Operation Management PDF

Chapter 3
Operation Management Strategies
(Just-in-Time, Total Quality Management, and Lean Operation)
Page 1
Outline
1. Introduction
1.1 Revolution in Manufacturing
1.2 Toyota Production System
2. JIT Production System
2.1 Waste
2.2 Key Elements of Just-in-Time
2.3 JIT Contribution to Competitive
Advantage
3. Total Quality Management

3.1 Introduction
3.2 Quality
3.3 TQM
3.4 Seven QC Tools
4. Lean Operation
Page 2
1. INTRODUCTION
1.1 Revolution in Manufacturing
Mass
Lean
Craft
Page 3
Major Revolutions in Manufacturing
Page 4

Operation Management
Quality:
Statistical
Quality
Control
Productivity:
Ford
Production
System
Business
Process
Reengineering
Six Sigma
Total
Quality
Management
Lean
Six Sigma
Toyota
Production
System
Lean
Six Sigma
Supply Chain
Lean
JIT
Supply Chain
Information
Technology:
MRP,
MRP II
ERP
CRM
Page 5
1.2 TOYOTA PRODUCTION

SYSTEM
Page 6
Production System
1913
1950
Henry Ford Line
Eiji Toyoda FORD

Toyota
Page 7
Main Features of TPS Elements of TPS

Greater Product Variety
Fast Response (Flexibility)
Stable Production
Schedules
Supply Chain Integration
Demand Management
The SMED (Single-digit in Minutes

Exchange of Dice) Program.
Highlight Problems (Jidoka).
Gradual Elimination of Waste.
Continuous Improvement (Kaizen),
Root-Cause Analysis (5-whys?) and
Fool-proofing (Poka-Yoke).
Cross-Trained Workers.
Just-In-Time Production.
Stable Production Schedules (Heijunka)
Page 8
1) SMED
SMED (Single Minute Exchange of Die)
(Setup) 2
Internal Setup)
External Setup
(Changeover)
(Preparation Step)
(Fixture Exchange Step)

(Centering, dimensioning and setting step)

(Trial Runs and Adjustments)
. (
50% )
Page 9
(SMED)
Page 10
(SMED)
Setup Cart
SMED Table
Page 11
2) Highlight Problems by Jidoka and Andon
Page 12
3) Gradual Elimination of Waste

- Continuous Improvement (Kaizen)
- Root-Cause Analysis (5-whys?) and
- Fool-proofing (Poka-Yoke)
Page 13
The five whys

What is it?
Why
A tool to help uncover the root cause or

real reason for the issue
Why
Why
Why
It is a variation of the approach used in

fishbone analysis
Why
Why
Why
Why
When would you use it?

When you have identified an issue and
want to deepen your understanding of it
and its underlying causes
It avoids group moving into fix it mode

and addressing the symptoms of an issue
without understanding the root causes
Issue
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Why
Page 14
Five whys example

Staffing very stable
Staffing costs
86% of the
budget.
Costs too
high
Premises costs
8.5%
Revenue
budget
not
balanced
Income too
low
Income
heavily reliant
on LEA
formula.
Schools
facilities are
underused
Teachers are 70%

Low number of
TAs
Premises staff
costs 3.5%
5 year routine
maintenance plan
undercosted.
Beacon school
funding not
renewed
LEA uses January
PLASC for Fair
Funding formula.
New Council sports
centre opened
locally
School not
used for
external
events.
Large number of management points

Teachers used to support pupils with SEN.
Historic.
Employ own cleaning staff at high rates.
Cleaners local people with strong
connection to school.
Have allowed some queue jumping.
Plan still has 3 years to run.
School decided not to reapply 2 years ago.
Co-ordinators salary now in main school
budget.
Roll drop in January
Knock-on impact in other areas e.g. FSM, SEN
Greater variety of facilities available.

