Jit in Indian Automobile Industry

INTRODUCTION

Just In Time: The traditional concepts of Quality and customer satisfaction have been
challenged in the recent years. Customer choices and perceptions have also been changing
continuously.

Just-in-time (JIT) refers to a collection of practices that is designed to eliminate waste and
achieve manufacturing excellence.

These organizational practices encompass the entire logistics flow of materials from purchasing
through production and distribution. The elements of JIT may include shared product design
with suppliers and customers, movement toward single sourcing, proximate suppliers and
customers, reduced set-up times, preventive maintenance, reliance on analytic tools to identify
sources of defects and plant optimization layout (re)configurations, among others Just-in-time
(JIT) manufacturing systems have attracted the attention of industries all over the world.

The perceptible impact of JIT lies in attaining productivity and quality standards. The real
challenge before Indian managers is to establish priorities among potential JIT techniques to
achieve best possible advantage of JIT implementation in Indian industries. With the variety of
products on offer increasing with customization and evolving customer needs, it is but
important that a manufacturing facility embraces the advantages of JIT in making the
operations lean and flexible.

Indian Automobile Industry:

India currently has approximately 40 million vehicles. In February 2009, monthly sales of
passenger cars in India exceeded 100,000 units. Current low penetration, rising prosperity and
the increasing affordability of private vehicles along with importance to exports offer a healthy
prospectus for the Indian automobile industry. (Source: http://www. kpmg.
de/docs/Auto_survey. pdf) Several Indian automobile manufacturers such as Tata Motors,
Maruti Suzuki and Mahindra and Mahindra, have expanded their domestic and international
operations.

India's robust economic growth led to the further expansion of its domestic automobile market
which attracted significant India-specific investment by multinational automobile
manufacturers. Due to strong Global competition Indian companies started focusing on
adopting new techniques and technologies which enabled manufactures to improve their
processes and products

JIT IN AUTOMOBILE INDUSTRY OF OTHER COUNTRIES

Many countries have got leverage by implementing JIT techniques in their respective
automobile industries.

Peter Turnbul, [1] analyzes the trends in the UK automotive industry during the 1980’s, giving
special focus to the adoption of JIT and TQM principles. This includes development from within
the organization and relations between suppliers. Also the implications of adopting Japanese
techniques on Information systems have also been looked into. It was found out in the study
that Japan was way ahead of UK and US in terms of productivity and Quality in the cars
manufactured due to successful implementation of JIT and TQM techniques and US and UK
companies are gradually bridging this gap.

Bo Hou, [2] conducted a research on the benefits and difficulties faced in implementing JIT for
an automotive company in China. An international automotive company with factory located in
China was taken for the Case study, examining the pre and post JIT implementation
experiences. In order to collect data Semi-structured interviews were organized. Most
interviewee’s support that proper design of information systems could assist JIT systems.
According to the interviews, Kanban is a primary management method in the case company’s
JIT model.

It was found after the interviews that inventory can be maintained at a reasonably low level.
Performance indicators have been employed to examine the achievement of suppliers in
quality, on-time delivery etc. in order to encourage suppliers to participate in the JIT program.
JIT IMPLEMENTATION IN INDIA Several Indian companies have initiated JIT implementation into
their systems or are claiming to have implemented many key features if JIT. While studying the
implementation of JIT in India the following factors have to be considered. 1) Size of the firm )
Indian economy (only opening up in early 1990’s) 3) How MNC’s having manufacturing
operations in India are Implementing JIT In a Survey of JIT practices conducted by
Mahadevan[3], Questionnaires were sent to 400 companies but only 43 of them responded
usefully. Fourteen critical factors were identified and participating organizations were asked
whether these factors were important for JIT implementation in their firms. Quality circles and
cellular manufacturing have been rated low while TQM was rated very high. Vikas Kumar [4],
explains the interrelationship between the different JIT elements.

