Course Name: Inventory Management Topic 4: Just-In-Time System Objectives At the end of this topic, you will be able

to: recognize the Concept and Philosophy of Just-In-Time (JIT) system; know the Prerequisites for JIT system; identify the elements of JIT system; know the implementation of JIT system; differentiate the application of MRP and JIT system; and comprehend implementation of JIT system in the service sectors.

Abstract Just-In-Time (JIT) is a management philosophy that focuses the organization on continuously identifying and removing sources of waste so that processes are constantly improved. This topic begins with a broad orientation to JIT and its various prerequisites and elements. Then, each of the specific elements is discussed in detail in a separate section. This topic also explains on implementation of JIT system. The topic concludes with a comparison of JIT and MRP and some comments on implementation of JIT in the service sector. 4.1. Introduction Many companies are excited about Just-in-Time (JIT) manufacturing nowadays. JIT is an integrated set of activities designed to achieve high volume production using minimal inventories of raw materials, work-in-process, and finished goods. Parts arrive at the next workstation "Just in Time" and are completed and move through the operation quickly. Just-in-time is also based on the logic that nothing will be produced until it is needed. Exhibit 4.1 illustrates the JIT process. Need is created by actual demand for the product. When an item is sold, in theory, the market pulls a replacement from the last position in the system-final assembly in this case. This triggers an order to the factory production line, where a worker then pulls another unit from an upstream station in the flow to replace the unit taken. This upstream station then pulls from the next station further upstream and so on back to the release of raw materials.
Work-in-process Generally describes inventory that is currently being processed in an operation, or inventories that has been processed through one operation and are awaiting another operation.

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In order for this pull process to work smoothly, JIT demands high levels of quality at each stage of the process, strong vendor relations, and a fairly predictable demand for the end product.

Fab
Sub

Vendor Vendor Vendor Vendor

Fab
Customers Final Assembly

Fa Sub Fa

Material is pulled through the system only when there is demand

Figure 4.1: JIT Pull System

Not all companies use the JIT as a term. IBM uses the term continuous flow manufacture, Hewlett-Packard calls it both stockless production and the repetitive manufacturing system, GE calls it management by sight, Motorola calls it short cycle manufacturing, and several Japanese firms simply use the term The Toyota System. Some companies are using the term time-based competition (TBC).

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4.2. Philosophy of JIT The JIT system was developed at the Toyota Motor Company in Japan. Even though Schonberger (1982) indicates that JIT might be traced back to the Japanese shipbuilding industry, the modern application of JIT was popularized in the mid-1970s at Toyota by Taiichi Ohno, a Toyota vice president, and several of Ohnos colleagues. The JIT concept was then apparently first transferred to the United States about 1980 at Kawasaki's Lincoln, Nebraska, plant. Since then, many of the best corporations in the United States have implemented JIT, and it has achieved widespread use around the world. The roots of the JIT system can probably be traced to the Japanese environment. Owing to a lack of space and lack of natural resources, the Japanese have developed an aversion to waste. They view scrap and rework as waste and thus strive for perfect quality. They also believe that inventory storage wastes space and ties up valuable materials. Anything that does not contribute value to the product is viewed as waste. U.S. companies, in contrast, with wide-open spaces and a vast supply of raw materials, have not viewed waste in the same way. As a result, it was natural for the JIT philosophy to develop in Japan. There is nothing culturally inherent in the JIT system that prevents companies anywhere in the world from using it or improving on it. Many companies now use JIT as their preferred approach. . In addition to eliminating waste, JIT has another major tenet in its philosophy, which is, utilizing the full capability of the worker. Workers in the JIT system are charged with the responsibility for producing quality parts just in time to support the next production process. If they cannot meet this responsibility, they are required to stop the production process and call for help. In addition to greater responsibility for production, workers are also charged with improving the production process. Through quality teams, suggestion systems, and other forms of participation, workers offer improvements to the process of production. Thus, the capabilities of workers are used to a much greater extent in the JIT system than in traditional production approaches. The objective of the JIT system is not, however, worker participation; rather, it is to improve profits and return on investment through cost reductions, inventory reductions, and quality improvements. The means for achieving these objectives are eliminating waste and involving

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Course Name: Inventory Management Topic 4: Just-In-Time System workers in the production process. How this is done is summarized by prerequisites for JIT system and basic elements of JIT described in subsequent pages. 4.3. Pre-requisites for JIT System The basic idea of JIT is to drastically reduce work-in-process (WIP) inventories throughout the production system. In this way, products flow from suppliers to production to customers with little or no delays or interruptions beyond the amount of time they spend being produced at work centers. The main objective of JIT system is to reduce manufacturing lead times, and this is primarily achieved by drastic reductions in WIP. The result is a smooth, uninterrupted flow of small lots of products throughout production. Most successful JIT applications have been in repetitive manufacturing operations where batches of standard products are produced at high speeds and high volumes with materials moving in a continuous flow. The Toyota automobile factories, where the notion of JIT may have started, are perhaps the best example of the use of JIT in repetitive manufacturing. In these factories, the continuous flow of products makes planning and control rather simple, and JIT works best in these shop-floor situations. Smaller, less complex job shops have used JIT, but these companies have taken many steps to change operations so that they behave like repetitive manufacturing. To implement JIT system, some changes to the factories need to be taken. Below are among the changes:

