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repeatbusinesswiththesamesuppliers;analysistoenabledesirable tobecomemoreefficient.
supplierstobecome/staypricecompetitive;competitivebidding
mostlylimitedtonewpurchases;buyerresistsverticalintegration END-OF-CHAPTER PROBLEMS
andsubsequentwipeoutofsupplierbusiness;andsuppliersare 16.1Demandduringleadtimeof2:(1,0002)2,000
encouragedtoextendJITbuyingtotheirsuppliers. Safetystock(1/2day)500
9.The word is kanban, andiscloselyassociatedwithJIT. It Maximuminventorylevel2,500
relies onvisual orother simplesignals toindicate whenitems Numberofkanbansneeded:
needtobepulled.Itissymbolicofthewastereduction,distance 2,500(Maximuminventorylevel)
reduction,andsmalllotsizethatcharacterizeJIT. 5
500(Kanbansize)
10.Standardized, reusable containers within the plant: in
16.2Demandduringleadtime125
shipping;protectthespecificquantitiestobemoved;reduceweight
Safetystock62.5
and
Maximuminventorylevel187.5
disposalcosts;generatelesswastedspaceintrailers;andrequire
Numberofkanbansneeded:
lesslabortopack,unpack,andprepareitems.Insidetheplant:to
conveythequalityofthekanbanandtoprotecttheitems. 187.5(Maximuminventorylevel)
3.75 4
11.Lean production is applicable everywhere. It ranges from 50(Kanbansize)
lean layouts at McDonalds kitchens (see the Global Company
Copyright2011PearsonEducation,Inc.publishingasPrenticeHall.
2 DS 2(20,000)(20) 800,000 800,000
Qp 4359 66
d
80 250(1 0.266) 183.5
H 1 250 1
p 300
244 Thenwedeterminethenumberofkanbans:
CHAPTER 16 J I T A N D L E A N O P E R AT I O N S
Demandduringleadtime 240(=3daysDailyusageof80)
Safetystock 150(=1/2dailyproductionof300)
Thereforemaximuminventoryshouldbe 390mainshafts.
Becausethekanbansizeis66mainshafts,5.9kanbansare
appropriate(390/66).Thiscanberoundedto6.
Demandduringleadtime 160(=16DaysDailyusageof10)
Safetystock 80(=4dailyproductionof20)
Thereforemaximuminventoryshouldbe 240subassemblies
Becausethekanbansizeis50subassemblies,5kanbansareappropriate(240/50),roundedfrom4.8.
2 DS 2(2,500)(30)
Qp
d
10
H 1 120 1 20
p
150,000 2 DS
2,500 50 Q
60 16.8 d
H 1
Thenwedeterminethenumberofkanbans: p
16.4First,wemustdeterminethekanbansize.Todothis,we where D = annual demand, S = setup or order cost,
determinetheproductionorderquantity(seediscussionin H =holdingcost, d =demandrate, p =productionrate.
Chapter12),whichdeterminesourkanbansize. SolvingforS(setupcost):
16.5D2,000;H$12;S$30
d 120
2(2,000)(30) Q2 H 1 1202 12 1
(a)EOQ 100lamps p
960
12 S
2D 2 31,200
2,000(30) 100(12)
(b)TC $1,200 14,400 12 (1 0.125)
100 2 $2.42
62,400
2,000
(c)No.oforders 20orders/year
100 $2.42/setup 60minutes/hour
Setuptime
16.6D2,000;H$20;S$0.50 $20 / hour
2(2,000)(0.50) 7.26minutes/setup(whichis.12hours)
(a)EOQ 10lamps
20 2 DS
Q
2,000 16.9
(b)No.oforders 200orders/year d
10 H 1
p
2,000 (0.5) 10(20)
(c)Totalannualcost where D = annual demand, S = setup or order cost,
10 2
H = holding cost, d = daily demand rate, p = daily
1000 200
100 100 $200 productionrate.SolvingforS(setupcost):
10 2
d 150
16.7WithJIT,purchase/deliveryofgoodsimmediatelyprecedes Q2 H 1 1502 10 1
demand.ThedecreaseinEOQforlamps,from100to10, p 1000
S
increases deliveries from 20 to 200. With the new 2D 2 39,000
relationship with Specialty Lighting, DiscountMart has 22,500 10 (1 0.15)
reduceditsinventorycosts,ausualpatternforcompanies $2.45
78,000
usingJITpurchasing.
