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Lecture Purchasing and supply chain management (3/e): Chapter 6 - W. C. Benton

Chapter 6 - Just-in-time (lean) purchasing. Just-in-time (JIT) or lean purchasing is introduced in Chapter 6. The current shift toward the so-called “Lean Thinking” manufacturing environment is one of the major motivations for JIT purchasing. JIT has changed the role of purchasing from merely placing orders to investigating the supplier’s technical and process capabilities. | 1 Chapter 6: Just-in-Time (Lean) Purchasing Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013 W. C. Benton Jr., All rights reserved The Two Rival Production systems MRP production systems Just-in-time (JIT) manufacturing Popularity of JIT JIT conversion success testimonials Harley-Davidson and Hewlett-Packard 2 Just-in-time (JIT) Philosophy Just-in-time (JIT) is not just a set of tools but rather a philosophy The JIT philosophy is based on: Elimination of waste Continuous improvement Example of the JIT philosophy applied to a firm Just-in-time (JIT) production Just-in-time (JIT) purchasing 3 Just-in-time (JIT) Production A powerful management tool Based on planned elimination of all waste and on continuous improvement Also referred to as lean production Applied to repetitive manufacturing processes Reduces: Inventory levels Variability Delivery lead times Setup costs Thus, improving product quality 4 Definition of Lean Production System A set of several . | 1 Chapter 6: Just-in-Time (Lean) Purchasing Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013 W. C. Benton Jr., All rights reserved The Two Rival Production systems MRP production systems Just-in-time (JIT) manufacturing Popularity of JIT JIT conversion success testimonials Harley-Davidson and Hewlett-Packard 2 Just-in-time (JIT) Philosophy Just-in-time (JIT) is not just a set of tools but rather a philosophy The JIT philosophy is based on: Elimination of waste Continuous improvement Example of the JIT philosophy applied to a firm Just-in-time (JIT) production Just-in-time (JIT) purchasing 3 Just-in-time (JIT) Production A powerful management tool Based on planned elimination of all waste and on continuous improvement Also referred to as lean production Applied to repetitive manufacturing processes Reduces: Inventory levels Variability Delivery lead times Setup costs Thus, improving product quality 4 Definition of Lean Production System A set of several manufacturing practices including: Worker empowerment Process focus Pull production Continuous improvement The main objective: Satisfy customer needs on the highest possible level through the elimination of waste 5 Push and Pull Production Systems Alternative systems for executing the production process When should the next unit of production be made? The three systems: Push system Pull system Hybrid production Combination of push and pull 6 Determining the Number of Kanban Cards Number of kanbans (N)= N: number of kanbans or containers d: average demand during a given period L: lead time S: safety stock C: container size 7 Example: Number of Kanbans How many kanbans are required for the bottling process? Average of 90 bottles/hour output (d) Container size of six bottles (C) Lead time of 20 minutes (L) Safety stock level of 10 percent (S) 8 N= JIT Purchasing Advantages Reduced inventory levels Improved lead-time reliability Scheduling flexibility Improved quality and customer satisfaction Reduced costs of parts Constructive synergies with suppliers 9 Just-in-time (JIT) and Environment Cultural Fit Need a culture that facilitates cooperation and harmony between organizations For example, difference between corperate cultures of Japan and USA Low Variability in Demand 10 Questions? 11