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At Toyota, for instance, there are both stable and level production schedules. The master production schedule (MPS) is frozen for the first month, and the entire MPS covers one year. The production schedule is exactly the same for each day of the month. This means that the same products are produced in the same quantities in the same sequence every day of the month. Toyota divides the total number of each automobile model to be manufactured during a month by the number of workdays in the month to get the number of that model to be produced daily. Even if only a few of a particular model were needed in a month, some would be assembled in each day of-the month. This provides the same daily production schedule throughout the month. This approach to the MPS simplifies parts explosions, material flows, and worker job assignments. A fundamental requirement for JIT is to increase the production capacity of manufacturing work centers. Production capacities are usually increased in two ways, increasing production rates and reducing setup times at work centers. Reducing setup times at work centers can increase production capacity. Setup time is the time it takes to adjust the machine settings, replace materials, change tools, and do everything it takes to change over from producing one product to a different one at a work center. Because production at work centers is shut down while the work centers are being changed over, reducing setup times will reduce down time and increase production capacity. By improving product quality, cross-training workers, reducing equipment breakdowns through preventive maintenance, and establishing reliable material flows from suppliers, interruptions to production are minimized. With these factors present in manufacturing, the ultimate success of JIT is vastly increased. 4.4. Elements of JIT System Elements of JIT system will be discussed by examining the below components: a) The underlying assumption of JIT system b) The approach of JIT system c) Method of planning and controlling production d) Several ongoing activities

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In general, there are nine elements of JIT system. They are: 1. Eliminating waste Eliminating waste of all kinds is the deep-seated ideology behind JIT. Shigeo Shingo, a JIT authority at Toyota, identified seven wastes in production that should be eliminated. Table below lists and describes these wastes.

2. Enforced Problem Solving and Continuous Improvement Figure 4.2 illustrates an analogy for JIT. Production is viewed as a converging system of streams. The water level in the streams is viewed as inventory. At the bottom of each stream are rocks, which represent problems relating to quality, suppliers, delivery, machine breakdowns, and so forth. The traditional approach is to hold inventory high enough to cover up the rocks and thereby keep the stream flowing. The JIT approach is the opposite; the water level is lowered to expose the top of the rocks. When these rocks have been pulverized (i.e., the problems solved) through continuous improvement, the water is lowered again and more rocks are exposed. By drastically reducing the inventories, production problem are uncovered and production have to stop until the cause of the production problem are solved. This process is repeated until all rocks are turned into pebbles and the stream flows smoothly at a low level. This analogy is very good because it highlights the problem-solving approach that is at the heart of JIT.

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Figure 4.2: Analogy of JIT

JIT is really a system of enforced problem solving. There are few safety factors in JIT. Every material is expected to meet quality standards, every part is expected to arrive exactly at the time promised and precisely at the place it is supposed to be, every worker is expected to work productively, and every machine is expected to function as intended without breakdowns. Managers in JIT manufacturing have a choice. They can put a huge effort into finding and solving the causes of production problems, or they can live with an intolerable level of interruptions to

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Course Name: Inventory Management Topic 4: Just-In-Time System production. One of the approaches to implementing a JIT program is to reduce in-process inventories incrementally in small steps. At each step, different production problems are uncovered, and the workers and their managers work to eliminate the problems. Then when there is almost no in-process inventory, the causes of most production problems have been removed. But the job of eliminating production problems is not over. Vigilance in continuing to study potential problem areas is needed to ensure continuous improvement. Japanese manufacturers have long practiced what they called kaizen, the goal of continuous improvement in every phase of manufacturing. Managers may encourage workers to reduce in-process inventories a step further to see if any production problems occur, thus identifying a target for the workers to eliminate. Machine setups may be studied with workers and managers working to strip away the fat so that setups are almost instantaneous. Japanese manufacturers have long used the term SMED, which is an acronym for single minute exchange of dies, meaning that their goal is to have all setups take less than a minute. Continuous improvement is central to the philosophy of JIT and is a key reason for its success. 3. People Make JIT Work Businesses ultimately succeed or fail because of their people. JIT is no exception to this rule. Because JIT is a system of enforced problem solving, having a dedicated workforce committed to work for production problems solving is essential. Therefore JIT system must have a strong element of training and involvement of workers in all phases of manufacturing. Below are the critical things needed to make a JIT system work.
Elements To Make JIT System Work Multifunction Worker

