – Design and analysis of processes

Topic 6: Supply chain and network perspective

Part III: Creating Competitive Advantage through Operations

Topic 7: Quality management principles

Topic 8: Operations improvement tools and frameworks

Topic 9: Outsourcing
 Topic Objectives

• To appreciate the philosophical motivation behind the

“lean/JIT” operating model
• To understand the basic elements of the lean/JIT operating
model
• To identify the key characteristics of a lean/JIT operating
model
• To appreciate the role and value of inventory in the lean/JIT
operating model
• To understand how the lean/JIT operating model manifests
in non-manufacturing sectors
• To appreciate the benefits and limitations of lean/JIT
operating model
 Sales & Marketing (Forecasts) Operating •Planned
•MRP system
Planners (AP, MS, MRP, scheduling, loading) System Models •‘Push’
System •American’
•Philosophy:
Process1 Minimize total cost
•Large MNCs
Input A1 A2 A3 An Output

RAW FINISHED
P2 PRODUCTS
MATERIALS
EOQ X EOQ
P3

MRP quantities
Inspection
STORES Transformation – How?
•QM (Six sigma, TQM)
•SCM
•Process Reengineering
Planners
System
Cn Cell1 Sales & Marketing

A3 An Customers
•Lean
•JIT
Raw •‘Pull’
A2 A1 •Japanese
Materials
EOQ = 1 •Philosophy:
Bins Minimize inventory &
total cost 4
Component suppliers •Small/medium firms
Lean/JIT Operating
Model
 Lean/JIT Operating Model

• Goal is to achieve high degree of responsiveness through

elimination of “waste” or non-value adding activities

• Some characteristics:
– Cellular operating setup
– Short setup times
– Multi-skilled teams of workers
– Pull processing
– Perfect first-time quality
– Flexibility
– Visual control
– Long term relationship with small set of suppliers
– Continuous improvement

• “Doing more with less”

 Lean/JIT Operating Model

History and Philosophy

• Lean/JIT way of operating is strongly associated with Japan
• Japan is a small country with minimal resources and a large
population
• Lean/JIT system was “developed” by Toyota in mid-1970s
• Three tenets
– minimize waste in all forms
– continually improve processes and systems
– maintain respect for all workers
• These 3 aspects are very much characteristics of Japanese
culture
 Foundations of Lean/JIT Operating Model

• Product/Service design • Organisational elements

– Standard parts – Multi-skilled workers
– Modular design – Continuous improvement
– High quality
• Operations planning and control
• Process design – Level loading
– Operating cells – Pull systems
– Small lot sizes – Visual signals (Kanban)
– Short setup times – Low Work-In-Process inventory
– Balanced system – Fewer, closer suppliers
– Little inventory storage – Preventative maintenance
– Fail-safe methods
– Quality improvement
 Waste Elimination

“Value” vs. “Waste”

• Value-added activities
– Customers willing to pay for them
– Create some change in the product/service
– E.g., Patient undergoing treatment in a hospital

• Necessary non-value-added activities

– Carried out to meet customer needs but not willing to pay
for them
– E.g., Patients completing paperwork

• Unnecessary non-value-added activities

– Waste
– E.g., Patients waiting for treatment
 Waste Elimination

Seven Types of Waste (muda)

as defined by Taiichi Ohno (Toyota executive, 1912-1990)
• Defects
• Overproduction
– making things not demanded by actual customers
• Inventories
– awaiting further processing or consumption
Taiicho Ohno
• Unnecessary over-processing
– (for example, relying on inspections rather than designing the process to eliminate
problems)
• Unnecessary motion of employees
• Unnecessary transport and handling of goods
• Waiting
– for an upstream process to deliver, or for a machine to finish processing, or for a
supporting function to be completed, or for an interrupted worker to get back to
work...
https://youtu.be/jPp_3-zfPaQ
 Waste Elimination

Excess inventory (WIP) hides

process problems
 Waste Elimination

Lean/JIT philosophy involves…

• lowering inventory levels to expose problems
• problems being solved systematically using a variety of methods
from the operations and quality management area
• using ‘root-cause’ analysis as a predominant method
Reducing Setup Times
 Concept in machine set up time
“SMED – Single Minute Exchange of Die”

