Flexible Manufacturing System - Essay Example

JUST IN TIME Table of Contents Page Executive Summary 3 2 Introduction 4 3 JIT Explained 4 4 The Methodologies 5 4.1 Material Requirement Planning 5 4.2 Just in Time – Kanban 6 4.3 Optimized Production Technology 7 4.4 Flexible Manufacturing System (FMS) 7 4.5 Theory of Constraints 8 5 Merits and Demerits of JIT based Lean Manufacturing 8 6 Case Study 1 9 7 Case Study 2 11 8 Comparative Study 14 9 Conclusion 14 10 Bibliography 15 11 World Wide Web 16 1 Executive Summary The Just in Time (JIT) methods have been examined and several versions have been discussed their strengths and weaknesses were highlighted. It was discovered that while the concept is over half a century old it has undergone improvements and various variations have been adopted by different manufacturing industries. However, in some form or the other, it is the prevalent solution adopted in manufacture. The latest form of JIT which incorporates the strengths of all variations is the Theory of Constraints which has been adopted by Lean Manufacturing and is now in vogue in general industries while JIT or Kaban are practiced more exclusively by the Automobile sector. The decision is also oriented by culture as we see predominance of JIT in Japan while the Europeans prefer OPT. Two companies, one automobile and one glass manufacturer who have adopted JIT & TOC technologies were analyzed. As the automobile company is in the niche market, JIT it very much the answer to its specific needs. In case of the manufacturer its manual operations went in favour of the TOC. 2 Introduction It is an established fact that the Just-in-Time (JIT) based System is the answer to manufacturing assembly operations. JIT has lead to the development of what is known as Lean Manufacturing. It offers scope for reducing inventories and introducing ways and means to improve productivity by planning optimal use of resources. By elimination of all activities that do not add value and/or are safety nets, maximum use of scarce resources like capacity, manpower and capital becomes achievable. It also results in value addition for the customer, improved bottom line and enhanced productivity of employees. This is the ultimate objective of Lean Design 3 JIT Explained While there are a variety of softwares available, the most suitable are those that have been adopted and perfected by the larger Automobile companies like Toyota Corporation. They are the pioneers of the Just-in-Time concept and have perfected it to an extent that has made them world class competitors to larger companies in the world. JIT has also been adopted due to its advantages such as: • The overriding focus of its activity is value addition for customer • By systematic and planned reduction and elimination of wastes in production process, it aims at production of quality goods resulting in higher customer satisfaction, • Under this method the objective is to shorten product life cycle time in production. The ability to respond quickly and with flexibility to changes also becomes a habit rather than a task. In contrast, other methods try to automate current business process and while implementing, there is a risk of simply automating the waste. With them quality is an issue that is left for other standards like ISO etc. For these reasons, Just in Time is now a widely adopted philosophy for focusing on customer value adding activities through eliminating wastes and striving towards continuous improvement. Lean Designs are based on JIT methods and are most popular today. An ARC Groups’ strategy report authored by Simon Bragg (2004) suggests that today 36% of US manufacturers and 70% UK manufacturers “are today using Lean as their primary improvement methodology”. (Simon Bragg) 4 The Methodologies Today manufacturing faces new challenges and has been offered a variety of solutions to manage these. Most prominent among them are the Material Planning Method (MRP), the Japanese Just in Time system called Kanban, the offer from Israel that is named Optimized Production Technology (OPT) and the latest thinking the Flexible Manufacturing System (FMS) adopted by many leading solution providers like SAP. The Theory of Constraints (TOC) is the culmination of the above and a better answer to industry needs. 4.1 Material Requirement Planning This is a push based system. The focal point in this exercise is to optimize Purchase and it is Supplier centric. It provides for inventory or parts planning for the production department. It creates or explodes a Bill of Materials based on requirements of lots and sizes pitched against lead times. It attempts to cover the large variety of materials required and to have it in stock against possible demand giving a lot of weightage to supplier end issues of time and quality. The tendency is to overstock rather than fall short and to anticipate demand. The result is higher inventory but more accurate and timely delivery quotations. This will also result in better utilization of production facilities as materials will always be available on demand. Similarly the spare parts will also be well stocked and this will help reduce down time which is a very vexing factor for the industry. The downside is that it will lock up a huge amount of working capital in inventory and parts. Another issue is what will happen should there be a change in demand pattern or delivery schedules. Profitability is likely to take a hit in these events. 