Chapter 16 – Lean Operations, JIT, TPS & Kanban

Definitions & Key Concepts

• Lean Operations – Deliver exactly what the customer wants, when they want it, with zero waste and a mindset of continuous improvement (Kaizen).
• JIT (Just-In-Time) – Inventory arrives “just in the nick of time.” Primarily an inventory strategy but inseparable from Lean because it:
– Forces problem-solving by exposing issues quickly.
– Reduces carrying costs and space.
• TPS (Toyota Production System) – Historical origin of modern Lean.
– Spawned today’s Ford, Mercedes, Honda, etc. production systems.
– Interlocks Lean + JIT under a culture of respect for people and relentless improvement.
• Triad Relationship
– Lean = strategic philosophy.
– JIT = inventory mechanism.
– TPS = cultural/operational framework that institutionalises the first two.

Competitive Aims of Lean

• Eliminate Waste (Muda)
• Remove Variability (Mura)
• Increase Throughput (Flow)
• Applicable to manufacturing and service sectors (hence “Lean Operations,” not merely “Lean Production”).

The Seven Wastes (Taiichi Ōno)

1. Overproduction – Making more/earlier than needed.
2. Waiting/Queues – Idle time (e.g., Disney queues → Fast-Pass solution).
3. Transportation – Unnecessary moves; Mercedes located suppliers within $20!–!50\,\text{mi}$ of Tuscaloosa plant to cut this waste.
4. Inventory – Ties cash, hides defects; “Inventory is evil” in Lean parlance.
5. Motion – Excess walking/reaching.
6. Over-processing – Doing more work or tighter tolerances than customer values.
7. Defects – Rework, scrap, warranty.
   • Add-on wastes often cited: energy, water, space, talent, etc.

5S (House-Keeping for Waste Removal)

1. Sort – Remove unused items.
2. Straighten / Simplify – Arrange for easy retrieval (peg-board silhouettes, labelled drawers).
3. Shine / Sweep – Clean = problems become visible.
4. Standardise – Same method every time; eliminates variability.
5. Sustain – Make it habitual; audits, visuals.
   • Additional S’s frequently appended: Safety & Support → “7S.”

Variability Reduction

• Any deviation from the optimum (positive or negative) is wasteful.
• Inventory hides variability (the “river & rocks” analogy).
– Lower inventory → expose problems → fix them → lower inventory further.
• Primary sources: poor quality, bad maintenance, erratic demand/forecasting.

Throughput & Pull Systems

• Throughput – Time a unit spends from start to finish.
• Pull vs Push
– Pull: Production triggered only by actual demand (Kanban signal).
– Fast-food example: order at speaker triggers sandwich assembly.
– Improves flow, quality, freshness; minimises WIP.
• Small lots shorten lead-time, expose defects sooner.

JIT & Supplier Partnerships

• Lean/JIT extends upstream; suppliers must be involved.
– Joint process design, shared data, frequent deliveries, quality assistance.
• Supplier concerns:
– Heavy dependence on one customer & frozen schedules.
– Short lead-time & small lots raise set-up frequency.
– Need guaranteed volume/pricing to offset risk.

Facility Layout & Workforce

• Cellular flow, short paths, minimal space.
• Poka-yoke (error-proofing) embedded.
• Cross-training & flexible stations enable quick change-over.

Inventory, EOQ & Set-up Cost Trade-off

• EOQ formula (Chapter 12 reminder): $EOQ = \sqrt{\frac{2DS}{H}}$ where
– $D$ = annual demand, $S$ = set-up/ordering cost, $H$ = holding cost/unit/year.
• Lowering lot size $q$ halves average inventory $q/2$ but doubles set-ups – unless $S$ is reduced.
• Set-up-time ↔ Set-up-cost bridge:
– $\text{Set-up Cost} = (\text{Set-up Time})\times(\text{Labor Rate})$.
– Example: Budget $\$2.40$ per set-up.
• $30/h tech ⇒ $4.8\,\text{min}$ allowed.
• $60/h engineer ⇒ $2.4\,\text{min}$.
• Simplify so a $15/h intern can do it ⇒ $9\,\text{min}$, or do it in $5\,\text{min}$ and shrink $S$ further.
• Reducing $S$ drops total cost curve, permitting smaller EOQ and hence Lean-desired low inventory.

Kanban Systems

• Kanban = “signal” or “card.” Could be:
– Empty pallet/box, flagged rack space, electronic order, verbal cue.
• Mechanics: downstream process sends Kanban upstream; upstream produces only what Kanban specifies.
• Number of Kanbans (containers)
$k = \frac{D<em>L + SS}{C}$ – $D</em>L$ = demand during lead-time (same units as container).
– $SS$ = safety stock (can be % of demand, fixed qty, or days of supply).
– $C$ = container capacity (use EOQ if container size is flexible).
• Cupcake Example:
– Demand: $500\,\text{cakes/day}$.
– Lead-time: $2\,\text{days}$ ⇒ $D_L = 1000\,\text{cakes}$.
– Safety stock: $0.5\,\text{day} = 250\,\text{cakes}$.
– Container (tray): $C = 250$.
– $k = \frac{1000+250}{250} = 5$ trays required to keep flow uninterrupted.
• Creating extra Kanbans speeds flow (e.g., Chick-fil-A employee with iPad at car 10-14 adds earlier “signals” in the queue).

Toyota Production System (TPS) Culture & Tools

• Respect for People – Empowered workers stop process for quality (Jidoka).
• Kaizen – Frequent small improvements; employees hunt waste.
• Standardised Work – Removes variability, eases training.
• Jidoka – “Automation with a human touch;” Andon board visually flags stoppage/root cause.
• Heijunka – Level loading to smooth schedule (helps suppliers).
• Gemba Walk – Managers “go to the real place” to observe facts firsthand.
• Balances elimination of Muda (waste) with avoidance of Muri (over-burden) & Mura (unevenness).

Lean in Service Industries

• Fast-food, banking, healthcare, theme parks all apply Lean:
– Chick-fil-A pull system & on-lot order takers.
– Disney Fast-Pass reduces queue waste.
• Metric focus shifts from part counts to patient wait time, loan approval cycle, etc., but principles identical.

Ethical, Philosophical & Practical Implications

• Reducing waste conserves resources (environmental benefit).
• Respect-for-people principle fosters safer, more engaging workplaces.
• Continuous improvement culture prevents complacency, sustaining competitiveness.

Key Formulas & Numerical Reminders

• EOQ: $\sqrt{\frac{2DS}{H}}$.
• Average inventory under EOQ: $\frac{q}{2}$.
• Kanban count: $k = \frac{D<em>L + SS}{C}$. • Set-up budget time: $T = \frac{S</em>{\$}}{\text{Labor Rate}}$.

Logical Flow of Implementation

1. Adopt Lean mindset – zero waste, customer focus.
2. Map processes – identify 7 wastes.
3. Apply 5S to gain quick wins & visibility.
4. Lower inventory gradually to reveal variability.
5. Streamline set-ups to offset increased frequency.
6. Introduce Kanban to regulate pull.
7. Engage suppliers; extend JIT upstream.
8. Institutionalise TPS tools – Kaizen, Jidoka, standard work, Gemba.
9. Measure & repeat – continuous improvement never ends.

“Inventory is evil, but variability is its accomplice; shrink one to expose and eliminate the other.”

End of Chapter 16 Lean Operations study notes.