Operation management – wastes control and implementation of Just-in-time (JIT)

By | April 20, 2015

 

Question 1

Introduction

Waste is defined as anything which does not add value to your product when it proceeds through its’ production. Waste exists in all kinds of work and organizations. Our aim is to increase productivity and reduce costs. To achieve this target, we focus on eliminating unnecessary functions in our organizations. There are seven types of wastes: overproduction, waiting, transportation, processing, inventory, motion and defects, which are discussed in more details below.

Overproduction

Overproduction is to manufacture an item before it is actually required. In brief, overproduction is resulted from producing more than need or faster than need. Overproduction is a highly costly waste to a manufacturing plant as it hinders the smooth flow of materials and actually causes degraded quality and low productivity. Overproduction is considered as a waste also because it makes the company spend excessive money to produce something not being required yet and decreases the quality of the products if they are set on the shelf for a long time. Generally overproduction is due to high changeover times, unreliable equipment, or unreliable process. Companies always lose a huge amount of money, and spend excessive lead times on storage which makes difficultly detect defects. For example, film industry is commonly big batch production. There is a film factory, previously, no matter how much the quantity of client need, every time starting device was about serial production a week or a month even. From before in light of the idea, the more you starting device, the more you waste. However, the following problems were mass production needed to store, and time deteriorated film quality. Although its unit cost in manufacturing domain was lower, but for the whole supply chain, the cost that the factory paid was rather high. To solve the problem of overproduction, the firm must have a greater awareness of fluctuations in market demand, grasp the trend of market demand in time and control the main factors of various changes. According to the market trend, the firm should adjust production plans and production rhythm. (Stand originally 2008)

Waiting

It is a waste when the time can not be used effectively. It happens when planned work does not go according to the plan, such as waiting for information to be collected, analyzed and processed. We have to admit that most of the product’s life is spent in waiting for proceeding to the next stage of the whole process. The waste caused by waiting now is related to the costs of wages and some other fixed costs, such as rent, rates, heating fee and the like that still have to be paid during that time. So we should use every second effectively. Each additional hour of waiting equals the loss of income of an hour, which can never be recovered. In summary, there are several forms of waiting–work waiting for people, people waiting for work and people or work waiting for available equipments. For example, a small motorcycle components manufacturing company once had such a problem. One time, the equipment broke down suddenly, a part of the production line had to stop producing to wait for the equipment repaired. As is known to all, each stage of its production process is closely related. Upstream production line of the part had to wait due to lack of demand. At the same time, downstream production line also can not produce without materials. A bad node led to the production collapse. There are two methods to eliminate waiting time. One is to make the production process clear, and then eliminate the negative factors affecting production efficiency, making the whole production process smoother. In fact, increased productivity is itself an important means of reducing waiting waste. The other one is to draw up a manufacturing plan that covers the whole production process. In the plan, the company will consider all possible situations and their counter-measures. Then in the case of emergence, they can take it in their stride without consuming too much time.

Transportation

Transportation refers to the movement of goods from one place to another but the goods will not increase the value during this process. Inevitably, some products are lost or damaged in process of moving, which causes the loss of money. So there is a need of recording the process of moving from one area to another, which also needs people to perform. And that is another waste. Additionally, some unnecessary movements may increase lead time and reduce the flexibility of the system. Obviously, all of these will increase workload in progress. For example, by comparison of Chinese and American figures, we can easily understand that the efficiency of logistics in China is pretty low. The cost of electrical products and food transportation is 40%—50% higher than US. There are about 27 times turnover in every supply chain. The return rate in Chinese logistics is lower than 2%, but it is about 7%—8% in US. Chinese average stoke is about 51 days, but 7 days in US. Therefore, a relative lower logistics will bring a problem of huge waste. The total output of vegetables and fruits in China every year is about 300 million ton, but there are 37 million for rot losses, which is 20%-30% compared with developed countries’. The way to eliminate the waste of transportation is based on factors of suppliers, customers, transportation distance, load, transportation route, transportation intension and industry regulations, organizations should make an analysis and assessment of transportation decrease turnover rate in supply chain, hence waste in logistics can be decreased as well.

