Lean Production and Just-in-Time

3.3.1. Short Description

LeanandJust-in-Time (JiT) have been extensively covered by researchers and practitioners alike throughout the past thirty years and it is not this researcher’s intention to provide a complete account here. Instead, a concise overview of the central tenets that have ramifications for the management of bottlenecks is sought to be provided.

Lean andJust-in-Time (JiT) are mostly synonymous terms that surfaced at different points in time, however (Hopp & Spearman 2008). An early account of the production methodology and management paradigm that later have been associated with the term Lean has been provided by Hayes (1981) who did not use this term, however, in his vivid description of the Japanese manufacturing environment. As Holweg (2007) discusses, there has been extensive coverage

of JiT methodology in the research literature throughout the 1980s before the term Lean has been established through the publication and tremendous success of the bookThe Machine that Changed the World(Womack et al. 1990). Lean and JiT will be used interchangeably when referring to the production and man-agement paradigm. When JiT is used to refer to the actual delivery process, it will be obvious from the context.

Hayes (1981) describes his observations and impressions from visiting sev-eral Japanese factories. His article captures many of the features and particu-larities of the Japanese production system (most often referred to as the Toyota Production System, TPS) that later have been formalized as a comprehensive science of production and management – which we refer to as Lean or JiT. The increasing success of Japanese firms in the US at that time by many had been attributed to particular Japanese habits, Japanese governmental support, cheap labor, and other idiosyncratic factors unavailable to US firms (Holweg 2007).

Others expected high automation, superior equipment, or some type of special techniques the Japanese were using to be responsible for the growing produc-tivity and cost gap between Japanese and Western manufacturers. What Hayes (1981) saw and described, however, was largely the same equipment as used in the US (or even simpler), no hidden secrets or special techniques, but simply prudent and diligent Operations Management combined with the strive for per-fection and the absence of compartmental thinking. Hayes’ paper thus provides an early documentation of the ideological attachment of JiT – as opposed to a set of tools or techniques. A quote from his article brings this to the point:

“The modern Japanese factory is not, as many Americans be-lieve, a prototype of the factory of the future. If it were, it might be, curiously, far less of a threat. We in the United States, with our technical ability and resources, ought then to be able to duplicate it. Instead, it is something much more difficult for us to copy; it is the factory of todayrunning as it should” (Hayes 1981, p. 57, emphasis in original).

The quote suggests that the key to productivity and quality as sought by “the Japanese” is predominantly a matter of mindset and organization. Nevertheless,

JiT includes a variety of tenets that are derived from the broader philosophy and put into practice through standard operating procedures.

Reduction is one of the most important activities in JiT. Reduction of waste (muda) lies at the core of the concept (Bicheno & Holweg 2009). This includes reduction of inventory. In fact, Hayes (1981) quotes a Japanese senior manager on the problems attached to inventory:

“We feel that inventory is the root of all evil. You would be surprised how much you simplify problems and reduce costs when there are no inventories. For example, you don’t need any inven-tory managers or inveninven-tory control systems. Nor do you need ex-pediters, because you can’t expedite. And, finally, when something goes wrong, the system stops. Immediately the whole organization becomes aware of the problem an works quickly to resolve it. If you have buffer inventories, these potential problems stay hidden and may never get corrected” (Japanese senior manager, as quoted in Hayes 1981, p. 59).

Figuratively, inventory is sometimes compared with the water level in a river.

As the water level – representing inventory – is decreased, rocks – representing problems – will surface that previously remained covered. As the rocks are removed and the water level is further decreased, new rocks will keep surfacing, and so on (Hopp & Spearman 2008, p. 165).

Reduction of complexity is a central tenet of JiT (Klaus & Krieger 2008, p.

308). Since the reduction of inventory will reveal problems (which is expected and intended), they are less likely to surface unexpectedly and can be resolved as they are found. This reduces the time gap that is to be bridged by the feed-back loop, which is an important factor for complexity reduction (Senge 2006).

Lower variety of products and processes reduces the chance of unexpected inci-dents and thereby further lowers the level of complexity. Process irregularities have a designated term in the JiT terminology –mura – and are continuously tried to reduce.Standardize(Seiketsu) is one of the5S– five methods for work-place organization (Bicheno & Holweg 2009).

Reduction of batch size is intended to reduce the average throughput time of parts. To make this possible, changeover time of tools likewise has to be reduced and thus is one of the core core operational objectives in JiT. Moreover, continuous reduction of changeover time is part of a broader set of activities to continuouslyimprove. In fact, continuous improvement (kaizen) is another key activity which is reflected in a steady effort to improve product and process quality.