Establish Quality Teams & Suggestion Systems

Workers Understanding & Cooperation

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Course Name: Inventory Management Topic 4: Just-In-Time System Multifunction Workers: In most cases, each worker must be able to operate several machines in a group, going from one to the next to make the parts required. Since parts are not produced unless they are needed, the worker must be able to shut off the machine and move on to another job where parts are needed. The worker must also be able to set up machines, do routine maintenance, and inspect the parts. This ordinarily requires workers who are cross-trained in several different skills. Moving toward a flexible workforce may require changing the way workers are paid and rewarded. Traditional pay systems are often based on seniority and job skill level. New pay systems are needed that reward workers on the basis of the number of different jobs they can perform. This will encourage workers to learn more skills and to become more flexible. Establish Quality Teams & Suggestion Systems: In JIT systems, quality teams and suggestion systems are used for the problem solving purpose. An environment of participation must be created in order to get all employees to contribute toward problem solving on the shop floor. Workers Understanding and Cooperation: JIT cannot be implemented without full worker understanding and cooperation. Management must ensure that workers understand their new roles and accept the JIT approach to manufacturing. So many changes are required; JIT cannot possibly succeed without the active and enthusiastic support of all managers, the HR function, and employees. JIT is not simply another program but a whole new approach to manufacturing. 4. Total Quality Management JIT system depends on a system of total quality management (TQM) being in place. Although it is tempting to discuss TQM now, it is sufficient to our understanding of JIT manufacturing to say that successful JIT manufacturing goes hand-in-hand with an organization-wide TQM culture. Just as everyone has to be involved in JIT, and also must everyone be involved in TQM. Total commitment to producing products of perfect quality every time and total commitment to producing products for fast delivery to customers have one essential thing in common: Both are finely focused on the overall goal of satisfied customers. To achieve the goal of customer satisfaction, company has to practice to do it right the first time and when something goes wrong, stop the process or assembly line immediately. Factory

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Course Name: Inventory Management Topic 4: Just-In-Time System workers become their own inspectors, personally responsible for the quality of their output. Workers concentrate on one part of the job at a time so quality problems are uncovered. If the pace is too fast, if the worker finds a quality problem, or if a safety issue is discovered, the worker is obligated to push a button to stop the line and turn on a visual signal. People from other areas respond to the alarm and the problem. Workers are empowered to do their own maintenance and housekeeping until the problem is fixed. When employees are responsible for quality, JIT works at its best because only good-quality products are pulled through the system. When all products are good, no "just-in-case" extra inventory is needed.
Total Quality Management An approach to business management that focuses on quality and typically has: a strong customer orientation, total involvement, measurement systems, systematic support, and continuous improvement.

5. Parallel Processing An important part of JIT manufacturing is to exploit parallel processing wherever possible. Any operations being performed in series (one after the other) that can be performed in parallel (simultaneously) can take huge chunks out of manufacturing lead times. This concept is similar to simultaneous engineering that involves product, process, and service design. By doing product design and process design simultaneously, the time to bring new products to market is reduced. The same approach is taken in companies that want to engage in time-based competition through JIT. Many operations can be made parallel simply through scheduling, as production is scheduled to occur at the same time at one or more operations. In other cases, layout redesign and product redesign may be needed to achieve parallel processing. But the additional costs can usually be more than offset by significant reductions in manufacturing lead times.

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Course Name: Inventory Management Topic 4: Just-In-Time System

Performed in Series Cycle Time for Each Operation = 1 Hour Total Product Cycle Time = 1x8 = 8 Hours
Op 1 Op 2 Op 3 Op 4 Op 5 Op 6

Performed in Parallel Cycle Time for Each Operation Total Product Cycle Time = 1 Hour = 1x5 = 5 Hours

Op 2 Op 1 Op 3 Op 6 Op 5 Op 4 Op 7 Op 8

Note: Operations and 4 starts at the same time as Operation 1

6. Kanban Production Control Kanban is the method of production authorization and materials movement in the JIT system. As noted earlier, Kanban, in the Japanese language, means a marker (card, sign, plaque, or other device) used to control the sequencing of jobs through a sequential process. Kanban is a subsystem of JIT. Purpose of Kanban System The purpose of the Kanban system is to signal the need for more parts and to ensure that those parts are produced in time to support subsequent fabrication or assembly. Pulling parts through from the final assembly line does this. Only the final assembly line receives a schedule from the dispatching office and this schedule is nearly the same from day to day. All other machine operators and suppliers receive production orders (Kanban cards) from the subsequent (using) work centers. If production should stop for a time in the using work centers, the supplying work centers will also soon stop, since they will no longer receive Kanban orders for more material. The Kanban system is a physical control system consisting of cards and containers. Assume for the purposes of discussion that eight containers are used between work centers A and B (A supplies B), and each container holds exactly 20 parts. The maximum inventory that can exist between these two work centers is then 160 units (8 x 20) since production at work center A will stop when all containers are filled.