Inappropriate Processing

One source, inappropriate processing, revolves around doing more than necessary. In manufacturing it involves subjecting work to additional and unnecessary steps in the process. Many organizations use expensive and sophisticated equipments to do easy work that could have been done by simpler tools. This often results in poor plant layout because preceding or subsequent operations are located far apart. In addition they encourage high asset utilization in order to recover the high cost of the equipment. For example, an amusement invested a huge amount of money to introduce advanced facilities transforming a 3d cinema into a 4d cinema. However, due to not fully took account of the limitation of 4d resources, the reconstructed theater still only showed 3d videos in most of the time. On one hand, the initial investment did not achieve the expected effects, which caused the waste of facilities; On the other hand, the amusement park had to constantly maintain the new equipment, resulting in a durative waste of resources. The solution to waste is to reasonably estimate the demand of hardware and software which involved in production process. Of course, this assessment should not only reflect the current production needs, but also forecast product upgrade for a long period to come. Based on this, organizations should make a software/hardware demand program which matches productivity development, maximizing the utilization of investment resources, in order to avoid or reduce waste of inappropriate processing. (Stormy Brain 2005)

Inventory

Unnecessary inventory is due to unreasonable production system, inconsistent production process and nonstandard operations. Unnecessary inventory often masks problems on the plant floor, which leads to increased lead times, delayed detection of problems, limiting space, and poor communication. It must be identified and solved in order to improve operating performance. For example, an electronic factory has experienced the problem of inventory waste. Copper tube is the main raw material. As the increasing inventory, new copper tubes press on the old ones. If the earlier tubes are used for priority, then extra movement is needed as well. In the other way, if the new tubes are chosen conveniently, the old tubes which are stocked for a long time will bring up a serial of problems, such as low quality. Except that, as the inventory increased, the space for good, maintenance, daily management, inventory time etc. will all be increased. In additional, due to inventory, the unbalanced situation of equipment and workers is difficult to be detected. When capital is used on huge stock, the total amount of capital will raise and also the interest and the warehouse management fee. When there is a product type changing, the money for bulk purchased materials which are bought before is now can be used to purchase a new product type for 40% discount. Virtually the value for product is reduced, cost is increased and profit is decreased. What is the solution to inventory? Starting from the origin of inventory, organization should expose the problem by lowering down the inventory, thereby taking effective measures to fundamentally solve the problem. Hence the problem can be solved totally and will never turn up again. Therefore, production process will be continuously improved during the process of exposing problem and solving problem. By intensifying the foundation management level and increasing operation stability to modify and polish inventory management. Then the waste of inventory can be reduced finally. (David McBride 2003)

Motion

Unnecessary or excess motion is the action that does not add value on goods, as walking, stretching, bending and lifting, which could be avoided. This kind of waste is related to health—a large amount of motion is easy to make the employees feel tired, and is likely to lead to safety issues as well, which is increasingly becoming a big problem for organizations. It happens a lot in assembling workshop. A large number of tools, being used from time to time, are always put everywhere. This makes them inconvenient in fetching. Workers have to walk an extra distance or do excess motion to get what they want to use. Obviously, it is easier to work, as long as we make some modification. Then a higher efficiency will be achieved. The solutions to this are as follow. First, shorten the distance. For example, put assemblies and tools together at a proper and easy-to-reach place. Second, use both hands at the same time. If we can use both of our hands simultaneously and flexibly, the efficiency will be twice as high as used to be when the work was finished with just one hand. By doing so, the operations are performed in an orderly and well-sequenced way, which makes the work easier to complete. Third, reduce excess motion. In addition to some apparent motion waste, such as put things haphazardly or passing things from one hand to the other, excess motion includes changing the direction too carefully, repetitive checking on things, worrying about the work too much etc. Fourth, work in a relaxed manner. Companies need to know whether the workers are comfortable when doing their work, whether the work pace is in a state of disorder and the like. To help the workers finish their work in a relaxed attitude is useful for reducing motion waste.

Defects

In an organization, the most original waste is raised by components or products that do not meet the standard. Quality defects cause repeat work to revise mistakes and the resulting scrap cost a huge cost to organizations. Related costs include re-inspecting, additional inventory and rescheduling. The cost of defects accounts for a significant portion of the total manufacturing cost. The elimination of waste is not only to reduce the cost, but also to increase competitiveness of your organization. For example, a version of antivirus software had a bug program, which made the Vista system paralysis. After the incident, a large number of customers complained the product. The company had to recall all bug software and re-inspected the entire programs then re-tested. It then turned out that it is an error procedure. Research and development (R&D) engineers did not perceive the mistake when they design the procedure. Simultaneously, the test engineer did not find the error because his computer system is not Vista. All CD-ROMs on which recorded the error procedure became scraps. Further, the next quarter schedule was disrupted by this incident. The worse thing is that, this incident has brought negative impact on the company and many customers said that they would not buy this brand of antivirus software any more. The cost of this small defect is loss of money and reputation. It is a high price to pay for it. Thus, we should discovery anything defective in time, and identify the source of those things, thereby reducing the rate of imperfect item. Eliminating or reducing waste caused by all non-value-added activities by all means such as inspection, transportation and waiting and the like. More specially, introduce the idea of zero return rate in the production. Every work should be well done at the first time. Above all, at the very beginning of the production, prevent unqualified material from entering subsequent stages of process. Always put the idea of zero return rate at the first place. Make a great effort to eliminate or reduce the waste caused by defects. (David Taylor & David Brunt 2001) (Womack, J. & Jones, D. 1994)