3.3.2. Ramifications for Bottleneck Management

JiT operationalizes the flow principle. That is, it employs a holistic view on the entire system and attempts to reduce measures that inhibit the unhindered flow of products (Klaus & Krieger 2008). Part of thewastethat JiT aims to reduce is non-value-adding time of parts spent in the system. Non-value-adding time is, for example, waiting time in queues (Christopher 2011). Waiting time in queues is reduced via the reduction of work-in-progress (WiP) inventory. A means to this end is the reduction of process and transfer batches. The idealized goal is zero inventoryand a batch size of one, that isone-piece flow. In this case, parts would flow through the system and no time would be wasted waiting in queues for processing (process batches) or for completion of transfer batches.

Although continuous flow of parts is desired in a Lean/JiT setting, workers are empowered to stop the production process if they encounter quality problems (or problems of other kind, respectively) so the problem can be resolved. That is, production interruptions will be frequent until a certain quality level is reached.

Accordingly, JiT does not only foster stable processes but also requires a stable environment (Christopher 2011). Put differently, “JiT is inherently inflexible”

(Hopp & Spearman 2008, p. 173). Flexibility, however, is needed to cope with variability. Generally, there are three types of buffers in systems: inventory, capacity, and time (Hopp & Spearman 2008) Each buffer comes at a cost and it depends on the specific situation in which combination and to what extent they should be used. As previously discussed,inventoryis tried to be reduced to the greatest extent in JiT systems as it is considered waste or even “the root of all evil” (cf. p. 159). Accordingly, inventory is not the predominant way

in which JiT systems buffer against variability. Time is the buffer to which systems fall back when they fail to deal with variability and find better solutions;

in most cases, it may be the most undesirable type of buffer. Using time as a buffer simply means that throughput time extends so that customers would need to wait longer for delivery. Although there may be situations when this is acceptable, activities within supply management generally seek to avoid having customers wait for the product. Capacity is the third type of buffer against variability, and it is one type frequently utilized. Both ToC (see below) and JiT accept low utilization of process steps (e.g., machines or workers), in which case excess capacity is available to cope with demand peaks. In sourcing audits in the automobile industry, suppliers have to indicate the number of work shifts per week they will need to achieve the requested production output so that the customer (e.g., the OEM) knows that additional work shifts will be available in case demand will be higher than forecasted (Beer 2011). Capacity seems to be the buffer most favored in JiT systems. Foremost priority remains, however, the reduction of variability in the first place.

As inventory buffers are removed, there is the danger that interruptions occur more often. Bretzke (2010, p. 3) remarks:

“We have to realize that the combination of rigid process inter-facing and strong time compression has made our supply chains unnecessarily vulnerable and thus has lead to unnecessarily high shares of special express deliveries. It is no indicator of great logis-tical intelligence to configure hyper-lean process chains, creating an unanticipated amount of disruptions, to later use our whole mental concentration to create ’Supply Chain Event Management’ in order to mitigate these disruptions subsequently.”³

3Translated by the author. Original in German: “Auch werden wir zur Kenntnis nehmen müssen, dass die Kombination von rigiden Prozesskopplungen und starker Zeitkompression unsere Lieferketten unnötig verletzlich gemacht und damit unnötig hohe Expressfrachtanteile produziert hat. Es ist kein Zeichen von großer logistischer Intelligenz, erst hyperschlanke Prozessketten zu konfigurieren, die in einem ungeplanten Ausmaß Störungen produzieren, um dann mit unserer vollen geistigen Konzentration ein ’Supply Chain Event Management’

zu kreieren, dass diese Störungen nachträglich entschärfen soll.”

In an interview, the Director of Supply Chain Management at a major car maker indicated that supply interruptions had to be dealt with more often after suppli-ers adopted JiT delivery (Beer 2011). In factory environments, where the origin of JiT lies, interruptions were embraced as they served to reveal problems that ought to be solved (Hopp & Spearman 2008). Used in relatively stable environ-ments, the cost of (relatively rare) interruption may be acceptable as they come with quality improvements. Supply networks, however, are relatively open sys-tems, prone to induced variability from a variety of external sources. While the reduction of waste in general remains a valuable goal in either way, it must be evaluated with care for each particular case whether lean supply processes will generate benefits that exceed cost due to interruption.