LEA cut back on community use of school.
Health and safety issues.
Governing body have stopped s/keeper
overtime.
Page 15
Five Whys ()
Part A
Part B
2

Q
?
&
A
A B
()
B ?
(drawing)
Page 16
Shigeo Shingo
Poka-Yoke: mistake-proofing
Poka-Yoke: mistake-proofing
identify errors before they become defects
stop the process whenever a defect occurs, define the
source and prevent recurrence
1967: source inspection + improved PY

prevented the worker from making errors so that defects
could not occur
Zero Quality Control
Page 17
Poka-Yoke
JIGS & FIXTURES

Page 18
Poka-Yoke in Our life
Page 19
5) Stable Production Schedules (Heijunka)

- (Lead
time)

-

- (Kanban) JIT
Page 20
Page 21
Page 22
Monthly Production Planning
Page 23
Sequence Planning
Page 24
2. JIT PRODUCTION SYSTEM
Page 25
APICS Definition of JIT

A philosophy of manufacturing based on planned
elimination of waste and continuous improvement of
productivity
American Production and Inventory Control Society (APICS) is an
organization for professionals working in the field of Operations
Management
Page 26
Just-In-Time and Lean Production

JIT is a philosophy of continuous and forced problem
solving that supports lean production
Lean production supplies the customer with their exact
wants when the customer wants it without waste
Key issues are continual improvement and a pull system
Page 27
Key Principles of Just-in-Time

Waste reduction
Things that do not add value from the customer perspective
Variability reduction
Any deviation from the optimum process that delivers perfect

product on time, every time
Pull Production System
Pull systems where material is produced only as needed / when

requested
Page 28
1. Waste Reduction
Waste is anything other than the minimum amount
of equipment, materials, parts, space, and workers time,
which are absolutely essential to add value to the product.
Shoichiro Toyoda
President of Toyota
(Muda)

Page 29
Waste
2
1. Value added cost ( )
2. Non value added cost ( )
Non-valueadded cost
Non-valueadded cost
Value-added cost
Value-added cost
Page 30
Ohnos Seven Wastes

Original Toyota Seven Wastes
(TPS)
7
Overproduction ( )
Inventory ()
Waiting ()
Unnecessary movement of material
( )
5. Overprocessing
( )
6. Motion ( )
7. Defect ()
1.
2.
3.
4.
1 Waste
Jeffery Liker The Toyota Way
1
8. Unused creativity (
)
1 Waste
9. Environmental ( )
Page 31
Waste Reduction
Faster delivery, reduced work-in-process, and faster
throughput all reduce waste
Reduced waste reduces room for errors emphasizing quality
Reduced inventory releases assets for other, productive
purposes
Page 32
2. Variability Reduction
JIT systems require managers to reduce variability
caused by both internal and external factors
Variability is any deviation from the optimum
process
Inventory hides variability
Less variability results in less waste
Page 33
Causes of Variability
1. Employees, machines, and suppliers produce units that
do not conform to standards, are late, or are not the
proper quantity
2. Engineering drawings or specifications are inaccurate

3. Production personnel try to produce before drawings or
specifications are complete
4. Customer demands are unknown
Page 34
3. Pull Versus Push Systems

A pull system uses signals to request production
and delivery from upstream stations
Upstream stations only produce when signaled
System is used within the immediate production
process and with suppliers
Page 35
Continuous Flow Processing: Pull System
Page 36
3. Pull Versus Push Systems

By pulling material in small lots, inventory cushions are
removed, exposing problems and emphasizing
continual improvement
Manufacturing cycle time is reduced
Push systems dump orders on the downstream stations

regardless of the need
Page 37
Traditional Buffered Supply Chain

2nd Tier
Flow of Production
1st Tier
Flow of Information
Assembler
Customer
Demand
Page 38
The Just-in-Time Supply Chain: No Stocks!

2nd Tier
Flow of Production
1st Tier
Flow of Information
Toyota
Customer
Demand
Page 39
JIT Components
Suppliers
Layout
Inventory
Scheduling
Preventive Maintenance
Quality Production
Employee Empowerment
Commitment
Page 40
1) Suppliers
Reduced number of vendors
Nearby suppliers
Repeat business with same suppliers
Long-term contract
Supportive supplier relationships

Support suppliers so they become or remain price competitive
Quality deliveries on time

Share forecasts of demand
Frequent deliveries of small-lot quantities
Suppliers package in exact quantities
Page 41
2) Layout
Work-cell layouts with group technology

