Operations Management

Topic 4 Supply Chain Management, JIT, Kanban and Lean Manufacturing

UiTM Shah Alam Lecturer: Pn. Noriah Yusoff T1-A16-6C
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Learning Objectives
When you complete this chapter you should be able to:
1. Explain the strategic importance of the supply chain or what is the supply chain management 2. Able to discuss the need and benefits of Supply Chain Management Example of Supply Chain in Darden Restaurants
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Darden Restaurants
Largest publicly traded casual dining company in the world Serves over 300 million meals annually in more than 1,400 restaurants in the US and Canada Annual sales of $2.4 billion Operations is the strategy
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Darden Restaurants
Sources food from five continents and thousands of suppliers Four distinct supply chains Over $1.5 billion spent annually in supply chains Competitive advantage achieved through superior supply chain
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The Supply Chains Strategic Importance (What is Supply Chain Management)

Supply chain management is the integration of the activities that procure materials and services, transform them into intermediate goods and the final product, and deliver them to customers Competition is no longer between companies; it is between supply chains
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Supply Chain Management

Important activities include determining
1. Transportation vendors 2. Credit and cash transfers 3. Suppliers 4. Distributors 5. Accounts payable and receivable 6. Warehousing and inventory 7. Order fulfillment 8. Sharing customer, forecasting, and production information
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Supply Chain Requirements in Global Environment

Supply chains in a global environment must be able to
React to sudden changes in parts availability, distribution, or shipping channels, import duties, and currency rates Use the latest computer and transmission technologies to schedule and manage the shipment of parts in and finished products out Staff with local specialists who handle duties, freight, customs and political issues
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Need for Supply Chain Management

1. 2. 3. 4. 5. 6. 7. 8. Improve operations Increasing level of outsourcing Increasing transportation costs Competitive pressures Increasing globalization Increasing importance of e-commerces Complexity of Supply Chains Manage Inventories

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Benefits of Supply Chain Management

Lower inventories Higher productivity Greater alertness Shorter lead times Higher profits Greater customer loyalty
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Creating an Effective Supply Chain

Develop strategic objectives and tactics Integrate and coordinate activities in the internal supply chain Coordinate activities with suppliers and customers Coordinate planning and execution across the supply chain

Form strategic partnership

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Managing the Supply Chain

There are significant management issues in controlling a supply chain involving many independent organizations Mutual agreement on goals Trust Compatible organizational cultures

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Factors in Choosing a Supplier

Quality and quality assurance Flexibility Location Price Product or service changes Reputation and financial stability Lead times and on-time delivery
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Outsourcing
Transfers traditional internal activities and resources of a firm to outside vendors Utilizes the efficiency that comes with specialization Firms outsource information technology, accounting, legal, logistics, and production
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E-Procurement
Uses the internet to facilitate purchasing Electronic ordering and funds transfer
Electronic data interchange (EDI) Advanced shipping notice

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E-Procurement
Online catalogs
Catalogs provided by vendors Catalogs published by intermediaries Exchanges provided by buyers

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Internet Trading Exchanges

Health care products ghx.com Retail goods gnx.com Defense and aerospace products exostar.com Food, beverage, consumer products transora.com Steel and metal products metalsite.com Hotels avendra.com
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E-Procurement
Auctions
Maintained by buyers, sellers, or intermediaries Low barriers to entry Increase in the potential number of buyers
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E-Procurement
RFQs
Can make requests for quotes (RFQs) less costly Improves supplier selection

Real-time inventory tracking

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Learning Objectives for JIT

Be able to understand the concept of JIT,TPS and Lean Production Able to discuss the elements and benefits of JIT Able to link the application of Kanban in JIT systems Able to discuss the steps in transition into JIT systems

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Just - in -Time (JIT)

A highly coordinated processing system in which goods moving through the system, and services are performed, just as they are needed. JIT is a pull demand system The ultimate goal of JIT is a balanced system Achieves a smooth, rapid flow of materials through the system

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Just-In-Time (JIT)
Powerful strategy for improving operations Materials arrive where they are needed when they are needed Identifying problems and driving out waste reduces costs and variability and improves throughput Requires a meaningful buyer-supplier relationship
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Just-In-Time, TPS, and Lean Operations

JIT is a philosophy of continuous and forced problem solving via a focus on throughput and reduced inventory TPS emphasizes continuous improvement, respect for people, and standard work practices Lean production supplies the customer with their exact wants when the customer wants it without waste
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Benefits of Just-In-Time Systems

Reduced inventory levels High quality Flexibility Reduced lead times Increased productivity Increased equipment utilization Reduced scrap and rework Reduced space requirements Reduced setup costs Pressure for good vendor relationships
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Elements of JIT
1. 2. 3. 4. Product Design Process Design Personnel/organizational elements Manufacturing planning and control

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Product Design
Standard parts Modular Design Highly capable production systems Concurrent engineering

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Process Design

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Small lot sizes Setup time reduction Manufacturing cells Limited work in process Quality Improvement Production flexibility Little inventory storage
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Personnel/organizational elements
Workers as assets Cross-trained workers Continuous improvement Cost accounting Leadership/project management

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Manufacturing planning and control

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Level loading Pull System Visual Systems Kanban Close vendor relationships Reduced transaction processing Preventive maintenance
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Kanban
Kanban is the Japanese word for card (signal or visible record) The card is an authorization for the next container of material to be produced A sequence of kanbans pulls material through the process Many different sorts of signals are used, but the system is still called a kanban
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Kanban
1. User removes a standard sized container 2. Signal is seen by the producing department as authorization to replenish
Signal marker on boxes Figure 16.8
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Advantages of Kanban
Allow only limited number of faulty or delayed material Problems are immediately evident Puts downward pressure on bad aspects of inventory Standardized containers reduce weight, disposal costs, wasted space and labor
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Transitioning to a JIT System

Get top management commitment Decide which parts need most effort Obtain support of workers Start by trying to reduce setup times @ costs Gradually convert operations Convert supplier to JIT Prepare for obstacles commitment supplier resistant
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