lot sizes. The need to balance these opposite interests gave
rise to the “economical lot sizes” concept.
As shown in Figure 2.15, the economical lot size is the lot
size that achieves the best balance between (that is, the lowest
total for) inventory maintenance costs and changeover costs.
It is not too difficult to understand how economical lot
sizes can be determined based on process-specific cost measures.
However, this method of determination may not work
so easily on a larger scale, such as an entire production line
or an entire factory.
On such larger scales, it becomes apparent that making lot
sizes even just a little smaller will benefit such economical
considerations as lower warehouse investment costs, turnover
of operating assets, profit ratio, and cash flow.
We also need to remember that production lead-time is not
simply the sum of process-specific operation times. Lead-time
is actually proportionate to production lot size, which is to say
the amount of work-in-process. Therefore, a long lead-time
means that a great deal of work-in-process must still be
manufactured before the product can be shipped. If production
schedule changes are made after a production run has
already begun, the flow of materials and information in the factory—and the flow of management processes—will all fall
into disorder. Production cannot be made that flexible.
In JIT, we use “factory graveyards” as a nickname for the
kind of warehouse inventories factories accumulate when they
stick to large-lot production. Such factories may seem impressive
in the huge array of materials they contain, but their true
“insides”—full of concealed waste and other problems—are
in pretty bad shape.
Today, factories should not resemble those large, awesome,
but hopelessly outdated beasts known as dinosaurs. Rather,
they should be more like small, agile, and alert mice.
Once we have managed to shorten the manufacturing
lead-time, we can responsibly shorten the main schedules,
such as for sales and production, and can be more flexible
toward schedule changes. As a result, we can help minimize
“lost opportunities” in marketing.
In dealing with today’s fast-paced technological advances,
we can also help minimize the impact of all-too-frequent
design changes. In other words, having a shorter lead-time is
a key factor enabling adaptability to changing sales figures.
It also saves time. And since time is money, it saves money.
Thus, smaller lots do not necessarily mean higher costs.
When we look at the various components of warehouse
maintenance costs, we find: interest, insurance, taxes, storage
costs, and obsolescence costs.
How do these costs compare with higher changeover costs
incurred by small-lot production? Such costs include: manufacturing-related
clerical costs, mechanical changeover costs,
loss of materials, and set-up and removal (labor) costs.
Let us take a close look at these two sets of component
costs. It should be easy enough to spot which set is most
conducive to improvements.
In the first set of component costs, almost all of them resist
improvement, no matter how hard the company employees
might try to attack them. For instance, the only way to reduce
warehouse maintenance costs is by decreasing lot sizes.
By contrast, the component costs for changeover—such
as the manufacturing-related clerical costs, mechanical
changeover costs, and loss of materials—are all amenable
to improvement if people get together and brainstorm some
improvement ideas. In short, these costs are prime targets for
JIT improvement activities.
In fact, JIT shows us how we can even get rid of our fixed
idea of “lots” by changing factories into a level system where
products are built in short production runs without disturbing
the overall flow of the factory.
Lesson 10. Do Not Neglect the Economic Forest by
Focusing on Economic Trees
Motion and Work
One of the things factory workers tend to mumble on their
way out the gate at the end of the day is something along the
lines of, “Man, I worked my tail off today.”
Ordinarily, we take such expressions at face value. But
if we look beneath the surface, we will find that different
people have widely different understandings of the meaning
of “work.” Some people feel that simply being at the company
for eight hours is work. These people make time their
measure of work, in that every minute or even every second
they spend at the company is regarded as work. They watch
the clock and keep careful track of their overtime as defined
in the employee’s manual.
Other people evaluate work in terms of “sweat.” There
is a long tradition in Japan and in the West of regarding a
person’s perspiration as irrefutable evidence that he or she
is hard at work. People are suspicious of work that does not
cause the worker to sweat. In fact, given a choice between
two equally productive work methods—one that produces
sweat and one that does not—they will usually pick the
sweat-producing method.
Then there are people who derive their sense of work
satisfaction from the “added value” their work produces.
These are just a few of the different ways people understand
the meaning of work.
I would suggest that the people I first described—the “time”
workers—are actually more “not working” than working. The
“sweat work” people perform more motion than work. It is
the “added value” people that come closest of the three to
actually working. For simplicity’s sake, we will include the
“not working” people in with the “moving” people.
As I mentioned earlier, people have different perceptions
of work. Even within a single day’s work time, we can recognize
such differences between the “moving” people and the
“working” people.
Equipment operators ordinarily work an eight-hour day.
Obviously, not all of that eight-hour time is spent working. In
fact, the great majority of that time is spent “moving” rather
than “working.” (See Figure 2.16.)
As noted in Figure 2.16, “work” is only the part of the
operations that actually adds value. Every other part of the