Cells designed to be rearranged as volume or designs
change
Movable, changeable, flexible machinery
Often U-shaped for shorter paths and improved
communication
High level of workplace organization and neatness
Reduced space for inventory
Delivery directly to work areas
Units are always moving because there is no storage
JIT Components
Suppliers
Layout
Inventory
Scheduling
Quality Production
Commitment
Page 42
Process Layout: Before
43
Page 43
Cellular Manufacturing

(Group
Technology, GT)
Cell
Cell
Page 44
Cellular Layout: After
Page 45
3) Inventory
Firms hold inventory to:

decouple activities
provide a buffer (safety stock) for
supplier reliability, quality problems,
etc.
From a Just-in-Time perspective,
inventory is being used to mask
problems rather than solve them
JIT Components
JIT
low inventory
small lot sizes
low setup times
Suppliers
Layout
Inventory
Scheduling
Quality Production
Commitment
Page 46
Reducing Lot Sizes

Customer orders 10
Lot size = 5
Lot 1
Lot 1
Lot 2
Lot size = 2
Lot 2
Lot 3
Lot 4
Lot 5
Page 47
Large-Lot Approach
A
Time
Small-Lot Approach
A
Time
Small lots:
reduce inventory
increase flexibility to meet
customer demands (cut lead times)
help achieve a uniform operating system workload
Page 48

( Reduce Lot Sizes)
= 40
Lot Size 200
= 100
Lot Size 80
Average inventory = (Lot size)/2

Page 49
Reduce Lot Sizes
Ideal situation is to have lot sizes of one pulled from one process to
the next
Often not feasible
Can use EOQ analysis to calculate desired setup time
Two key changes

Improve material handling
Reduce setup time
Page 50
Lower Setup Costs

Holding cost
Cost
Sum of ordering and

holding costs
T1
Setup cost curves (S1, S2)
T2
S2
S1
Lot size
Page 52
4) Scheduling
Schedules must be communicated
inside and outside the organization
Level schedules
Process frequent small batches
Freezing the schedule helps stability
Kanban
Signals used in a pull system
JIT Components
Suppliers
Layout
Inventory
Scheduling
Quality Production
Commitment
Page 53
Kanban
Japanese word for card may be

a card, flag, empty container,
space on shelf, etc.
1.
User removes a standard

sized container
2.
Signal is seen by the

producing department as
authorization to replenish
Signal marker
on boxes
Part numbers
mark location
Page 54
Kanban
When the producer and user are not in visual contact, a card can be
used
When the producer and user are in visual contact, a light or flag or
empty spot on the floor may be adequate
Since several components may be required, several different
kanban techniques may be employed
Page 55
Kanban Signals
Finished goods Customer order
Kanban
Work cell
Ship
Raw
Material
Supplier
Kanban
Final assembly
Kanban
Purchased
Parts Supplier
Kanban
Kanban
Sub-assembly
Kanban
Page 56
Page 57
Calculating the Number of Containers

between Work Centers
UT(1+P)
N=
C
N = Total number of containers between 2 stations

U = Usage rate of downstream operation
T = Average elapsed time for container to make
entire cycle (Pitch Time)
P = Policy variable indicating efficiency... 0 - 1
C = Capacity (number of parts) of standard container
Page 58
Example: Number of Containers

There are two adjacent work centers, one of which is fed parts from the other. The
production rate of the using work center is 165 parts per hour. Each standard Kanban
container holds 24 parts.
It takes an average of 0.6 hour for a container to make the entire cycle from the
time it leaves the upstream center until it is returned, filled with production, and leaves
again. The efficiency of the system is observed to be 0.2.
How many containers are needed?
Page 59
Example: Number of Containers

Number of Containers, N
N = UT(1 + P) / C
= 165(0.6)(1 + 0.2) / 24
= 99(1.2) / 24
= 118.8 / 24
= 4.95 or 5 containers
Page 60
5) Preventive Maintenance
Scheduled
Daily routine
Operator involvement
JIT Components
Preventive
Breakdown
Non-routine inspection Routine inspection
& servicing
& servicing
Prevents failures
Remedial
Bases for doing
Basis for doing
- Time: Every day
- Equipment failure
- Usage: Every 300 pieces
Suppliers
Layout
Inventory
Scheduling
Quality Production
Commitment
- Inspection: Control chart deviations