According to him the elements of JIT important to India are Buffer stock removal, Cellular
manufacturing, Kanban and Error prevention Garg D [5] conducts a case study in JIT
implementation of an Indian tractor assembly. It started implementing JIT purchasing in the mid
1980s. Initially, the company received discouraging results in almost all the areas for several
years. Later on everything was streamlined and management began achieving significant results
in terms of reductions in inventory, material movement, space, manpower, work in process and
lead time, and an increase in productivity and quality.
It can be said that in spite of old machinery, the company is sustaining its competitiveness in
the tractor market by applying JIT. Vikas [6] conducted a survey on 34 Indian firms with the aim
to find: 1) Those elements of JIT that might be difficult to implement in Indian Industry. These
have been found to be Buffer stock removal, Error prevention, Frequent and reliable delivery,
Kanban system, Multi functional worker, short lead time, Small lot size, Zero defect etc. )
Reason for slow implementation of JIT in India which have been found to be High cost of
implementation, Informal and casual Auditing, Lack of support from suppliers, Lack of training,
Lack of understanding of JIT techniques, shortage of multi functional workers Garg D [5]
explains that the key steps in JIT implementation were: extensive training of employees on pull
concepts; identification of key performance parameters; new layouts based on U-shaped cells
( wherever applicable) ; standardization of operations; a maintenance plan for each machine;
housekeeping; visual control; and multi-skill training.

Vikas Kumar [4], Several Indian industries are implementing the JIT with belief that it would be
helpful to face the global competition. Yet, its effectiveness would depend upon qualities,
attitudes and values of Indian work force. The paper gives focus to work culture of the
organization. Some of the elements of work culture desirable for JIT are flexible workforce,
Cross training, long term employment, Job enlargement and Labor unions, Work force
involvement etc. Benefits

Vikas Kumar [4] identified that the Potential benefits of JIT include reduced setup cost, labor
cost, and move distances According to Chandra[7] the major benefits of JIT manufacturing
system in ascending order are Reduction in inventory, Quality improvement, Increased
productivity, Increased profit margin, Improved competitive position. Vikas Kumar [6] Highlights
the most expected benefits of JIT which are Improved equipment utilization, improved quality
control, worker efficiency, inventory turnover, flexibility, productivity, Profit margin, Team
work, Low scrap rate etc Disadvantages of JIT

Some of the disadvantages of JIT as highlighted by Vikas [6] are: * Implementation if JIT does
not automatically translate to profits as many direct and indirect costs are involved in JIT
implementation. Also JIT requires appropriate fit between manufacturing activities,
organizational design, processes etc. * JIT programs need continuous check and control for
sustained improvement * The timely of delivery of goods is extremely important which might
be difficult to achieve in some parts of India * JIT may demand unrealistic commitment from
employees.

Managerial powers are extended to the workers JIT IN INDIAN AUTOMOBILE INDUSTRY With
respect to the Indian Automobile Industry JIT purchasing, a few elements of JIT production and
JIT Logistics are given focus in this research paper. Purchasing In industries like the automobiles,
where the cost of raw material accounts for almost 50-60% of the cost of the final product,
Purchasing is a key element to focus for cost reduction [Haritha Saranga (8)]. According to
Sultan Singh. 9] Purchasing involves determining the need, selecting the supplier, and arriving
at proper price, terms and conditions, issuing the contract or order and to follow-up to ensure
proper delivery on time According to Sultan Singh, Dixit Garg. [10] The traditional approach to
purchasing is at the root of many problems that business faces today. High inventory levels,
soaring costs, adverse relationships with suppliers and quality issues which either stop
production or results in poor products are just a few of the problems with the current way of
purchasing JIT Purchasing