Conclusion

In quality management, Shigeo Shingo came up with the concept of the seven wastes. Over time, the concept of seven wastes has not only been used in manufacturing, but also plays a big role in others industries. Eliminating wastes has become a necessary mean of accelerating the development and improving competitiveness.

Question 2

Introduction

Just-in-time (JIT) is a technique of manufacturing and inventory management, initially developed by the Toyota Motor Corporation, which has been widely adopted around the world. JIT is often considered as a synonym for lean production, and has been affirmed due to its higher efficiency, better customer service, and improved cost savings, which can help organizations enhance competitiveness. These will be discussed in more details in this paper.

Priorities

In the JIT enterprises, priorities can generally be understood that products are only designed for a part of the customers who have specified need for some functions, but not all. And then there are not many options available for the customers to choose. As a JIT enterprise, it just focuses on its primary business, giving up part of relevant market. Although the target market is limited, the consumer group is clear. Because the JIT enterprises know exactly what this group of customers wants. This can help greatly decrease the possibility of making errors and reduce the costs, and be effective in improving the quality as well. In the traditional enterprises, most of the firms try to expand the market to get orders as many as possible, which not only extends the design cycle, but also increases the total cost, while the quality may not be well controlled. And as for the customers, there are also some disadvantages as follow: first, they may have to pay more; second, they may get something additional they don’t want, and third, they may get something of common quality which could have been well produced. For example, in a traditional mobile phone, the manufacturers usually install a lot of functions on it in order to meet the different needs of different people, such as, the most common messaging function, MP3, navigation, Internet and the like. In this case, many functions are integrated in a mobile phone, which increase the cost of the phone. In fact, most consumers do not need all of the functions, so they are unwilling to pay for what they may never use. So after a lot of investigations and researches, Nokia, one of the corporations who have introduced JIT system already, found that SMS is a most expected function for a phone. In addition, students like Mp3 function, business people prefer auto navigation function, and most IT professionals choose Internet-enabled mobile phone. These discoveries make the production task easier and the products can be produced at a lower cost. So Nokia can then produce different functional mobile phones according to different needs and sell these mobile phones in a lower price.

Engineering

In JIT firm, engineering integrates every module of the design in dependant on a unified standard to form a template. By doing so, the firm just needs to make some modifications to part of the template which is not consistence with the need of customers to get an improved product rather than redesigning. Actually, every modification to a part or assembly is a process of incremental improvement to the product. And it makes the outputs standardized. What is more, the outputs will be far more simplified and improved in this gradual process of evolution. For the different needs of customers, it only changes the outputs on the basis of the template, never starting from scratch. With JIT, engineering usually considers whether the design is suitable for assembly. The traditional enterprises can not take so much into account because everything is from scratch. Due to limited time, engineering designs should be as quickly as they can, and then the designs will be used in manufacturing soon. Products produced through this process often have poor qualities and high costs. Sometimes products can not be assembled as design defects, so the design will be modified from the beginning. But this may not occur in JIT firms. For example, when Haier refrigerator cracked the French market, they encountered resistance. Because Chinese people like single-door refrigerators which have some small grids in it, while in Europe, due to different habits and customs, the Europeans like double-door refrigerators which have large grids. When Haier understood the demand, they made a change rapidly on the basis of the original design template to meet this demand. From receiving the demand to finishing the design, Haier used only one day. And then Haier produced 105 sets of new refrigerators within 10 days. In the following, Haier successfully captured French market through continuous improvement. As can be seen, the success of Haier is due to JIT system. They design products on the original standard template which created new improved design and continually improve each design template. Although the requirements of customers are different, it is convenient to make the modification on the design templates. (Michael A. Cusumano 1985)