4.2 Just in Time – Kanban JIT emerged in the Japanese shipbuilding industry in the late 1950s and early 1960s (Slack et al. 2001). As opposed to MRP this is a Pull Based system where the material required is pulled in by production and therefore required to be available Just in Time of requirement. This calls for fine tuning of supplies in accordance with the Production Plan which becomes the focal point in manufacturing. In this case the Purchases or ordered according to requirement and suitable suppliers have to be located and organized to work according to lead times demanded by Production. This is suitable where lead times are short, there is stable demand and high repeatability of materials. There are immense benefits of JIT such as improved quality and productivity. This results in standardization and customer satisfaction. Inventories are low and working capital is more effectively used. JIT is useful in conditions where there is mass production and mass customization. Indeed Toyota has perfected this art and according to Hill, “Toyota can point to an inventory turnover of 70 times on purchased parts and work-in-process and 16 times if finished goods inventory is included.” (Fujita, K. Hill, R.C. 1993) Kanban was introduced by Toyota where Kan means the card and ban which means the signal. As soon as there is a demand a signal is created through light on the floor or a card or by any other software generated signal to highlight the need. The materials or parts are stored in bins and can be fetched on raising of signal. The central idea is to reduce time and improve productivity. Over a period of time both the Kanban and the bin quantities will get reduced as a result of higher efficiencies. 4.3 Optimized Production Technology Optimized Production Technology is based on Flow Control. (Lundrigan, R). Essentially this depends on Production Planning but whereas there is a flow of materials in unequal quantities in the Assembly Line and a bottleneck is likely to occur at several places due to this disparate flow. This identifies the bottlenecks and organizes a check on how to regulate the flow of each component separately. It is a Lean Design but with emphasis on controls within the Production Lines and by extension controlling the flow of inventory in accordance with need. It is a variation of JIT and most useful for Automobile Industry where, for example, one large part may require several smaller ones for assembly and a batch is defined for that particular completion. All subsequent batches will be controlled by the designated flow to prevent any bottleneck. 4.4 Flexible Manufacturing System (FMS) In cases where there are chances of a change in quantity, size or process, the JIT system will fail to address its requirements. Here the probability of change will rule the order and the ability to adapt is more central than inventory or production control. Midway the materials or accessories might change or the process or routing may require different machinery either automated or robotic, and this has to be done in the least possible time. Such flexible systems are more suited to industries like Fashion and Garments and are designed for them. This system also works best in a highly automated system where changes can be made easily and quickly. (Toni, A.de, and S. Tonchia.S) 4.5 Theory of Constraints (TOC) The objective of the theory of Constraints is how to optimize the flow in the manufacturing process and to plan the takt. The German word takt means beat time, as in the orchestra, and is used as the time required to complete and operation or process. Therefore if the time is say 17 minutes to produce a product or a part then that is the takt that must flow through the bottleneck and off the assembly line. The TOC is the combination of JIT, MRP and Kanban and this is the present thinking in Lean design. The TOC therefore continuously works at identifying and resolving the constraints within the system. The TOC was developed on the book The Goal written by Eliyahu M. Goldratt and Jeff Cox. (Goldratt et al) 5 Merits and Demerits of JIT based Lean Manufacturing Advantages It focuses on value addition for the customer and therefore concentrates on those activities to the exclusion of others that are then termed as waste. As waste is identified, it can be eliminated resulting in better utilization of working capital. It aims at reduced lead times due to faster flows of materials