Sultan Singh. [9] has found that Just-in –Time Purchasing has received an increasing amount of
attention throughout the world due to its potential for quality improvement and cost saving.
Jocclyn Drolet. [10] found that many studies indicate that the JIT purchasing function is of
paramount importance for successful JIT implementation According to Sultan Singh, Dixit Garg.
[10] The four basic principles of JIT purchasing are: * Elimination of waste * Employees
involvement in decision making * Supplier participation Total quality control Sultan Singh. [9]
Found that JIT purchasing has been implemented in many industries of several countries such
as United States, United Kingdom, Italy, Germany, and Korea etc. Today many reputed Indian
industries have also switched to the Japanese JIT Purchasing concept to improve their product
quality and productivity. In traditional purchasing importance is given mainly to the price of the
product. Supplier relationship building, quality, delivery time, supplier satisfaction etc are in the
back seat. Sultan Singh. 9] States that Japanese JIT Purchasing is an uninterrupted flow of 100%
acceptable materials delivered on due dates and time at optimal cost 100% of time. In JIT
purchasing environment purchasing is carried out in small lots with frequent deliveries in small
standard containers used to hold exact quantity and to the required specifications from a
nearby local single supplier with a long-term contract. The company relies more on
performance specifications Consistent quality and delivery performance is most important
parameters in the supplier evaluation while price is an important one.

This area includes supplier’s management, inspection of incoming raw materials/ semi
finished / maintenance components etc. The expectations of the buying firm in JIT Purchasing
Dixit Garg [5] conducted a survey to identify the important attributes of JIT Purchasing with
respect to the Indian Context. The importance of JIT purchasing attributes in a decreasing order
as were High Quality, Mutual trust and Co-operation, Reliable delivery, Exact quantity and
Increased customer support. Jocclyn Drolet. 11] Stated that the most frequently mentioned
benefits are the reduction in lead times, the decrease in inventory levels, waste elimination,
and improved quality of incoming parts, raw materials and the delivery process. In fact, these
four benefits have been so widely cited in analytical studies, and cross validated in empirical
studies, that we believe that they may no longer belong to the domain of hypothetical benefits
but must be taken as factual benefits. Sultan Singh, Dixit Garg. [2] States that in JIT Purchasing
no percentage of rejects from supplier is acceptable. The supplier is also encouraged to be
more innovative.

Jocclyn Drolet. [11] Stated that some of the success factors of JIT purchasing are JIT supplying
Partnership, Restructuring supplier network, Quality of purchased products, Long term and
exclusive agreement with suppliers, Proximity etc. He emphasizes that partnership is a catalyst
for other JIT purchasing success factors Problems encountered in JIT purchasing
implementation in India Sultan Singh. [9] Found that most serious problems, however, are not
operational in nature. They are “people problems”- stemming from attitude and orientation,
past experience and practices, and the passive factors of interpersonal relations. The suppliers
may not fully support JIT purchasing program because of following reasons: * Lack of incentives
for suppliers to adopt JIT delivery. * Lack of commitment from buyers. * Considerable strain on
suppliers on JIT delivery. Sultan Singh. [9] Has found Evidences which shown that JIT purchasing
can be beneficial in Indian context. The supplier is encouraged to be more innovative. He is
given “loose specifications “. The company relies more on performance specifications than on
product design. Counting and receiving inspection of incoming parts is eliminated.

Formal paper work is reduced to minimum delivery schedule or quantity can be changed by
simple telephone calls/fax/telex message. Supplier is evaluated by consistence in quality,
delivery performance and price. It can be concluded that JIT Purchasing is a key element for the
successful implementation of JIT. The benefits of JIT purchasing can be summarized as
reduction in lead time and inventory levels, improved quality of raw materials and better
delivery process. Also there are increased supplier participation and employee involvements.