Page 61
6) Quality
JIT cuts the cost of obtaining good quality because JIT
exposes poor quality
Because lead times are shorter, quality problems are
exposed sooner
Better quality means fewer buffers and allows simpler
JIT systems to be used
JIT Components
Suppliers
Layout
Inventory
Scheduling
Quality Production
Commitment
Page 62
JIT Quality Tactics

Use statistical process control
Empower employees
Build fail-safe methods (poka-yoke, checklists, etc.)
Expose poor quality with small lot JIT

Provide immediate feedback
JIT requires TQM
Page 63
7) Employee Empowerment
JIT
Components
Empowered employees bring their knowledge
and involvement to daily operations
Some traditional staff tasks can move to

empowered employees
Training, cross-training, and fewer job
classifications can mean enriched jobs
Companies gain from increased commitment
from employees
Suppliers
Layout
Inventory
Scheduling
Quality Production
Commitment
Page 64
7. Employee Empowerment
Page 65
8. Commitment
Suppliers
Layout
Inventory
Scheduling
Quality Production
Commitment
support of management, employees, and suppliers
Page 66
Suppliers
Layout
Inventory
Scheduling
Quality Production
Commitment
Page 67
Results
Queue and delay reduction speeds throughput, frees assets, and wins
orders
Quality improvement reduces waste and wins orders
Cost reduction increases margin or reduces selling price

Variability reduction reduces waste and wins orders
Rework reduction reduces waste and wins orders
FASTER BETTER CHEAPER

Order Qualify
Order Winners
Page 68
2. Total Quality Management

(TQM)
Page 69
2.1 Introduction
Page 70
Total Quality Management

()

()
TQM (ISO 8402 : 1994)

Management approach of an organization,
centered on quality, based on the
participation of all its members and
aiming at long-term success through
customer satisfaction, and benefit to all
members of the organization and to
society
Page 71
2.2 Quality
Page 72
?
Totality of characteristics of an entity that bear on its ability to
satisfy stated and implied needs
A basic business strategy that provides goods and services that

completely satisfy both internal and external customers by
meeting their explicit and implicit expectation
Page 73
?

Internal customers & Internal suppliers
External customers
?
Page 74
2.3 TQM
Page 75

Total
Quality
Management
Page 76

TQM
1.
/ (Quality of Life)
2.
(Customer Satisfaction)
Page 77

Quality
in
Supplies
TQM
Process
quality
Management
Customer
Satisfaction
1.
2.
PDCA
Page 78
Page 79
Page 80
Quality
A
B
Year
Page 81
TQM
Quality
Act
Check
Scientific
approach
Teamwork
Plan
Do
Task teams
Quality circle
7 basic management tools
Page 82

? ?
A P
Quality
QA
Quality
Time
Scientific approach
Teamwork
Page 83
2.4 Seven Quality Control

Tools
Page 84
Seven Quality Control Tools

Check sheet
Pareto Chart
Histogram
Cause and Effect Diagram
Graph (Run Chart)
Scatter diagram
Control chart
Process flow diagram
Page 85
1. Check Sheet
Defect Type
Shifts
Page 86

. ........
..
.
.....
...
......
:

: 1525

17
11
26
3
5
62
42
Page 87
Page 88
2. (PARETO DIAGRAMS)
200
100
180
90
160
80
140
70
120
60
100
50
80
40
60
30
40
20
20
10
0
D
-
-
-
-
-
-
Page 89
20%
80
%
80
%
20%

Page 90
Pareto chart
Model : ABC

2558 5,000
200 4%
Page 91
70
Pareto Chart
(64)
Percent from each cause
60
50
40
30
20
(13)
10
(10)
(6)
(3)
(2)
(2)
Causes of poor quality
Page 92
3. (Histogram)

25
Frequency
20
15
10
Category
Page 93
4. (Cause and Effect Diagram)

Show the relationships between a problem and its possible
causes.
Developed by Kaoru Ishikawa (1953)
Also known as
Fishbone diagrams
Ishikawa diagrams
Page 94
Cause and Effect Skeleton
MAN
MC
,,
METHOD
MATERIAL
Page 95
Fishbone Diagram : Example