to production lines. It aims to focus on maintenance of takt time and to reduce it further by removing constraints. Drawbacks For the sake of reducing inventories capacities may be underutilized Capacity Planning is a challenge where the product mix has too many variations for each operation and difficult to define takt. Kanbans are useful within the manufacturing unit but unless there is coordination with suppliers, there usefulness is questionable. There is need for Kanban integration with suppliers to make it practical. In case of a breakdown in any one production area total production comes to a halt as it can work only with single flow. The bottleneck created is too huge and all takts fail. This calls for total Productive Maintenance and spare capacity planning. 6 Case Study 1 Premier Auto is a car manufacturer who is in the niche market of making sports cars and has one manufacturing unit. Although its planned capacity is 10,000 cars per annum yet it can deliver only between 7 to 8 thousand units only. Its Order Book is always overbooked due to the specialized nature of its product. The company has 50 dealerships all over the American and European Market with fixed annual quotas. The Company produces 3 to 4 models and introduces one new model every 2 years. The company has Assembly Lines with 3 machine shops for various body parts fabrication. The engine and the accessories are all out-sourced from about 80 suppliers. The engine supplier is located about 100 Km away but the accessory suppliers are scattered all over the country There is a paint shop but the company uses a contractor to do the jobs with his own labour. B The Problems 1. Production is inconsistent from week to week. 2. There is either a shortage or excess of raw materials at Production Assembly Line as the company works on basis of Material Requirement Planning (MRP) and is dependant on supplier offering delivery dates 3. Movement within the plant is slow and not smooth. There are few conveyor belts and only 3 forklift trucks, one for each Machine shop. 4. The company works in 2 shifts of 8 hours each and still pays overtime. 5. There are frequent breakdowns. As a result of above there are Erratic Dispatches. There is no consistency in Production plan. It is made weekly as per demand pressure without considering availability of capacity or raw materials. Many movements within same section and between sections are manual as there is shortage fork-lift trucks No attention has been paid to installation of conveyers within sections and adding more forklift trucks between sections. Despite the equipment being relatively new breakdowns occur due to non existence of Preventive Maintenance Plans and non availability of spares in time Supply chain is not synchronized with Production hence raw material arrival does not match Production requirements. The company works in 2 shifts but only 5 days a week or approximately 22 days a month. There is idle time in between production processes due to slow movement; as a result wages are paid without actual production. There is also unnecessary overtime. Wages are not linked to productivity. Despite having fixed quotas for 50 dealerships the company is unable to forecast its requirements. This shows complete ignorance of how to use data and information for production planning. There is some amount of customer dissatisfaction due to delay. This can have a serious effect in company reputation and loss of orders. Higher wage bill is increasing the cost of cars and someday it might cause grave harm to the company. The Solution The company adopted JIT and production plans were made on quota forecast. Then it placed orders according to production requirement. This resulted in faster turnaround of inventory. It also introduced forklifts and conveyors to ensure quick transfer of materials. Productive maintenance was introduced to eliminate downtime and overtime was abolished by introducing productivity linked bonus based on takt time. 7 Case Study 2 In 1995, Oregon Glass was not profitable and despite $13 million annual revenue the supplier of tempered glass to the window and door industry had a 60 percent on-time delivery record, poor quality, 125 percent employee turnover, and served a dying market. As the wood door market slowly dried up, Oregon Glass saw 25 percent of its sales disappear within a two year period, it became obvious that the company had to take radical action to turn things around before it was too late. They decided to pursue TOC methods, beginning April 1996. There were two parts to their TOC program; institute the use of Drum-Buffer-Rope within the plant to improve throughput and customer service, and apply the TOC Thinking Processes in the sales process to secure more business. The Problems For the TOC view of the sales process, Oregon Glass set out to determine their customers real problems. By focusing on throughput and inventory, it became clear that the winning