Unit 3: Modern productivity techniques & purchasing

Just-in-Time (JIT) produces and delivers exactly what is needed, when it is needed, in the quantity needed — eliminating waste. Developed at Toyota (Taiichi Ohno). Seven wastes (muda): overproduction, waiting, transport, over-processing, inventory, motion and defects. Kanban is a pull-based signalling system: a card (or bin) signals the previous stage to produce or supply more only when parts are used. Requirements for JIT: reliable suppliers, small lot sizes, quick set-ups, preventive maintenance, flexible workers and good quality.

• Total Quality Management (TQM): a company-wide approach to continuous quality improvement focused on customer satisfaction, involving everyone. Principles: customer focus, continuous improvement (Kaizen), employee involvement, process approach, fact-based decisions and supplier partnerships. Deming's PDCA cycle (plan-do-check-act) drives improvement.
• Six Sigma: a data-driven method to reduce variation and defects to 3.4 defects per million opportunities, using DMAIC — Define, Measure, Analyse, Improve, Control. Experts are certified as Green Belts and Black Belts.

Purchasing acquires materials of the right quality, in the right quantity, at the right price, from the right source, at the right time.

Methods: market purchasing, tender purchasing, rate contracts, centralised and decentralised purchasing, and e-procurement. Value analysis examines each component's function to achieve it at the lowest cost without reducing quality: Value = Function / Cost.

• Fixed order quantity (Q-system): order a fixed quantity (EOQ) when stock falls to the reorder level.
• Periodic review (P-system): review stock at fixed intervals and order enough to reach a target level.
• Two-bin system: when the first bin empties, order; use the second bin meanwhile.

A virtual factory coordinates production across outsourced partners and suppliers linked by information technology, so the firm focuses on design and marketing while partners manufacture (as many smartphone and apparel brands do).