$2.45/setup 60minutes/hour
Setuptime
$40 / hour
3.675minutes/setup
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CHAPTER 16J I T A N D L E A N O P E R AT I O N S 245
Q 2 H (1 d / p) 2.Suggestedlayoutfollows:
16.10 (a)UsingthemodelS
2D
2002 10 (1 100 / 800)
2 30,500
S$5.74
5.74
(b) Setuptime 60 8.61min
40
2 DS 2(50,000)(25) 2,500,000
Qp 25,000 158
d
200 100
H 1 200 1
p 400
Thenwedeterminethenumberofkanbans.
Demandduringleadtime 1,200(=6daysdailyusageof200)
Safetystock 400(=1timesdailyproductionof400)
Thereforemaximuminventoryshouldbe 1600compressors.
Becausethekanbansizeis158compressors,10kanbansareappropriate(1600/158).
CASE STUDIES
1 MUTUALINSURANCECOMPANYOFIOWA
1.Wecanassumethatifcarriedoutproperly,allthegoodthings
thataresupposedtohappenwithJITwill.Forinstance,weexpect
reduced floor space, higher quality (fewer errors), less WIP,
3.Weareassumingthatthepersonnelcanbecrosstrainedforall
empoweredemployeeswithhighermorale,fasterthroughput,etc.
the jobs in the cell, that training budgets will increase, and that
equipmentutilizationwillimprove,yieldinglesscapitalexpenditure.
4.ThenewJITsystemwillreducethroughputtime,yieldsatisfied
customers,andcreatemoresatisfyingjobs.(SoundslikeDeming.)
2 JITAFTERACATASTROPHE
Thiscaseandthediscussionbelow(muchofwhichisfroma
seriesofWallStreetJournalarticles;May19,2008,B1,B2;July
20,2007,B1;September13,2001,B1,B4;andMay8,1997,A1,
A5) can make for a very interesting class discussion. More
resourcefulstudentsmayevengotothesourcesandbeprepared
withtheseanswers.
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246 CHAPTER 16 J I T A N D L E A N O P E R AT I O N S
1.Whatdoyoudotokeepcouplingproductiongoing? couplingplantoutsidetheU.S.tosupplyfuturegrowth
andprovidebackupifthereisanothercrisis.
AtCaterpillar: At Toyota:ThefireanditsaftermathhaveleftToyota
ThemorningafterthetornadoMr. Folley was on site executivesconvincedthattheyhavetherightbalanceof
withSteveBrister,whosecompanyhadbuiltthefacility efficiencyandrisk.Manypeoplesayyoumightneedto
10yearsearlier. scatterproductiontodifferentsuppliersandplants,but
then you have to think of the costs of setting up
FolleygaveBristeratwoweekdeadlinetogettheplant
expensivemillingmachinesateachsite,Mr.Ikebuchiis
running.
quoted in the WSJ as saying. We relearned that our
Within48hoursCaterpillarengineerswerescouringthe systemworks.
worldforcouplings. In fact, the fire may have made the system even more
Caterpillar recruited new vendors and dispatched efficient.NisshinKogyoCo.,whichwasmakingtheother1%of
manufacturingengineerstocheckqualityandcapacity. ToyotasPvalves,saysthatduringthecrisisitraisedproduction
efficiency30%byspeedingupproduction.
The company promised Oxford employees that their
The fire spurred Toyota to begin an effort to trim the
paycheckswouldcontinue.
numberofitspartvariations,aprojectthatshouldeventuallycut
ItrecruitedvolunteerstomovetemporarilytoaMichigan costs. And solesource suppliers are moving quickly to build
plantwheresomecouplingproductionwasstarted. failsafe supply chains. In some cases this means revamping
Caterpillar built a new temporary supply chain that systems to facilitate easily shifting to another site if disaster
piecedtogetherthecapabilityofmanyplants. strikes.
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CHAPTER 16J I T A N D L E A N O P E R AT I O N S 247
SKUsisacontinuingissueatAPH,asitisforoperationspersonnel
everywhere.
Copyright2011PearsonEducation,Inc.publishingasPrenticeHall.