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How Kanban System Works? In the normal course of events, the eight containers might be distributed as shown in figure 4.3. Three containers are located at work center A in the output area filled with parts. One container is presently being filled at work center A by the machine. One full container is being moved from A to B, two full containers are sitting in the input area of work center B, and one container is being used at B. These eight containers are needed since work center A also produces parts for other work centers; machines at A may break down, and move times from A to B are not always exactly predictable. To control movement of the containers, there are two main types of Kanban cards, production cards and withdrawal (move) cards. These cards are used to authorize production and to identify parts in any container. Kanban cards may be made of paper, metal, or plastic, and they generally contain the information shown in Figure 4.4. Kanban cards take the place of shop paperwork used in traditional repetitive manufacturing. Here is how the Kanban system works, assuming containers are moved one at a time. When a container of parts is emptied at work center B, the empty container and associated withdrawal card are taken back to work center A. The production card from a full container of parts is removed from its container and replaced by the withdrawal card. The production card is then placed in the Kanban receiving post at work center A, thereby authorizing production of another container of parts. The empty container is left at work center A. The full container of parts and its withdrawal card are moved to work center B and placed in the input area. When this container of parts is eventually used, its withdrawal card and the empty container are taken back to work center A, and the cycle is repeated. The significant thing about the Kanban system is that it is visual in nature. All parts are neatly placed in containers of a fixed size. As empty containers accumulate, it is clear that the producing work center is getting behind. On the other hand, when all containers are filled, production is stopped. The production lot size is exactly equal to one container of parts.

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Determining the number of Kanban needs The number of containers needed to operate a work center is a function of the demand rate, container size and the circulating time for a container. This is illustrated by the following formula:

n=

DT (1 + P) C

Where: n= D= C= T = Total number of containers. Demand rate of the using work center. Container size in number of parts, usually less than 10 percent of daily demand. Time for a container to complete an entire circuit: filled, wait, moved, used and

returned to be filled again.

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Course Name: Inventory Management Topic 4: Just-In-Time System P= A policy variable that indicates the efficiency of the system. P can take on values

from 0 to 1. A 0 would indicate perfect efficiency; a 1.0 would indicate perfect inefficiency. Case study
Case Study There are two adjacent work centers, A and B work center. The production rate of the using work center is 175 parts per hour. Each standard Kanban container holds 100 parts. It takes an average of 1.10 hours for a container to make the entire cycle from the time it leaves the work center A full until it is returned empty, filled with production, and leaves again. Compute the number of containers needed if the Kanban system is rated at a P of 0.25. Solution Step 1: Define the Formula

n=

DT (1 + P) C

Step 2: Find out the related variable values D = 175 part / hour T =1.10 hours C = 100 parts/ containers. P =0.25

Step 3: substitute all to formula to find out the n n=

175(1.1)(1 + 0,25) 100 240.6 = 100

= 2.4, or 3.0 containers

Reducing the size of the containers or the number of containers used can decrease inventory. This can be done by reducing the time required to circulate a container, including its machine setup time, run time, wait times, or move times does this. When any of these times has been reduced, management can remove Kanban cards from the system and a corresponding number of containers. It is the responsibility of managers and workers in a JIT system to reduce inventory by a constant cycle of improvement. Reducing lead-time is the key. Kanban links all work centers in a production facility and the suppliers as shown in Figure 4.4. All material is pulled through by the final assembly schedule, based on a highly visible shop floor and supplier control system.

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Figure 4.4: The Kanban square marked by the dashed rectangle signals the need for the production of a cabinet. Only one cabinet is placed on this square at a time. When the square is emptied by subsequent production another cabinet is produced.

7. JIT Purchasing The same pull-type approach in JIT is applied to purchasing shipments of parts from suppliers. In JIT purchasing, suppliers use the replacement principle of Kanban by using small, standard-size containers and make several shipments daily to each customer. If a supplier uses Kanban, Kanban cards authorize the movement of containers of parts between the supplier's shop and the customer. In such arrangements, suppliers are ordinarily located near their customers. JIT therefore not only reduces in process inventories by using Kanban, but applying the same principles to suppliers also reduces raw-materials inventories. The essential elements of JIT purchasing are as follows: 1. Supplier development and supplier relations undergo fundamental changes The nature of the relationships between customers and suppliers shifts from being adversarial to being cooperative. The Japanese call these relationships subcontractor networks and refer to suppliers as co-producers. Customers and suppliers often share sensitive information, assistance in reducing costs and improving quality, and even financing.