Many companies in different countries have successfully implemented JIT purchasing. Some of
the problems which Indian companies encountered were Lack of support from suppliers, Lack
of support and commitment from Top management, Low product Quality, Employees
resistance to change and Lack of communication. Maruti is focusing on Supplier development
and sharing its quality and manufacturing practices with them. Mahindra and Mahindra is now
working to minimize supply constraints through advanced capacity planning, long term contract
with suppliers and capacity enhancement. JIT Production

According to Vikas[4], The major elements of JIT production in Indian context include Buffer
stock removal, Cellular manufacturing, Kanban, Error prevention and others. In this research
paper the attributes taken for study are Cellular Manufacturing and Kanban. Cellular
Manufacturing Mahadevan [12] infers that there has been an increasing demand for more
variety in the recent years thereby pushing volumes down. It is estimated that 70 % of
manufacturing industries will have mid-volume, mid-variety scenario. Cellular manufacturing
provides a solution for the mentioned situation.
According to Frost ; Sullivan [13] Cellular manufacturing is based on the Group Technology
concept and involves the use of work cells. A Work Cell is a group of equipment and
workstations arranged in the logical sequence of production, which can produce a product (or
part of a product). To successfully maintain One-piece flow in manufacturing cells companies
employ quick change over techniques The key factors that affect the design of an efficient cell
can be grouped broadly as the number of process required, number of products that fit into the
cell, market segments/requirement, and degree of automation.

Mahadevan [12] mentions the benefits of Cellular Manufacturing as: * Production planning and
control become easier as it is similar to breaking the Manufacturing process into smaller units
which are independent and more manageable. * Material handling and traceability becomes
easier as materials seldom go outside the respective cells for processing. Work enrichment:
Employees would be in a position to better relate to the workplace and make improvements
The benefits as mentioned by Frost ; Sullivan[13] are: improved resource [both man and
machine] utilization reduced lead times, improved product quality, better space utilization,
lesser blocked capital in inventory, and an overall improved work space. Timothy[14] identifies
the disadvantages of cellular manufacturing as: * Increased capital expenditure * Decreased
machine utilization * A breakdown can cause work stoppage in cell Shishir Bhat [15] analyses
the impact of cellular manufacturing in a Gear manufacturing Machine shop.

The evaluation was done based on two outputs, throughput and flow time. It was found that
the average monthly throughput [order completed in a month]for Main Gears before
implementation of Cellular Manufacturing was 59. 5 and that after implementation was 90. 5.
Also the average flow time [man hours a product spends on shop floor ] for main gears reduced
from 58 to 30. The paper shows that when a job shop manufactures a group of products with
similar characteristics and stable demand, Cellular Manufacturing is an effective way for
performance improvements. Kanban

Kanban is a system of continuous supply of components, parts and supplies, such that workers
have what they need, where they need it, when they need it. Kanban facilitates elimination of
waste and is one of the most powerful tools of the “Toyota Production System”. Kanban is
designed for quick response to actual consumption and ensures material availability at all times
even in the face of temporary demand swings. Improved material availability helps achieve
agility and flexibility in production. Kanban Systems are usually custom designed for each client
and each item.

A good design takes cognizance of all relevant factors such as consumption level, lead time,
transit time, optimum shipping lot, and desired delivery frequency. It can be quickly adjusted in
response to seasonality of demand. Inventory reduction is regarded as one of the key strategic
levers to improve productivity and profitability of the firm in theory and practice (Lieberman
and Demeester 1999, Chen et al, 2005). Kanban which facilitates visual control was originally
designed for manual operation. This encourages employee involvement at all levels.

However it can be integrated with any ERP system. Many tasks can then be automated, thus
increasing the speed of material flow and accuracy of transactions. B. Vijaya Ramnath,C.
Elanchezhian and R. Kesavan [16] wrote a paper which deals with implementation of lean
manufacturing in Engine valve machining cell in a leading auto components manufacturing
industry in the South India. The main objective of the paper was to present an overview of
manufacturing wastes and introduce the tools and techniques that are used to transform a
company into a high performing lean enterprise.

