Lecture Purchasing and supply chain management (3/e): Chapter 6 - W. C. Benton

Chapter 6 - Just-in-time (lean) purchasing. Just-in-time (JIT) or lean purchasing is introduced in Chapter 6. The current shift toward the so-called “Lean Thinking” manufacturing environment is one of the major motivations for JIT purchasing. JIT has changed the role of purchasing from merely placing orders to investigating the supplier’s technical and process capabilities.

Chapter 6: Just­in­Time (Lean) Purchasing Purchasing and Supply Chain Management 3rd edition Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013  The Two Rival Production systems MRP production systems Just­in­time (JIT) manufacturing • Popularity of JIT • JIT conversion success testimonials • Harley­Davidson and Hewlett­Packard PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Justưinưtime(JIT)Philosophy ã ã ã Justưinưtime(JIT)isnotjustasetoftoolsbutrathera philosophy TheJITphilosophyisbasedon: ã Eliminationofwaste • Continuous improvement Example of the JIT philosophy applied to a firm • Just­in­time (JIT) production • Just­in­time (JIT) purchasing Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            Just­in­time (JIT) Production • • A powerful management tool  • Based on planned elimination of all waste and on continuous  improvement • Also referred to as lean production • Applied to repetitive manufacturing processes Reduces: • Inventory levels • Variability  • Delivery lead times • Setup costs Thus, improving product quality PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. ã DefinitionofLeanProductionSystem ã ã Asetofseveralmanufacturingpractices including: ã Workerempowerment • Process focus • Pull production • Continuous improvement The main objective: Satisfy customer needs on the highest possible level  Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            through the elimination of waste • Push and Pull Production Systems • Alternative systems for executing the production process • • When should the next unit of production be made? The three systems: • Pushsystem ã Pullsystem ã Hybridproduction ã Combinationofpushandpull PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. DeterminingtheNumberofKanbanCards PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Example:NumberofKanbans ã Howmanykanbansarerequiredforthebottling process? ã Averageof90bottles/houroutput(d) ã Containersizeofsixbottles(C) • Lead time of 20 minutes (L) • Safety stock level of 10 percent (S) Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            JIT Purchasing Advantages • Reduced inventory levels • Improved lead­time reliability • Scheduling flexibility • Improved quality and customer satisfaction • Reduced costs of parts • Constructive synergies with suppliers PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Justưinưtime(JIT)andEnvironment ã ã CulturalFit ã Needaculturethatfacilitatescooperationandharmonybetween organizations ã Forexample,differencebetweencorperateculturesofJapan and USA Low Variability in Demand 10 Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            Questions? 11 Purchasing and Supply Chain Management, 3rd edition, Copyright © 2013, W. C. Benton Jr., All rights reserved.            ... Combination of push? ?and? ?pull PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. DeterminingtheNumberofKanbanCards PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved.... Low Variability in Demand 10 Purchasing? ?and? ?Supply? ?Chain? ?Management,  3rd edition, Copyright © 2013,? ?W.? ?C.? ?Benton? ?Jr., All rights reserved.            Questions? 11 Purchasing? ?and? ?Supply? ?Chain? ?Management,  3rd edition, Copyright © 2013,? ?W.? ?C.? ?Benton? ?Jr., All rights reserved.           ... Just­in­time (JIT) production • Just­in­time (JIT)? ?purchasing PurchasingandSupplyChainManagement,3rdedition,Copyrightâ2013,W.C.BentonJr.,Allrightsreserved. Justưinưtime(JIT)Production ã ã Apowerfulmanagementtool ã Basedonplannedeliminationofallwasteandoncontinuous