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2. Purchasing departments develop long-term relationships with suppliers The result is long-term supply contracts with a few suppliers rather than short-term supply contracts with many suppliers. Repeat business is awarded to the same suppliers and competitive bidding is ordinarily limited to few parts. 3. Focus on primary basis for supplier selection Although price is important, delivery schedules, product quality, mutual trust and cooperation become the primary basis for supplier selection. 4. Extend JIT methods Suppliers are encouraged to extend JIT methods to their own suppliers. 5. Shorter lead-time Suppliers are ordinarily located near the buying firms factory, or if they are some distance from the factory, they are usually clustered together. This causes lead-times to be shorter and more reliable. 6. Delivery of shipments Shipments are delivered directly to the customers production line. Because suppliers are encouraged to produce and supply parts at a steady rate that matches the use rate of the buying firm, company owned hauling equipment tends to be preferred. 7. Delivery of parts Parts are delivered in small, standard-size containers with a minimum of paperwork and in exact quantities. 8. Higher quality of purchased materials Delivered material is of near-perfect quality. Because suppliers have a long-term relationship with the buying firms and because parts are delivered in small lot sizes, the quality of purchased materials tend to be higher. 8. Reducing Inventories Through Setup Reduction If it costs a lot to set up a machine to produce a part, it makes sense to produce many units of the part each time it is produced. Central to JIT is an ongoing program aimed at the reduction of

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Course Name: Inventory Management Topic 4: Just-In-Time System production lot sizes so that inventory levels are reduced. But doesnt it seem that very small production lot sizes would result in too many machine setups, increased production costs, and lost capacity because of idle machines during setups. JIT systems spend large sums of money to reduce setup times to avoid these negative consequences of small lot sizes. Engineers study the setups, automatic devices are attached to the machines, workers are trained in more efficient work methods, and the result is very short setup times. In some cases, computerized controls can make the new machine settings instantaneously, with the result that the setup time between different parts approaches zero. Figure 4.5 shows that economic production lot sizes (EOQ) approach zero as the setup costs approach zero. JIT firms use the same EOQ formula to analyze lot sizes, but they turn it around. They treat a very small EOQ lot size as a given and then solve for the setup cost. In this way, production lot sizes can be set very low and the resulting setup times can be used for targets as engineers develop programs for reducing setup times.

Figure 4.5: Effect of Reducing Changeover Times on Production Lot Size

The economic production lot size (EOQ) model can be defined as below:

EOQ =

2DS p C p-d

Where: D = annual demand rate d = daily demand rate

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Course Name: Inventory Management Topic 4: Just-In-Time System p = daily production rate C = carrying cost per unit per year S = cost per setup The setup cost required for a given lot size can be derived from the EOQ model as:

S=

2 C(EOQ) 2 p-d 2D p

The setup time can be derived from the setup cost, S:

Setup Time =

S Labor rate

Setup reduction is a continuing process in a JIT environment, and it is important to involve the workers at each workstation in this process. The best ideas for setup time reduction frequently come from the people who are most familiar with the machinery and equipments. With encouragement from managers, workers can often come up with creative ideas for setup reduction that cost very little. One example of a low cost setup improvement is to perform some of the setup tasks ahead of time, while the last part of the previous batch is still being processed on the machine. Depending on the technological requirements involved, the worker might be able to collect all the tools, jigs, fixtures, and the first part of the next batch together beside the machine, ready to go. She might even be able to load the first part into the new fixture that will be placed into the machine when it is free. These actions could substantially reduce the time the machine is nonproductive, during the changeover, with little additional cost. The example below computes the setup time required to accommodate a small JIT production lot size. These types of computations could be used in a factory-wide program to reduce setup costs. Example: As part of a factory-wide JIT program to reduce setup times so that production lot sizes can be smaller, a firm wants to determine what the length of the setup time of a manufacturing operation should be in order to accommodate an economic production lot size (EOQ) of 20 units of a part. A production analyst has developed these data for the operation:

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If the labor rate for the operation is $10 per hour, what setup time results in an economic production lot size of 20 units?

9. Working Toward Repetitive Manufacturing The APICS Dictionary defines repetitive manufacturing as:

Repetitive manufacturing is a product-focused production of batches of standardized products. These are systems in which products flow continuously along a direct route until they are finished and in which there is little in-process inventory and parts rarely stop moving. Repetitive manufacturing clearly does not refer to the process-focused production of custom products that occurs in job shops. Proponents of JIT would argue that even job shops can be made to behave

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Course Name: Inventory Management Topic 4: Just-In-Time System more like repetitive manufacturing. Some companies have worked hard to make their factories behave more like repetitive manufacturing. Among the things that can be done to modify a factory to be more repetitive in its production are:
Reduce setup times and production lot sizes. Convert clusters of machines within process-focused layouts to cellular manufacturing (CM) centers or cells. In CM, groups of machines function as product-focused islands within the larger layout. Standardize parts designs to reduce the number of parts and the number of changeovers. Change the layout of the factory to allow streamlined product flows through the plant. Install flexible manufacturing systems (FMS). These groups of machines can accommodate product variety without the necessity of worker-performed machine changeovers. Train workers for several jobs. These flexible workers can move from one work center to another as necessary to balance the workload in the factory. Install effective quality control programs so that defective products do not interrupt product flows.