strategy was not to compete on price but to focus on how Oregon Glass could make their customers more productive. After glass panes were cut to size, cork disks were attached to keep the sheets separated and a sticker attached with the size and job number. The job sheets were stacked on an A-frame, strapped in place, and shipped to the customers factory. A typical customer receiving 150 sheets of glass a day would spend 15 to 20 man-hours unpacking and sorting the panes. In addition, each door or window would have to go through three cleaning stages to remove the residue from the stickers. The Solution Oregons solution was a new shipping rack with 150 individual slots to hold the glass panes. The glass could be loaded in the same order as the customers production schedule, meaning that there was no unpacking and sorting to be done. In addition, since there were no longer any cork disks or labels on the glass, the cleaning process could be reduced to one cycle rather than three. Combined with the improvements in throughput and on-time delivery that resulted from the implementation of TOC at the glass plant, Oregon was now on an upward trajectory. Customers remain loyal to Oregon Glass because of its reliability, customer service and high quality. Oregons focus is on helping its customers increase throughput and reduce inventory, and customers understand the value of having such a good supplier-partner. Oregon has even come up with a way to increase its customers yield by 14 percent - not what one would expect from a run-of-the-mill vendor. The company is now working on ways to increase business and better manage the seasonality of the glass market. The highly seasonal nature of the construction business, which drives the need for windows and doors, means that demand exceeds capacity during the summer months while the opposite is true the rest of the year. The capacity limitation is primarily a labor issue, since the machines and furnaces can handle the demand. Temporary laborers hired through a service proved both expensive and unreliable. To overcome the employee turnover problem Oregon Glass decided that hiring college student was the answer and they used the same methods to put the program together and convince the permanent workers that this was the best approach. The summer workers are paid a higher hourly wage than the average permanent employee and are offered a $1,000 tuition-assistance grant if they stay the whole summer. As a result, the company has hired reliable, enthusiastic temporary help that has stayed through the summer season and many of these students have applied to come back to Oregon Glass the following year. (case study from http://www.goldratt.com/oregonerp.htm) 8 Comparative Study Looking at the two companies’ one thing is clear. Premier Auto was more automated and with one plant the emphasis was rightly for Lean Design with Pull Based JIT to trim up the production process and support it with production oriented plans. The difference between the two is that while Premier Auto has an Assembly Line Production, the Pull Based JIT was more appropriate as it controlled the inventories and speeded up production. In the Oregon Glass case the production was manual and thus the Pull system was not required. What was needed was first to reorganize Finished Goods inventory and then control the high employee turnover. This was best achieved through TOC. 9 Conclusion Lean Manufacturing is the answer at factory level where there is Assembly Line Production and mass production and mass customization is involved. It will however not work in environments where there are significant variations in demand or major changes in either the product mix or routing processes. JIT or TOC will be best suited to single factory environment. The main advantage of JIT or TOC is that it links up and integrates the customer, production and supplier in a unique manner to deliver maximum value to customer, reduce wastages and increases productivity. . 10 Bibliography Bragg S. (2004), ‘Software Solutions taking Lean Manufacturing to the next Level”, ARC Strategies, ARC, Dedham, MA. K. Fujita and R. C. Hill 1993 Toyota City: industrial organization and the local state in Japan. Japanese Cities in the World Economy Philadelphia: Temple University Press, pp. 175-202. pp.207 Goldratt Eliyahu M. and Cox Jeff, TG - The Goal - A Process of Ongoing Improvement (English) 20th Anniversary Edition - Now with Case Study Interviews(Third Revised Edition) Lundrigan, R. (1986), “What is This Thing Called OPT,” Production and Inventory Management, 26, 2–12. Slack N., S. Chambers and R. Johnston 2001, Operation Management. (3rd Edition). Essex: Peason Education Limited. Toni, A.de, and Tonchia.S.Manufacturing Flexibility: a literature review by International Journal of Production Research, 1998, vol. 36, no. 6, 1587-617 World Wide Web Available at : case study from http://www.goldratt.com/oregonerp.htm Read More