Management philosphy of continuours and forced problem solving. (Kaizen)

- Waste reduction

- Variability reduction

JIT is time focused improvements and its by-product is waste reduction.

Supplies customers with exactly what they want, when they want it, without waste, through continuous improvements called "Kaizen".

Focuses on waste reduction and it's by-product is process time reduction.

- Attacks waste

- Exposes problems and bottlenecks caused by variability

- Achieves streamlined production

- Overproduction

- Waiting

- Transportation

- Inefficient processing

- Inventory

- Unnecessary motion

- Product defects

Material is pusehd into downstream workstations reardless of whether resources are available.

Creates excess inventory

- speedier

- Quality improvement

- Cost reduction

- Variability Reductions

- Rework reduction

JIT partnerships eliminate:

Unnecessary activiites

In-plant inventory

In-transit inventory

Poor Suppliers

- Steady output rate

- Frequent deliveries in samll- lot quantities

- Long-term contract agreements

- Minimal or no paperwork (use EDI or internet)

- Delivery quantites fixed for whole contract term

 - Little or no permissible overage or underage

- Suppliers package in exact quantities

- Suppliers reduce their production lot sizes

- Minimal product specifcations imposed on suppliers

- Help suppliers meet quality requirements

- Close relationship between buyers' and suppliers quality assurance people

- Suppliers use poka-yoke and processs control charts instead of lot-sampling techniques

- Eliminates lot sampling incoming inspection at the operations site

- Gets employees involved in product and process improvements

- Employees know job best!

- JIT requires:

- Empowerment

- Cross-training

- Training support

- Few job classifications

EOQ= SQRT ((2x Yearly Demand x Setup cost)/Yearly Holding Cost))

Total Cost = Setup cost+holding cost+Product Cost

TC= D/Q (S) + QH/2 + PD

Demand Source - Customer Orders

Material Type - Finished goods

Method of Estimating demand - Forecast and Booked customer orders

Planning Method - EOQ & ROP

Demand Source - Parent item from next level up

Material Type - WIP & Raw Materials

Method of Estimating Demand - Calculated based on needs of parent items

Planning method - MRP

MRP managed thru Operations information system

Determines quantity and timeing of dependent demands items

- What is needed

- How much is needed

- When is it needed

- Increased customer satisfaction due to meeting delivery schedules

- Faster response to market changes

- Improved labor and equipment utilization

- Better inventory planning and scheduling

- Reduced inventory levels without reduced customer service

- List of components & quantities needed to make product

- Provides product structure (tree)

- Parents - items above given level

- Children - itmes below given level

- Generally shown in practice using an indented BOM

- Provides integration of the supply-chain, production and administration

- Creates commonality of databases

- Can incorporate improved best processes

- Increases comunication and collaboration between business units and sites

- Has an off the shelf software database

- May provide a strategic advantage

- Is very expensive to purchase and even more so to customize

- Implementation may require major changes in the company and its processes

- Is so complex that many companies cannot adjust to it

- Involves an ongoing, possibly never ending, process for implementation

- Expertise is limited with ongoing staffing problems

- Decision making under uncertainty  (Complete uncertainty as to which state of nature may occur)

- Decision making under risk (Several states of nature may occur; Each has a probability of occurring)

- Decision making under certainty (State of nature is known)

- Maximax - Choose the alternative that maximizes the maximum outcome for every alternative (Optimistic Criterion)

- Maximin - Choose the alternative that maximizes the minimum outcome for every alternative (Pessimistic criterion)

- Equally Likely - Chose the alternative with the highest average outcome

- Each possible state of nature has an assumed probabilty

- States of nature are mutually exclusive

- Probabilities must sum to 1

- Determine the Expected Monetary Value (EMV) for each alternative

EMV Alternative 1 = (payoff of 1st state of nature)x(probability of 1st state of nature)

+(Payoff of 2nd state of nature)x(Probability of 2nd state of nature)

+...+(payoff of last state of nature)x(probability of last state of nature)

EVPI is the difference between the payoff under certainty and the payoff under risk

EVPI = Expected Value under Certainty - Maximum EMV

(Best outcome or consequence for 1st state of nature)x(probability of 1st state of nature)

+ (best outcome for 2nd state of nature)x(probability of 2nd state of nature)

+...+ (Best outcome for last state of nature)x(Probability of last state of nature

- Graphical display of decision process

- Used for solving problems

- With one set of alternatives and states of nature, decision tables can be used also

- With several sets of alternatives and states of nature (sequential decisions), decision tables cannot be used

- EMV is criterion most often used

Steps to Analyziing a Problem using a Decision Tree

1. Define the problem

2. Structure or draw the decision tree

3. Assign probabilities to the states of nature

4. Estimate payoffs for each possible combination of alternatives an states of nature

5. Solve the problem by computing expected monetary values for each state of nature node.