Install effective preventive maintenance programs so that machine breakdowns do not interrupt product flows. Develop an effective subcontractor network so that materials flow into the factory smoothly to support the inhouse production schedules, thereby allowing uninterrupted production.

Even if a firm cannot convert all of its operations to repetitive manufacturing, some sections of the system can be repetitive. For example, even if many custom-designed products are irregularly scheduled at final assembly, their component-part designs could be standardized; componentpart production schedules could be made stable as repetitive manufacturing could produce the component parts. With such changes as these, many more factories that are not pure repetitive manufacturing may be able to implement JIT manufacturing systems and enjoy many of the same benefits.

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4.5. Implementation of JIT System The first and most successful application of JIT systems was at the Toyota Motor Company in Japan. JIT implementation started in 1980 at Kawasaki U.S.A. in Nebraska. Implementation has been achieved in many other U.S. companies, including Ford, General Electric, General Motors, Eaton, Motorola, Black & Decker, Briggs and Stratton, Hewlett-Packard, IBM, John Deere, Bendix, Mercury Marine, Omark, Rockwell, Westinghouse, Tennant, 3M, and Honeywell. Some of the effects of JIT implementation are as follows: In the auto industry, JIT has achieved inventory turns of 50 to 100, compared with 10 to 20 for traditional approaches. In motorcycle production, JIT has given inventory turns of about 20, compared with 3 to 5 in traditional companies. JIT has also improved quality, reduced costs, and improved flexibility in these same companies. Implementation of JIT, however, is difficult. To facilitate implementation the following approach is suggested:

JIT is the preferred method for repetitive production in industry. JIT has such a major impact that it is being compared with the Ford moving assembly line and the Taylor system as one of the

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Course Name: Inventory Management Topic 4: Just-In-Time System great innovations in production management. The assumptions of the JIT system are certainly opposed to most of the traditional assumptions about repetitive manufacturing. 4.6. Comparison of MRP and JIT When JIT was first introduced, much was written on MRP versus JIT. This is because they were viewed as incompatible production control systems. More recently, we have come to recognize that MRP and JIT are compatible and can be used together in certain situations. In discussing the relationship between MRP and JIT it is important to understand the distinction between pull and push systems of production control. A push system, such as MRP, pushes material into production to meet future needs. A master schedule is constructed representing future forecasts/orders, which determines what components and parts are to be ordered and pushed through production. In a pull system, such as JIT, material is pulled through production by the subsequent (using) work centers. Materials are provided only when there is a subsequent demand; there is no pushing of materials into production to meet future demands. Because of the lack of forward visibility, a repetitive master schedule is required for a pull system to work. There are three situations to consider in comparing MRP and JIT: pure repetitive manufacturing, batch manufacturing, and job shop manufacturing. Details of each situation are explained in the table below.
Pure Repetitive Manufacturing A pure repetitive manufacturing situation is one where the master schedule is the same from day-today and level loaded. In this case, a pull system, such as JIT, works very well. Since there are no changes in the end products being made from day-to-day, the component parts needed each day are the same. The only uncertainty is breakdowns in the production process. These disruptions are handled by a pull system and excellent maintenance, since production will stop when using work centers stop. There is no need for an MRP system to predict future production requirements with its more complicated, and expensive, computerized elements. Batch Manufacturing A batch process might utilize a hybrid MRP-II and JIT type of system, particularly when the batches are somewhat repetitive in nature. In this case, the master schedule will not be identical from day-to-day but will have some repetitive elements. MRP-II is used to push material into the factory and to plan capacity, while the JIT (pull system) is used for execution on the shop floor. This makes it possible to eliminate the shop-floor control element of MRP-II with its substantial WIP tracking. The hybrid system works particularly well when batch production has been organized into cells, so that MRP can provide shop orders to the cells, rather than to each machine type. JIT is then used to pull material Job Shop Manufacturing A job shop process that is batchoriented and non-repetitive must use MRPII to plan and control production. An extreme example of this situation is where the factory makes products only to order and each order is different. In this case, a pull system will not work. Material must be pushed into the factory to meet future demands that are different for each order. A capacity-planning and shop floor control system is needed to regulate the flow of materials through production. Even in this case, however, certain elements of JIT such as reduction of setup times, multifunction workers, problem solving by workers and managers, and supplier partnerships can be used. It is

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through each of the cells. A common variation on a pure repetitive system is a system that changes from time-to-time but is still repetitive within a fixed planning horizon. An example is a repetitive schedule for the next five weeks, but in the sixth week the schedule will change to a different repetitive mix of products. In this case, a MRP type I system is needed for major event planning, which is a change in the future master schedule to different production rates. All work centers and suppliers must be notified in advance of the requirements for the new schedule. This can be done with a very simple MRP type I system used for planning purposes only. The JIT, pull system, is then used for execution of the plan on the shop floor. The JIT system is adjusted for major events by the MRP system. only the Kanban system that will not work.

