MANUFACTURING PLANNING AND CONTROL IN A JIT ENVIRONMENT

Manufacturing planning and control is governed by, and must work with, the manufacturing environment. Figure shows the relationship:

JIT MANUFACTURING

MANUFACTURING

PLANNING AND CONTROL PROCESS DESIGN

Forecasting Master Planning

Material Requirements Planning Capacity Management

Production Activity Control Purchasing

Flow Manufacturing Process flexibility

Total Quality Management Uninterrupted flow

Total Employee Involvement Supplier Partnerships

This section will study the effect a JIT environment has on manufacturing planning and control.

The complexity of the manufacturing process, the number of finished items and parts, the levels in the bill of material and the lead times have made the planning and control problems either simple or complex. If anything can be done to simplify these factors, the planning and control system will be simpler.

JIT process is not primarily a planning and control system. It is a philosophy and a set of techniques for designing and operating a manufacturing plant. Planning and control are still needed in JIT manufacturing.

Forecasting

The major effect that JIT has on forecasting is shortened lead time. If lead times are short enough that production rates can be matches to sales rates, forecasting for the MPS become less important.

Production planning

The JIT process has the potential for reducing long-lead-time purchase, but more importantly, it provides an environment in which the supplier and buyer can work together to plan the flow of material.

Master production scheduling

Several scheduling factors are influenced by JIT manufacturing:

- MPS tries to level capacity and JIT tries to level the schedule based on capacity and material flow;

- The shorter lead times reduce time fences and make the MPS more responsive to customer demand. Whether the company builds to a seasonal demand or to satisfy promotion, a forecast is still necessary. Planning horizons can also be reduced;

- The JIT system requires a stable schedule to operate. This principle is supported by using time fences. If lead times can be reduced through JIT practises, the time fences can be reduced;

- Traditionally, weekly time buckets are used. Because of reduced lead times and schedule stability, it is possible to use daily buckets in JIT environment.

Material requirements planning

MRP plans the material flow based on the bill of material, lead times and available inventory. JIT practises will modify this approach in several ways:

- The MRP time buckets are usually one week. As lead times are reduced and the flow of material improved, these can be reduced to daily buckets;

- In a pure JIT environment, there is no inventory on hand and the order quantity logic is to make exactly what is needed. Therefore, there is no netting required. If the lead times are short enough, component production occurs in the same time bucket as the gross requirement and no offsetting is required;

- Bills of material can frequently be flattened in a JIT environment. With the use of work cells and the elimination of many inventory transactions, some levels in bill of material become unnecessary.

Both MRP and JIT are based on establishing a material flow. In a repetitive manufacturing environment, this is set by the model mix and the flow rate. However, many production situations do not lend themselves to level scheduling and the pull system. Some examples are as follows:

- Where the demand pattern is unstable, - Where custom engineering is required, - Where quality is unpredictable,

- Where volumes are low and occur infrequently.

Capacity management

Capacity control focuses on adjusting capacity daily to meet demand. Leveling should make this task easier, but so will the JIT emphasis on cutting out waste and problems that cause ineffective use of capacity. Linearity, the practise of scheduling extra capacity, will improve the ability to meet priority schedules.

Inventory management

If order quantities are reduced and annual demand remains the same, more work orders and more paperwork must be tracked and more transactions recorded. The challenge is to reduce the number of transactions that have to be recorded. One system used is called backflushing or post-deduct.

Material flows from raw material to finished goods. In a post-deduct system, raw materials are recorded into WIP. When work is completed and becomes finish goods, the WIP inventory is relieved by multiplying the number of units completed by the number of parts in the bill of material. The system works if the bills of material are accurate and if the manufacturing lead times are short.

The impact on effective lot sizing

MRP is often called a push system. The trigger for the entire plan is the projection of the final product need, as represented by the MPS. Part of the difficulty with MRP is that often the plans are not effective because of problems or changes, including:

- Changes in customer requirements, both in timing and quantity;

- Supplier delivery problems, including timing, quantity and quality;

- Inaccurate databases that can make the plans invalid , depending on the nature of the inaccurate data;

- Production problems: absenteeism in the workforce, productivity and/or efficiency problems, machine downtime, quality problems, poor communication.

The pull system

The pull system was developed as an alternative to classical push MRP. The underlying concept is to react to the final customer order and produce only what is

needed to satisfy demand and then only when it is needed. Essentially, this system is much the same as the basic reorder point system used for independent inventory.

