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In today's competitive world shorter product life cycles, customers’ rapid demands and quickly changing business environment is putting lot of pressures on manufacturers for quicker response and shorter cycle times. Now the manufacturers put pressures on their suppliers. One way to ensure quick turnaround is by holding inventory, but inventory costs can easily become prohibitive. A wiser approach is to make your production agile, able to adapt to changing customer demands. This can only be done by Just In Time (JIT) philosophy. JIT is collection of management methods and techniques used to eliminate waste (particularly inventory). Philosophy: The philosophy of JIT is simple: inventory is waste. JIT inventory systems expose hidden causes of inventory keeping, and are therefore not a simple solution for a company to adopt. The company must follow an array of new methods to manage the consequences of the change. The ideas in this way of working come from many different disciplines including statistics, industrial engineering, production management, and behavioral science. The JIT inventory philosophy defines how inventory is viewed and how it relates to management. Inventory is seen as incurring costs, or waste, instead of adding and storing value, contrary to traditional accounting. This does not mean to say JIT is implemented without awareness that removing inventory exposes pre-existing manufacturing issues. This way of working encourages businesses to eliminate inventory that does not compensate for manufacturing process issues, and to constantly improve those processes to require less inventory. Secondly, allowing any stock habituates management to stock keeping. Management may be tempted to keep stock to hide production problems. These problems include backups at work centers, machine reliability, process variability, lack of flexibility of employees and equipment, and inadequate capacity. In short, the just-in-time inventory system focus is having “the right material, at the right time, at the right place, and in the exact amount”, without the safety net of inventory. The JIT system has broad implications for implementers.
The technique was first used by the Ford Motor Company as described explicitly by Henry Ford's My Life and Work (1922): "We have found in buying materials that it is not worthwhile to buy for other than immediate needs.” They bought only enough to fit into the plan of production, taking into consideration the state of transportation at the time. If transportation were perfect and an even flow of materials could be assured, it would not be necessary to carry any stock whatsoever. The carloads of raw materials would arrive on schedule and in the planned order and amounts, and go from the railway cars into production. That would save a great deal of money, for it would give a very rapid turnover and thus decrease
the amount of money tied up in materials. With bad transportation one has to carry larger stocks. They followed the concept of "dock to factory floor" in which incoming materials are not even stored or warehoused before going into production. This paragraph also shows the need for an effective freight management system (FMS) and Ford's Today and Tomorrow (1926) describes one. The technique was subsequently adopted and publicized by Toyota Motor Corporation of Japan as part of its Toyota Production System (TPS). Japanese corporations could afford large amounts of land to warehouse finished products and parts. Before the 1950s, this was thought to be a disadvantage because it reduced the economic lot size. (An economic lot size is the number of identical products that should be produced, given the cost of changing the production process over to another product.) The undesirable result was poor return on investment for a factory. Also at that time, Japanese companies had a bad reputation as far as quality of manufacturing and car manufacturing in particular was concerned. One motivated reason for developing JIT and some other better production techniques was that after World War II, Japanese people had a very strong incentive to develop a good manufacturing technique which would help them rebuild their economy. They also had a strong working ethic which was concentrated on work rather than on leisure, and this kind of motivation was what drove Japanese economy to succeed. Therefore Japan’s wish to improve the quality of its production led to the worldwide launch of JIT method of inventory Historically, the JIT philosophy arose out of two other things: • • Japan's wish to improve its production quality. At that time, Japanese companies had a bad reputation as far as quality of manufacturing and car manufacturing in particular was concerned. Kaizen, also a Japanese method of continuous improvement.
The Just-in-time framework regards inventories as a poor excuse for bad planning, inflexibility, wrong machinery, quality problems, etc. The target of JIT is to speed up customer response while minimizing inventories at the same time. Inventories help to respond quickly to changing customer demands, but inevitably cost money and increase the needed working capital.
The following are the key features of JIT production. • The production line is run on a demand pull basis, so that activity of each work station is authorised by the demand of downstream work stations. Thus, parts move through production system based on end unit demand, focusing on maintaining a constant flow of parts rather than batches of WIP(Work in Process).
Set-up time and manufacturing lead time are minimised. Demand-led production may require manufacturing small quantities of the product and producing small batches is economical only if set up time are small. The production line is stopped if parts are absent or defective work is discovered. In absence of buffer stock emphasis is placed on ‘doing the job right the first time’. The focus is on eliminating the root causes of defect, waste or re-works. JIT goes hand in hand with ‘total quality’.
In a JIT environment: • Absence of large amount of materials and work-in-progress inventory enables to control inventory through personal observation; • Work-in-progress constitutes, a lower percentage of total cost of production; • There is no need for an elaborate cost accounting system of stores requisition, material transfer notes, rework accounting and so forth. All the above provide tremendous cost advantage to firms adopting JIT production. In a JIT environment, EOQ model has lost its relevance because the focus is on synchronising delivery and usage. Such synchronisation requires no stock be purchased in large and kept in stores. Should a firm adopt JIT purchasing depends on reduction in cost of quality, cost of delayed delivery, cost of early delivery, and ordering costs. All these cost be compared with premium payable to suppliers (by way of increase in cost of quality products for JIT supply). Firms using JIT purchasing have reported significant saving in cost.