As explained in the above table, there are various situations that are best suited to a pure JIT or a pure MRP control system. But there are many opportunities for hybrid systems too. Figure 4.6 summarizes when these various options apply.

Figure 4.6: Uses of MRP and JIT

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4.7. JIT In Services Service firms have successfully applied many JIT techniques. Just as in manufacturing, the suitability of each technique and the corresponding work steps depends on the characteristics of the firms markets, production and equipment technology, skill sets, and corporate culture. Service firms are not different in this respect. Here are 10 of the more successful applications.
Characteristics for a Successful JIT 1. Organize Problem-solving Groups Honeywell is extending its quality circles from manufacturing into its service operations. Other corporations as diverse as First Bank/Dallas, Standard Meat Company, and Miller Brewing Company are using similar approaches to improve service. British Airways used quality circles as a fundamental part of its strategy to implement new service practices. 2. Upgrade Housekeeping Good housekeeping means more than winning the clean broom award. It means that only the necessary items are kept in a work area, that there is a place for everything, and that everything is clean and in a constant state of readiness. The employees clean their own areas. Service organizations such as McDonalds, Disneyland, and Speedy-Lube have recognized the critical nature of housekeeping. Their dedication to housekeeping has meant that service processes are work better, the attitude of continuous improvement is easier to develop, and customers perceive that they are receiving better service. 3. Upgrade Quality The only cost-effective way to improve quality is to develop reliable process capabilities. Process quality is quality at the source-it guarantees first-time production of consistent and uniform products and services. McDonalds is famous for building quality into its service delivery process. It literally industrialized the service delivery system so that part-time, casual workers could provide the same eating experience anywhere in the world. Quality doesn't mean producing the best; it means consistently producing products and services that give the customers their moneys worth. Second, the order entry department of a manufacturing firm converted from functional sub departments to customer centered work groups and reduced the order processing lead-time from eight to two days. First, Federal Express Corporation changed air flight patterns from origin-to-destination to origin-to-hub, where the freight is transferred to an outbound plane heading for the destination. This revolutionized the air transport industry. 4. Clarify Process Flow Clarification of flows, based on JIT themes, can dramatically improve the process performance. Here are examples.

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Third, a county government used the JIT approach to cut the time to record a deed transfer by 50 percent. Finally, Supermaids sends in a team of house cleaners, each with a specific responsibility, to clean each house quickly with parallel processes. Changes in process flows can literally revolutionize service industries. 5. Revise Equipment and Process Technologies Revising technologies involves evaluation of the equipment and processes for their ability to meet the process requirements, to process consistently within tolerance, and to fit the scale and capacity of the work group. Speedi-Lube converted the standard service station concept to a specialized lubrication and inspection center by changing the service bays from drive-in to drive-through and by eliminating the hoists and instead building pits under the cars where employees have full access to the lubrication areas on the vehicle. A hospital reduced operating room setup time so that it had the flexibility to perform a wider range of operations without reducing the operating room availability. 7. Eliminate Unnecessary Activities A step that does not add value is a candidate for elimination. A step that does add value may be a candidate for reengineering to improve the process consistency or to reduce the time to perform the tasks. A hospital discovered that significant time was spent 8. Reorganize Physical Configuration Work area configurations accomplish frequently this by require up reorganization during a JIT implementation. Often manufacturers setting manufacturing cells to produce items in small lots, synchronous to demand. These cells amount to micro factories inside the plant. 6. Level the Facility Load Service firms synchronize production with demand. They have developed unique approaches to leveling demand so they can avoid making customers wait for service. McDonald's offers a special breakfast menu in the morning. Retail stores use take-anumber systems. The post office charges more for next-day delivery. These are all examples of the service approach for creating uniform facility loads.

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during an operation waiting for an instrument that was not available when the operation began. It developed a checklist of instruments required for each category of operation. Speedi-Lube eliminated steps, but it also added steps that did not improve the lubrication process but did make customers feel more assured about the work being performed. Most service firms are far behind manufacturers in this area. However, a few interesting examples do come out of the service sector. Some hospitalsinstead of routing patients allover the building for tests, exams, X-rays, and injections-are reorganizing their services into work groups based on the type of problem. Teams that treat only trauma are common, but other work groups have been formed to treat less immediate conditions like hernias. This amount to micro clinics within the hospital facility. 9. Introduce Demand-Pull Scheduling Due to the nature of service production and consumption, business. demand-pull many (customer-driven) service firms are scheduling is necessary for operating a service Moreover, separating their operations into back room and customer contact facilities. This approach creates new problems in coordinating schedules between the facilities. The original Wendy's restaurants were set up so cooks could see cars enter the parking lot. They put a pre-established number of hamburger patties onto the grill for each car. This pull system was designed to have a fresh patty on the grill before the customer even placed an order. 10. Develop Supplier Networks The term supplier networks in the JIT context refers to the cooperative association of suppliers and customers working over the long term for mutual benefit. Service firms have not emphasized supplier networks for materials because the service costs are often predominantly labor. Notable exceptions must include service organizations like McDonald's, one of the biggest food products purchasers in the world. A small manufacturer recognized that it needed cooperative relationships for temporary employees as well as for parts. It is considering a campaign to establish JIT-type relationships with a temporary employment service and a trade school to develop a reliable source of trained assemblers.