Value stream mapping was a main tool used to identify the opportunities for various lean
techniques. One of the methods used for reduction of waste was the Kanban system. A Kanban
job Flow is arrived at which is used for building the future state of Value stream mapping. The
elimination and or reducing of wastes is by making the process improvements in the current
manufacturing line by adopting some lean tools like JIT, set up time reduction, WIP reduction
etc. JIT Logistics Today Indian Automobile players seek to increase their global footprint and
supply chain for many of these companies extends across several countries.

Hence Logistics is a key area Indian Automobile companies are focusing on. According to Kee-
hung Lai. [17] Just-in-Time (JIT) which has been effective in manufacturing operations can also
contribute to cost and service advantages in Logistics. However, the potential of JIT has not
been widely recognized in logistics. Kee-hung Lai. [17] has identified the major areas in Logistics
in which JIT can be applied such as 1) Transportation management 2) order processing 3)
Inventory management 4) Customer service, and a number of supporting lements including
materials handling, packaging, purchasing and warehousing. 1) Transport Management:
Typically materials were ordered in large lot shipments to obtain economies of scale. Similarly
full truckloads or railcars were more efficient. For less than full truckloads loads of different
companies having similar destinations were combined. Ken alternburg. [18] States that In JIT
Transport all the three parties i. e. the supplier, the carrier and the customer work more closely
with one another. One option is formation of Transport partnerships just like supplier
partnerships.

The carriers would be single source for a family of businesses that will treat these carriers as in-
house carriers. In some JIT Environments the parts manufacturing facility is constructed at or
near the final assembly plant, allowing small deliveries of parts to be made with greater control
over timeliness. Ken alternburg. [18] Suggests that where local manufacturing is not feasible,
closed loop transportation is employed in which delivery trucks make stops at various suppliers
on a predetermined schedule.
Disposable packaging can be replaced with reusable containers and racking compatible with
assembly line use, eliminating the costs of removing and disposing of packaging materials and
simplifying and speeding the loading and unloading processes Materials can be unloaded at or
near final point of use in JIT System as inspection is eliminated. Costs associated with
equipment used to speed the delivery process, such as specially configured trucks,
containerization, and unloading equipment, are offset by improvements in efficiency as implied
by Ken alternburg. [18]

Ken alternburg. [18] States that JIT environment has affected transportation providers,
requiring them to change and streamline their methods of operation, and make long-term
investments in technology, 2) Order Processing: According to Kee-hung Lai. [17] JIT adopts
technologies such as Logistical Information System [LIS], often in the form of Electronic Data
Interchange [EDI], Internet, Value Added Network etc so that different parties in the logistics
processes can gain access to the needed information for decision making 3) Customer service:
Kee-hung Lai. 17] states that In JIT logistics, all the activities that take up motion time, for
example, order picking, shipment arranging, transporting and so on, need to be managed
efficiently. The aim is to meet customer service requirements at the lowest possible cost KPMG
conducted a survey on the Indian Automotive supply chain to analyze the key challenges faced
by different sections of the Industry, identify the areas that need attention and also identify
opportunities. A primary survey was done among the heads of supply chain of some major
Indian Auto companies. KPMG [19]) The participants of the survey identified the following as
the key challenges in order of priority: Integrating the end-to-end supply chain and managing it
as a single integrated entity: While past efforts of OEMs have been focused on streamlining and
improving different areas of the supply chain independently, through efforts in dealer
management, operations planning, vendor rationalization, IT package implementation etc, it is
expected that the linking up of these activities is expected to provide significant benefits to
players Managing Inbound Logistics/JIT Supplies: is a key concern which faces challenges
related to reliability of data, lead time and absence of quality logistics players on the upstream
side. Respondents felt that as OEM and Auto component players become more global in nature
it would have a significant impact on automotive supply chain. Managing costs: Cost, Quality
and Timely delivery continue to become the key concern area for players.