The basic elements of JIT were developed by Toyota in the 1950's, and became known as the Toyota Production System (TPS).The chief engineer Taiichi Ohno, a former shop manager and eventually vice president of Toyota Motor Company at Toyota in the 1950s examined accounting assumptions and realized that another method was possible. The factory could be made more flexible, reducing the overhead costs of retooling and reducing the economic lot size to the available warehouse space. Over a period of several years, Toyota engineers redesigned car models for commonality of tooling for such production processes as paint-spraying and welding. Toyota was one of the first to apply flexible robotic systems for these tasks. Some of the changes were as simple as standardizing the hole sizes used to hang parts on hooks. The number and types of fasteners were reduced in order to standardize assembly steps and tools. In some cases, identical subassemblies could be used in several models.
Toyota engineers then determined that the remaining critical bottleneck in the retooling process was the time required to change the stamping dies used for body parts. These were adjusted by hand, using crowbars and wrenches. It sometimes took as long as several days to install a large (multiton) die set and adjust it for acceptable quality. Further, these were usually installed one at a time by a team of experts, so that the line was down for several weeks. Toyota implemented a program called Single Minute Exchange of Die (SMED). With very simple fixtures, measurements were substituted for adjustments. Almost immediately, die change times fell to about half an hour. At the same time, quality of the stampings became controlled by a written recipe, reducing the skill required for the change. Analysis showed that the remaining time was used to search for hand tools and move dies. Procedural changes (such as moving the new die in place with the line in operation) and dedicated tool-racks reduced the die-change times to as little as 40 seconds. Dies were changed in a ripple through the factory as a new product began flowing. After SMED, economic lot sizes fell to as little as one vehicle in some Toyota plants. Carrying the process into parts-storage made it possible to store as little as one part in each assembly station. When a part disappeared, that was used as a signal to produce or order a replacement. JIT was firmly in place in numerous Japanese plants by the early 1970's. JIT began to be adopted in the U.S. in the 1980's.
JIT applies primarily to repetitive manufacturing processes in which the same products and components are produced over and over again For Example Cars, Fast Food Chains The requirements for a proper just-in-time management are: Standardization: Where the supplies are standardized and the suppliers are trustable and close to the plant. As there is little buffer inventory between the workstations, so the quality must be high and efforts are made to prevent machine breakdowns. Those organizations that need to respond to customer demands regularly this system is also being able to respond to changes in customer demands. Software: For JIT to work efficiently Supply Chain Planning software, companies have in the mean time extended Just-in-time manufacturing externally, by demanding from their suppliers to deliver inventory to the factory only when it's needed for assembly, making JIT manufacturing, ordering and delivery processes even speedier, more flexible and more efficient. Multi-Functionality: In JIT workers are multifunctional and are required to perform different tasks. Machines are also multifunction and are arranged in small U-shaped work cells that enable parts to processed in a continuous flow through the cell. Workers produce pars one at a time within cells and transport those parts between cells in small lots.
Schedules: Schedules are prepared only for the final assembly line, in which several different models are assembled at the same line. Requirements for the component parts and subassemblies are then pulled through the system. The "PULL" element of JIT will not work unless production is uniform and lot sizes are low. Pull system is also used to order material from suppliers (fewer in numbers usually). They make be requested to make multiple deliveries of the same item in the same day, so the manufacturing system must be flexible. Quality: Quality within JIT manufacturing is necessary, because without a quality program in JIT, the JIT will fail. Here we think about quality at the source and the Plan, Do, Check, Action with its statistical process control. Furthermore, techniques are also very important. The JIT technique is a pull system rather than a pull system, based on not producing things until they are needed. The well known Kanban card is used as a signal to produce. Moreover, integration also plays a key role in JIT systems. JIT integration can be found in four points of the manufacturing firm. • • • • Accounting side, Engineering side Customer side Supplier side
PROS AND CONS OF JUST-IN-TIME
Pros of Just-In-Time: Goals of JIT can vary, but there are a few that should be constant in any JIT system: 1. Increasing the organization’s ability to compete with others and remain competitive over the long run is very important. 2. The competitiveness of the firms is increased by the use of JIT manufacturing process as they can develop a more optimal process for their firms. 3. The key is to identify and respond to consumers needs. Customers’ needs and wants should be the most important focus for business today. This objective will help the firm on what is demanded from customers, and what is required of production. 4. Moreover, the optimal quality and cost relationship is also important. The organization should focus on zero-defect production process. Although it seems to be unrealistic in the long run, it will eliminate a huge amount of resources and effort in inspecting, and reworking defected goods. 5. Another important goal should be to develop a reliable relationship between the suppliers. A good and long-term relationship between an organization and its suppliers helps to manage a more efficient process in inventory management, material management, and delivery system. It will also assure that the supply is stable and available when needed. 6. Moreover, adopt the idea of continuous improvement. If committed to a longterm continuous improvement idea, it will help the organization to remain competitive in the future.
