JIT…A Failure Story

During the past weekend, I end up reflecting on how I have spent some summers of the past.  I don’t know why.  I just did for some reason.  There was one summer 17 years ago that ended sticking in my mind that I thought I would share.

I was working for a consumer electronics company that had manufacturing in the U.S. and in Mexico.  One fall, I was asked to help design a new manufacturing facility to be built in Mexico and they wanted it to be a Just-In-Time facility.  This was my first time hearing about JIT, so I read up on the concept.  Of course, 17 years ago almost all the material was about what it was and not how it worked.

The goal was to only have 2 hours of production materials at the production lines.  I made a super fancy spreadsheet that showed how much square footage was needed in each area based on line speed, shelving, component size, packaging, etc…

In July, I was approached again and asked if I would spend the month in Mexico straightening out what was going on.  The JIT system wasn’t working.  There wasn’t enough room for everything.

My boss and I went over the spreadsheet three times before we went on our visit and verified all the calculations and formulas.  It was all fine.

When we arrived the first day, we toured the plant.  We where horrified.  Televisions that were designed to stack 3 high were stacked 6 or 7 high.  Boxes were being crushed and leaning.  They looked like they could fall at any minute.  Areas that were not designed for storage were stuffed and there were approximately 100 trailers in the parking lot with materials in them.

This was a brand new facility.  It had only been open about 1 or 2 months.  It was a disaster.

The first thing I learned was there was no ramp up period.  On a Friday, one facility was closed.  The following Monday this facility was opened and expected to run at full capacity.  I had never seen any company do that before or since.  There is always a ramp up period.

The second thing we learned and more importantly was there had been no training on JIT, what it was or how it worked.  The facility was operating under old batch-n-queue mentality causing space to quickly fill up.

My manager and I were able to get the inventory under control through some strict inventory management processes and even get a more consistent delivery of materials to the assembly lines.

In the end, the company was not ready to run any differently.  It was a shame.  They ended up expanding the building and continued to run in a batch-n-queue manner.  I believe the facility has been closed in the last 3 or 4 years.

It was my first exposure to JIT and all that it takes to run a JIT system successfully.  I call it a system because it isn’t just about space and delivering parts.  It is the management mentality to reduce changeovers, run in much smaller batches and solve problems.  It really showed me how everything must work together.

Does anyone else have any horror stories from trying to implement a just-in-time system?

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NASCAR, Toyota, and Economies of Scale

In honor of the upcoming Daytona 500, I’m going to touch on a couple stock car topics this week.

In 2007, Toyota began racing its “Camry” in the top NASCAR series.  A year later, Joe Gibbs Racing switched brands and began racing Toyota branded vehicles.  For the first 4 years of the partnership, JGR built their own engines while TRD made the rest of the engines for the Toyota teams.  That arrangement is changed and TRD will now supply the engines for the Gibbs teams.

That, in itself, is not particularly interesting especially as it relates to Lean.  The part that I find most interesting is in a quote about the change from TRD’s president Lee White who says in this article, “Building for three teams or less is extremely expensive and inefficient. We’re hoping to recognize the tremendous economies of scale by spreading these costs across six or more teams in the future.”  As ‘Lean Thinkers’, one of the things we initially try to cut out of our vocabulary is the phrase “economies of scale”.   The phrase carries a stigma of filling warehouses with product to satisfy an outdated accounting metric.  What this highlights is that there is some real value to the thought as long as we aren’t using it to justify avoiding changeovers and over producing to keep machines busy.  The reality is that there is a significant investment to obtain a facility, outfit it, and hire and train the people that work in it.  A company can be the most Lean operation in the world in terms of their variable costs, but if the fixed costs are too high at the volume they run there isn’t much left to work with in looking at the ‘Profit = Price – Cost’ equation.  Instead of banishing the words “economies of scale”, maybe we should just move them out of the micro level (process and operation) and in to the macro level (overall customer demand).

There is another Lean theme that comes up in the article.  Both TRD and Joe Gibbs Racing representatives talked about the impact of this change on the people that work for them.  Both went out of the way to say that it would provide stability for the employees and that there wouldn’t be any layoffs as a direct result of the change.  I can only take those statements as face value, but it was refreshing to read about a move like this that wasn’t directly correlated to layoffs.

Supermarket Pull System

A couple of years ago, I was working with a group to create a complex supermarket pull system.  The supermarket was centered around a component that was manufactured inside the assembly facility and feed several assembly lines.  A timed delivery system was going to be used to deliver components to the each assembly line every two hours.  The deliveries were based on the orders the lines placed during the previous two hours.  Only four hours worth of components would be stored at the assembly line and the rest would be stored in the centralized supermarket.

Below is a quick presentation I gave to the leadership to help them understand how the system would work.  Slides 5 -15 show the specifics for this supermarket delivery system.

This is a specific example of how to use this supermarket system.  However, the concept is the same no matter what supermarket you use.  There should be:

• Centralized storage location for the components
• A small amount of inventory at the point of use
• A signal to replenish the point of use inventory
• A signal to replenish the supermarket inventory
• Replenishment triggers should be based on lead time to receive inventory from supplier

A well designed supermarket system can be a very powerful tool to help reduce inventory and simplify operations.