Measurement
Faulty testing equipment
Incorrect specifications
Improper methods
Inaccurate
temperature
control
Dust and
Dirt
Human
Machines
Out of adjustment
Poor supervision
Lack of concentration
Tooling problems
Old / worn
Inadequate training
Quality
Problem
Defective from vendor
Not to specifications
Materialhandling problems
Environment
Materials
Poor process
design
Ineffective quality
management
Deficiencies
in product
design
Process
Page 96
Fishbone Diagram : Example 2
Page 97
Cause and effect diagrams

To construct the skeleton, remember:
For manufacturing - the 4 Ms
man, method, machine, material
For service applications

equipment, policies, procedures, people
Advantages
making the diagram is educational in itself

diagram demonstrates knowledge of problem solving team
diagram results in active searches for causes
diagram is a guide for data collection
Page 98
5. (SCATTER DIAGRAM)
Page 99
X,Y
r =1
r = 0.8
r = 0.6
r = -1
r = -0.8
r =0
Page 100
6. (Graphs)
1.
2.
80
60
40
20
0
Page 101
()
Page 102
7. (CONTROL
CHART)
27
Number of defects
24
UCL = 23.35
21
c = 12.67
18
15
12
9
6
LCL = 1.99
3
2
10
12
14
16
Sample number
Page 103
Page 104
Page 105
Flowcharts
Graphical description of how work is done.
Used to describe processes that are to be improved.
Page 106
Flow Diagrams
Page 107
4. Lean Operation
Page 108
Lean Operations
Different from JIT in that it is externally focused on the
customer
Starts with understanding what the customer wants
Optimize the entire process from the customers
perspective
Page 109
Lean Operation in Production System

Different from JIT in that it is externally focused on
the customer
Often called the Toyota Production System (TPS)
In practice, JIT, Lean Systems, and TPS are often
essentially the same
Page 110
Building a Lean Organization

Transitioning to a lean system can be difficult
Lean systems tend to have the following attributes
Use JIT techniques
Build systems that help employees produce perfect
parts
Reduce space requirements
Page 111
Building a Lean (cont.)

Develop partnerships with suppliers
Educate suppliers
Eliminate all but value-added activities
Develop employees
Make jobs challenging
Build worker flexibility
Page 112
Lean Operations in Services

The JIT techniques used in manufacturing
are used in services
Suppliers
Layouts
Inventory
Scheduling
Etc.
Page 113
End of Chapter 3
Page 114

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Chapter 3

Operation Management Strategies

(Just-in-Time, Total Quality Management, and Lean Operation)

Operation Management Strategies

3. Total Quality Management

Major Revolutions in Manufacturing

Operation Management Strategies

Operation Management Strategies

1.2 TOYOTA PRODUCTION

Operation Management Strategies

Henry Ford Line

Eiji Toyoda FORD

Operation Management Strategies

Main Features of TPS Elements of TPS

Operation Management Strategies

The SMED (Single-digit in Minutes

Operation Management Strategies

Operation Management Strategies

2) Highlight Problems by Jidoka and Andon

Operation Management Strategies

3) Gradual Elimination of Waste

Operation Management Strategies

The five whys

A tool to help uncover the root cause or

It is a variation of the approach used in

When would you use it?

It avoids group moving into fix it mode

Five whys example

Operation Management Strategies

Teachers are 70%

Large number of management points

Greater variety of facilities available.

Operation Management Strategies

1967: source inspection + improved PY

JIGS & FIXTURES

Poka-Yoke in Our life

Operation Management Strategies

5) Stable Production Schedules (Heijunka)

Operation Management Strategies

Operation Management Strategies

Operation Management Strategies

Monthly Production Planning

Operation Management Strategies

Operation Management Strategies

2. JIT PRODUCTION SYSTEM

Operation Management Strategies

APICS Definition of JIT

Just-In-Time and Lean Production

Operation Management Strategies

Key Principles of Just-in-Time

Things that do not add value from the customer perspective

Any deviation from the optimum process that delivers perfect

Pull Production System

Pull systems where material is produced only as needed / when

Operation Management Strategies

Operation Management Strategies

Operation Management Strategies

Ohnos Seven Wastes

Operation Management Strategies

2. Engineering drawings or specifications are inaccurate

3. Pull Versus Push Systems

Continuous Flow Processing: Pull System

Operation Management Strategies