Cons of Just-In-Time: Regardless of the great benefits of JIT, it has its limitations: 1. For example cultural differences. The organizations cultures vary from firm to firm. There are some cultures that tie to JIT’s success, but it is difficult for an organization to change its cultures within a short time. 2. Also manufacturers that use the traditional approach which relies on storing up large amounts of inventory for backing up during bad times may have problems with getting use to the JIT system. 3. Also JIT is quite different for workers, in the sense that due to the shorter cycle time, lots of pressure and stress is added on the workers. 4. Also the JIT system throws workers off in the sense that if a problem occurs, they cannot use their own method of fixing the problem, but use methods that have been previously defined. 5. Moreover, the JIT system only works best for medium to high range of production volume manufacturers, thus leaving a question to whether it might work for low volume companies.
Case in which JIT has failed
JIT production allows companies to reduce both inventory and the entire production chain. It encourages the removal of all surplus, including surplus factories. Under normal business conditions this is not a problem. However, if there is any disruption at any given point in the supply chain, then all production grinds to a halt. Evidence of the problem with JITproduction became clear in the wake of Hurricane Katrina and Hurricane Rita, both of which hit the US Gulf coast in 2005. At that time, no new oil refineries had been built in the US since 1976. During that time period, companies actually shut down several refineries to reduce capacity. The old refineries still operating ran at full capacity, so no new refineries were needed according to JIT theory since they would only produce surplus gasoline. However, most of these refineries were clustered around the Gulf coast. When the Katrina hit, 15 oil refineries in Mississippi and Louisiana representing 20% of US refining capacity was shut down. Rita damaged another 16 refineries in Texas, accounting for 2.3 million barrels per day of capacity shut down. The lack of surplus in oil refining caused a shock to the United States. Gasoline prices surged. Had companies not shut down refineries in order to reduce capacity according to JIT theory, particularly refineries on the west coast, then it is likely that gasoline prices would have remained stable. US regular grade gasoline prices were $2.154 per gallon on November 28, 2005, down from a spike of $3.09 on September 19, 2005 in the immediate aftermath of the hurricane Katrina disaster
Just in Time in Indian Companies:
The Indian automotive component industry has shown tremendous growth over the last decade. Today it has 480 companies, employees more than
2,50,000 people and has an estimated turnover of approximately Rs 45,000 crore (US$ 10 billion).Just-in-Time has been widely adopted in the Indian companies especially in Indian automobile and manufacturing industry. List of Indian companies using Just in Time: Following is the list of some of the companies which are using Just In Time techniques. • •
Lukas-TVS Tata Motors
Gontermann-Peipers (India) Limited (GPI)
IFB Volkswagen India
Lucas-TVS: To deliver the quality product to the customer at the minimum cost Lucas-TVS, employed techniques like Total Quality Management (TQM). Quality Assurance methods like Advanced Product Quality Planning, Statistical Process Control Techniques, Effective Tool Management System, Process Capability Improvements.
In its continuous pursuit of both technological as well as methodological excellence, Lucas-TVS has adopted the Cellular Manufacturing System / Just In Time and also extending the same to its Suppliers. By the implementation of this system components from its suppliers are delivered on a pull basis with First In First Out concept supported by simple visual controls and supplied to the line on an hourly basis with KANBAN system. International Awards: Following is the list of awards won by the company in JIT • • • JIT Innovation Award from JIT Management Lab, Tokyo (2001 & 2004) JIT Grand Prix Award from JIT Management Lab, Tokyo (2002, 2005 & 2006) Deming Application Prize 2004
Gontermann-Peipers (India) Limited (GPI): It is a leading Cast Roll and Forge Roll manufacturing company, has posted excellent results for the second successive quarter. GPI’s net profit for the third quarter of this
fiscal zoomed by 119% to Rs.358.54 lacs as compared to Rs.163.92 lacs in the corresponding period of the last fiscal. GPI’s profit has been higher because of tight cost control, better realization, better operating efficiency etc. To achieve the maximum performance efficiency, company has undertaken modern management initiatives such as Six Sigma, Total Productive Maintenance (TPM), Activity Based Costing, Just-In-Time (JIT) in consultation with leading consultants in their respective fields. Volkswagen India: On the launch of the Polo from its US$700 million facility in Chakkan, near Pune in western India. Thomas Dahlem, Volkswagen India director of manufacturing engineering said: "As a global player, we realize the importance of India. We know that it will become the fifth-largest auto market by 2016. We understand that it is a price-sensitive market where it is tough to sell, but we are keen on it. Using just-intime techniques, we will build an auto environ here, controlling quality and technological inputs following a global sourcing model."
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