Work force

In a JIT system, work force is regarded as the most valuable resource that can uncover and solve problems. Work teams are the effective way to achieve these goals. Everyone in the team is trained to be a broadly skilled worker, so everyone may have the ability to solve problems. And a greater flexibility is provided to replace each other in the same team, if necessary. The teams are in charge of their own parts and products, including quality inspections and equipment maintenance. With JIT, It is noted that people in the firm have a cooperative attitude instead of a competitive attitude because everyone is responsible for his own performances, rather than managers. Additionally, changes are not made by opinions of managers. Plans and decisions are made by consensus. In the traditional firm, a part of the working time is used to do something that adds no value on products, such as looking for parts, moving materials or waiting for instructions. When the production begins, workers try to work at a rapid pace and do not care which parts of the product are needed and which are not, thereby causing poor quality, wastes and machine breakdowns. Oppositely, JIT workers focus on smooth flows, short setups and simplifications, though it may result in hard pace. Traditionally, managers enjoy greater benefits and privileges. JIT more respect for workers than that in a traditional firm. There is no status differential. The managers share the same facilities as the workers. Although they earn higher salaries, they are simultaneously expected to work for longer time. For example, JIT is applied to production by FAW-VW Automobile Company. They encourage workers to involve in teamwork. The responsibility for job scheduling and quality are often passed to the teams at the shop floor. Passing responsibility down to the team is essential to achieve a high level of activity coordination and information sharing among team members. Workers are regularly trained to operate several machines, to perform maintenance tasks, and to perform quality inspections, which not only reduce the number of workers, but also give workers more flexibility, so as to coordinate and deal with problem in the production process. (Mohammad Z. Meybodi 2003)

Suppliers

For JIT firms, the relationship with suppliers is not only the relationship of selling and buying. Suppliers almost become the primary elements of JIT manufacturing. A good and long-term relationship between customer and its supplier helps set up a more efficient process in material management, inventory management and delivery system. It can also be ensured that the supply is available and stable whenever it is needed. In traditional manufacturing, the relationships between them are more like adversary rather than cooperator. It just bases on contracts not trust. Both of them are eager to maximize their own benefit, but ignore the cooperation between them. With JIT and manufacturers relying on more frequent, smaller shipments of supplies to match the lean, streamlined flow of production, the suppliers must be considered as part of the team, even expected to participate in plan and design to improve quality, shorten delivery time, and offer ideas. JIT firm should also help suppliers improve technical capability and management level. In the JIT approach, single-sourcing is common. 100 percent of the requirements encourage suppliers to locate a plant or warehouse close to the customer, which can then help needed delivery in time, and also make quantity discounts become available. Moreover, single-sourcing is also more convenient for customer and supplier to interact and coordinate. In fact, the supplier is chosen strictly. JIT firms will select the most guaranteed one from a list of suppliers that they can rely on to deliver perfect quality. More importantly, there is no incoming inspection of the materials to check their qualityall parts must be of specified quality and guaranteed by the supplier. For example, the key element of IBM Company strategy is to help supplier establish the supply system what IBM can achieve truly localized supply. This is not only good for IBM, but also be helpful to suppliers. IBM established an open and compatible information platform, so as to improve the cooperation. On this basis, IBM can be more understanding of production process, product design, and quality, which can help suppliers find their own competitive advantage. By improving the technical level of supplier, the supplier not only enhances the market competitiveness, but also provides high quality products and better services for the IBM. ( Harold Kerzner 2006)

Maintenance

Maintenance combines technical and associated administrative to retain or restore an item in order to perform its required function. Many companies are looking for the way of increasing competitiveness with respect to cost, quality, services and on-time deliveries. Undoubtedly, maintenance is the basis of achieving the goal that has been looked as an important part of productivity improvement. Preventive maintenance as a kind of maintenance is the prevention of equipment breakdowns before it happens. This includes inspections, adjustments, regular service and planned shutdowns. Many manufacturers repair equipment as quickly as possible when the equipment breaks down, which is common in a corrective mode of operation, and then make it run until it breaks down again. This minimizes the life of equipment and may disrupt the production process. Preventive maintenance can help not only maintain production quality, but also meet delivery schedules. So beside the preventive maintenance, JIT firms also minimize the possibility of breakdown by means of running equipment slowly and steadily, throughout 24 hours. In the JIT shop, qualified operators involve in all maintenance activities to work on equipment and process improvements. For example, Toyota fully uses workers’ idle time to maintain equipment and prevent breakdowns. They encourage workers to perform maintenance tasks and quality inspections. In Toyota, twenty percent of machines are very old but with preventive maintenance they work very well, even as well as new machines. They keep equipment in top running condition. And productivity is enhanced by the decrease in unexpected machine breakdown. In addition, preventive maintenance increases the margin of safety by keeping reducing or eliminating unplanned downtime, thereby increasing machine efficiency. (Meredith, JR & Scott, MS 2002)

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