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Summary In this topic, you have learnt: JIT is an integrated set of activities designed to achieve high volume production using minimal inventories of raw materials, work-in-process, and finished goods. JIT eliminates waste and utilize the full capability of the workers. The basic idea of JIT is to drastically reduce WIP inventories throughout the production system. Changes are needed in order to implement JIT system. These changes are: o o o o o o Stabilize production schedules; Increase production capacities of manufacturing work centers; Improve product quality; Cross-train workers so that they are multi skilled and competent in several jobs; Reduce equipment breakdowns through preventive maintenance; and Develop long-term supplier relations that avoid interruptions to material flows. Eliminating waste; Enforced problem solving and continuous improvement; People make JIT work; Total quality management; Parallel processing; Kanban production control; JIT purchasing; Reducing inventories through setup reduction; and Working toward repetitive manufacturing. Obtain commitment from top management; Gain cooperation of the workforce; Start with the final assembly line; Working backward from final assembly; Balance fabrication rates with final assembly production rates; and Extend JIT to suppliers. Organize problem-solving groups;

There are nine elements of JIT system, which are: o o o o o o o o o

To facilitate JIT implementation, the following approach is suggested: o o o o o o

Below are the characteristics for a successful JIT: o

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Course Name: Inventory Management Topic 4: Just-In-Time System o o o o o o o o Upgrade housekeeping; Upgrade quality; Clarify process flow; Revise equipment and process technologies; Level the facility load Eliminate unnecessary activities; Reorganize Physical Configuration; Introduce demand-pull scheduling; and

o Develop supplier networks.

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Additional Readings: Kaizen Philosophy and Kaizen Method. www.valuebasedmanagement.net/methods_kaizen.hmtl Kaizen quality methodology articles, content and links. www.isixsigma.com/me/kaizen Kanban: An Integrated JIT System www.supplychainplanet.com/e_article000213392.cfm Total Quality Management (TQM) articles, content and links. www.isixsigma.com/me/tqm Toyota Cambridge Opens Up www.sme.org/leandirections Operations Management articles http://www.mhhe.com/omc/arts-frames.htm The Kanban System Game A Computer Simulation http://www.strategosinc.com/kanban_game.htm Operations Management: JIT/Inventory Management http://www.themanager.org/knowledgebase/operations/JIT.htm The Kaizen Management System http://www.kaizen-us.com/kms.php

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CROSSWORD PUZZLE TOPIC 4: JUST-IN-TIME SYSTEM

1 3 5 7 8 9 6 2 4

10 11 13 14 15 12

16

17

18

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P H Y R O D U C S T A B I O N P

M U

R E P S X S I C A L G C N E T W A O L R K I L I Z E R C L A R A L L R L T I F U F Y

E T I T I V E O K V W A S T E O R K N R B P M A R A I Z E N O N V D I A E U M L X C A U C T E L A H I T A O N C T I O N N O G N E E D

ACRO SS 1 Most successful JIT applications have been in _____ manufacturing operations. 5 The Kanban system is a _____ control system consisting of cards and containers. 7 JIT's objective can be achieved by elim inating _____. 8 The term supplier _____ in the JIT context refers to the cooperative association of suppliers and customers w orking over the long-term for mutual benefit. 11 The goal of continuous improvem ent in every phase of manufacturing is called _____. 13 O ne of the factory changes needed to

implem ent JIT is _____ production schedules. 16 The graphic show s the operations perform ed in _____. im age/jit1.gif 17 O ne of the elem ents to make JIT system work is the _____ w orker. 18 _____ is created by actual demand for the product. DOWN 2 In JIT, parts are delivered in small, standard-size containers with m inimum paperwork and in _____ quantities. 3 The purpose of the Kanban system is to _____ the need for m ore parts. 4 Make only what is needed now. W hat type

of w aste does the statem ent refer to? 5 A fundamental requirement for JIT is to increase the _____ capacity of manufacturing work centers. 6 _____ is the m ethod of production authorization and materials movement in JIT system. 9 O ne of JIT's m ajor philosophy is utilizing full capability of the _____. 10 JIT is an integrated set of activities designed to achieve high volum e production using _____ inventories of raw m aterials, W IP and finished goods. 12 Revising technologies involves _____ of the equipment and processes for their ability to meet the process requirem ents. 14 SMED stands for single m inute _____ of dies. 15 O ne of the characteristics for a successful JIT is _____ process flow.