The major reason reorder points normally do not work well in a dependent inventory environment is a significant violation of the assumption of relatively constant demand that allows a reorder point to work well in some independent inventory environments. The lot-sizing problem with dependent inventory often results in either a crisis shortage or a replenishment of stock well before it is actually needed.

The critical conditions causing the problem are the large lot sizes and the long lead times, both of which are major targets of JIT waste reduction.

The standard EOQ model helps determine the most economical lot size. A fundamental assumption of this model is that the 2 major costs involved are known and relatively fixed. While this is relatively true with holding cost, it is not true with order cost. If the order cost is equipment setup, then a major JIT effort is to reduce this setup cost. If it is a purchased item, the major effort is to work with suppliers to reduce the cost and time of purchase order and delivery. With this efforts, the order cost curve is driven downward and to the left, as in the figure.

This implies the economic order quantities and the reorder points are very small, meaning that we will be ordering frequently, but in very small batches.

The downside of the change. Given that the overall customer demand has not diminished, we will need to order batches to be built much more frequently since each batch is smaller in size. Each time the inventory of a given batch gets close to the reorder point, we risk a stockout if the demand during the replenishment lead time exceeds expectations:

The kanban system

The developers of the JIT concepts utilized a simple card system called Kanban. The system works very simply. The kanban signal, often a piece of cardboard, identifies the material to which it is attached. The information on the kanban will often include:

- Component part number and identification,

TOTAL COST C

O ST

HOLDING COST

ORDER COST

EOQ QUANTITY

Normal EOQ/ROQ pattern JIT Kanban pattern

QU A N T TI Y

Exposures to stockouts

TIME

- Container size,

- Work center (or supplier) of origin.

How it works. The following figure illustrate the use of what is often called a two-card kanban system. The 2 types of cards are a production card (authorizing production of whatever part number is identified on the card in the quantity specified) and a withdrawal card (authorizing the movement of the identified material).

At the start of the process there is no movement, since all the cards are attached to full containers. It is only when a card is unattached that activity is allowed. In this way the number of cards will clearly limit the inventory authorized to be at any location.

At some point, a downstream process needs some of the parts produced by work center 2. They take a container of the material, leaving the work center 2 production card with the center (step 1). This illustrates 2 additional rules of the system: all material movement is in full containers and kanban cards are attached to a work center. The unattached production card is the signal to start the work center 2 production to replace the container that was taken (step 2). To do that work they need raw material, which is in the containers in front of the work center with the move cards attached (step 3). When that material is used, the raw material container is now empty and the associated move card is unattached (step 4). It authorizes movement of material to replace the material that was used. That material is found in the “finished goods” section of work center 1 (step 6). The operator will now move the material and place the move card on the container as proof of the authorization to move the material (phase 6). Before doing so, however, it must remove the production card that had first authorized its production (phase 5). That represents another critical rule for kanban:

every container with material must have one, but only one, card attached. This process continues upstream even to the suppliers, who can also receive the kanban move cards as a signal for their next shipment to the facility (steps 7, 8, 9).

Production and movement of material are only authorized purely as a reaction to the utilization of material for production downstream. Also cards only circulate

Kanban rules. Even though there are no formal schedules in a Kanban system, there is a fairly important set of rules. Those rules are summarized:

- Every container with parts shall have one, but only one, kanban;

- There will be no partial containers stored. Every container will be filled, empty or in the process of being filled or emptied. This rule make inventory accounting easy;

- There will be no production or movement without an authorization in the form of an unattached kanban card.

Cards alternatives. Some of the alternative methods include:

- Single card systems. The single card is the production card, with the empty container serving as the move signal;

- Colour-coding of containers;

- Designated storage spaces;

- Computer systems, often with bar coding serving as the signal generator.

Using the kanban system for process improvement

Because the kanban system allows for a controlled inventory of relatively small containers, there is a great opportunity for using the system to promote continual process improvement. Removal of one kanban card will remove one container and since the containers are small, so too will be the impact of the removal. The important aspect of this is that some process problem will ultimately emerge, signaling the next target for JIT process improvement efforts.

This is not an easy approach to implement. That is certainly not a natural action for most people and the performance evaluation system needs to be altered to reflect this type of activity.