Shigeo Shingo
Operational Founder of SMED & “Poka Yoke”
Innovation (idiot-proofing of processes)
 1969
• Toyota took 4.5 hours to setup the 1,000 ton press
• Volkswagen took 2.0 hours to setup the 1,000 ton press
• Shingo was given the job to reduce this setup time
 6 months later……..
Volkswagen set- up time was
2.0 hours (same as before)

Toyota set–up time was 1.5

hours ( reduction of 3 hours )
1000 ton press

Shingo was pleased with this

outcome…
 But, Toyota gave Shingo a
stretch task…
Within
1.5 hours 10 min

DO or DIE
Theatre
 Revolving
Theatre

Set – Up
 SMED
Organisation Machine From To

Toyota 1000 ton press 1.5 hrs 3 min

Mitsubishi Boring machine 24 hrs 6 min 38 sec
Kyoei Kogyo Press brake 4.0 hrs 10 min
 Shingo’s contributions
• ‘Single Minute Exchange of Die’ (SMED)
• Dramatic reduction in setup times
• Flexible use of equipment
• Facilitated the development of operating cells
• Shingo Prize is highly coveted by manufacturing companies
 Kanban System

Kanban System
• A “pull” production/service system
• A physical and visual control system
• Composed of cards and containers

A “simple” kanban card A “complex” kanban card

Lean/JIT Operating
Model in Service Industry
 Lean/JIT Operating Model in Services

• The basic goal of the demand flow system in the service organization
is to provide optimum response to the customer with the highest
quality service and lowest possible cost

• Requirements
– Eliminate disruptions
– Make system flexible
– Reduce setup and lead times
– Eliminate waste
– Minimize WIP
– Simplify the process
Lean/JIT Operating Model in Services

Example 1:
Sushi train restaurant
 Lean/JIT Operating Model in Services

Example 2:
Racing pit stop

https://www.youtube.com/watch?v=UlIGI3laGAo
Lean/JIT Operating Model in Services

Example 3:
Budget airlines airport
turnaround

https://youtu.be/FYhPLt0PihQ
Lean/JIT Operating Model in Services

Example 4:
Checkout processes
at a discount retailer
Benefits & Limitations of
Lean/JIT Operating Model
 Benefits of Lean/JIT Operating Model

• Reduced inventory levels

• Higher quality
• Greater flexibility
• Reduced lead times
• Increased productivity
• Increased equipment utilization
• Reduced scrap and rework
• Reduced space requirements
• Pressure for good vendor relationships
• Reduced need for indirect labor
 Potential Problems Implementing Lean/JIT Operating Model

• Applicable primarily to repetitive operations

• Requires discipline
• Based on cooperation and trust
• Requires change of philosophy
• Management may not be committed
• Workers/management may not be cooperative
• Suppliers may resist
 Planned vs. Lean/JIT Operating Model

Planned Lean/JIT
Inventory High, to cover for Minimal
uncertainty
Deliveries Few, large Many, small

Lot size Large Small

Suppliers Many, “adversarial” Few, partnerships

relationship
Setups Few, long runs Many, short runs
Review
 Review

• By the end of the discussion on this topic, you should have a good
understanding of the key elements of a lean/JIT operating model

• These include
– Differences between “push and pull” systems
– Differences between value and waste
– The nature of the seven “wastes”
– Characteristics of a lean/JIT operating system
– Foundations of a lean system:
• product design, process design, organisational elements, control systems
– How the kanban system works

• You should also have a good understanding of the pros and cons of a
lean/JIT operating model
 Sales & Marketing (Forecasts) Operating •Planned
•MRP system
Planners (AP, MS, MRP, scheduling, loading) System Models •‘Push’
System •American’
•Philosophy:
Process1 Minimize total cost
•Large MNCs
Input A1 A2 A3 An Output

RAW FINISHED
P2 PRODUCTS
MATERIALS
EOQ X EOQ
P3

MRP quantities
Inspection
STORES Transformation – How?
•QM (Six sigma, TQM)
•SCM
•Process Reengineering
Planners
System
Cn Cell1 Sales & Marketing

A3 An Customers
•Lean
•JIT
Raw •‘Pull’
A2 A1 •Japanese
Materials
EOQ = 1 •Philosophy:
Bins Minimize inventory &
total cost 35
Component suppliers •Small/medium firms