Many OEM’s have implemented JIT inbound logistics which is not by increased visibility across
the supply chain and improved planning, it has only resulted in the burden of inventory getting
shifted from OEMs to their Tier-I vendors. The Key initiatives taken up by the companies to
address these challenges according to KPMG [19]) are: Increased Investment in IT and
processes: Implement Integrated IT systems [such as ERP], but survey revealed that they were
not able to leverage on such systems as their business process were not streamlined or aligned
with the needs of the IT System. Vendor/Dealer rationalization: Many respondents agreed that
Indian Industry has not evolved into fully tierized structure where Tier-I vendors take on
responsibility for modules / sub-assemblies

Outsourcing to logistics service providers: Outsource key activities along the supply chain to
logistics players, in an effort to reduce costs and increase focus on their customers and core
activities. Most OEMs and large Tier-I suppliers have already outsourced their outbound
logistics activities. These activities include carrying out ‘milk runs’ to collect and deliver parts to
OEMs on a daily basis, transferring materials across hubs and warehousing/inventory
management. Key logistics players have started maintaining warehouses in close proximity to
OEMs’ plants, and supplying materials on a JIT basis. Related services being provided by large
third party logistics service providers (3PLs) include consolidation of materials, packaging,
incoming inspection, cleaning, etc (KPMG [19])

JIT at Maruti Udyog Limited:

Maruti was the first Indian company where Japanese Manufacturing culture was implemented
from top to bottom. At the Maruti factory in Gurgaon the eight typical wastages at each
operational point (over-production, man movement, material movement, idle time
of operator, work-in-process, machine availability, waiting time and needless processing) had
been measured by observation and even videos. The bottlenecks have been identified and a lot
of work has been done to streamline the process. In 1995, when Maruti had 4,800employees, it
was producing at the rate of 730 cars a day. Later with 4,500 employees, the plant was
producing at the rate of 1,700 cars a day. Simultaneously, the supply chain system is being
modified.

A delivery instruction system places orders with the vendors for the next day's production
target. Maruti is now working with an inventory of four hours maximum for local items and six
days average for imported materials. The inventory to sales turnover ratio, on the scale of 100
in 1999-2000, is now down to 41. Maruti has also started working with its vendors to reduce
their cost of production so that its own cost can be reduced. It has also launched a quality
enhancement scheme, called the Quality Gate system. Maruti has implemented JIT for some of
its major suppliers. Some others are in the process of doing so. There is a stress on quality in
this highly competitive industry.

The bargaining power of suppliers of some components is high, because of capacity constraints.
This makes them accept only large orders, and therefore makes it difficult for assemblers to
implement JIT.

CONCLUSION
With India emerging as one of the important markets for Automobiles it is imperative for
Automobile manufactures to gain production and cost efficiency. JIT would help the companies
in achieving this end. The Japanese had perfected the implementation of JIT. Based on research
material available it can be concluded that JIT has been successfully implemented in
Automobile companies of many other countries such as United States, United Kingdom, China
to name a few.

Indian Manufacturing environment has huge prospects of advancement through JIT. Some of
the key aspects of JIT important for the Indian industry are Total Quality management [TQM],
Cellular Manufacturing, Kanban, Error Prevention to name a few. Some of the reasons for slow
implementation of JIT in India can be concluded as High cost of implementation, Lack of
support from suppliers, Lack of understanding or conviction in JIT techniques leading to non
effective implementation. Also work culture plays a crucial role for JIT. JIT would require a work
force that is flexible, can engage in cross training, and would be committed to their work on
providing long term employment prospects.

The Major benefits identified by the implementation of JIT are Improved Quality, reduction in
inventory, increased productivity and flexibility. There is enough evidence to prove that Indian
companies who have implemented JIT [at least partly] successfully have reaped the benefits.
The Case study of Tractor assembly factory and Maruti are testimony for the same. Also
Mahindra and Mahindra had implemented JIT techniques during the 1990’s to their advantage.
To gain the benefit of JIT, Indian Automobile Industry must be willing to modify their
procedures and processes.