JIT AND INDIA

Indian Institute of Materials Management (IIMM) is a forum for purchase and materials related
employees and they have frequent meetings, seminars and annual conventions to share
knowledge. In one of their annual conventions the topic was implementation of JIT for
competitive advantages. Leading personalities of the Indian industries talked lots of positive
points and benefits due to the JIT purchase and JIT manufacturing methods.

Many presented calculations and statistics of savings in costs and time and how it helps in
reduce the price of the end products and hence competitive advantage. Most of the audience
were impressed about the theory and thought of practical application in their respective
companies.

However, few of the executive participants were more worried about practice and less
interested in idealistic theories. One Mr. JItendra Joshi of LML’s Bangalore office was
impressed. He has been arranging Engine Block castings, tyre tube sets, machined components,
speedometers etc from southern region to LML, Kanpur Unit.

He has 15 years’ of experience in facing lots of problems in arranging the long distance supplies.
He mustered courage to get up and ask few questions against the JIT and summary of question
to Mr. Sudhakar (the speaker) were as follows: Mr. Joshi said JIT cannot be fully implement able
in Indian conditions due to following genuine constraints.

(a)The interstate disputes like ‘Kaveri Dispute’, “Border disputes’ at times disturb the
arrangements.

(b)On and off terrorism, political agitatations, holidays due to local, regional and national
leaders’ deaths also disturb work environment.

(c)Spread of vendors all over India and vastness of coverage do not enable to know correct
position of WIP of vendors.

(d)Transport bottlenecks, heavy rains, floods (coastal areas), workers’ strikes cause anxiety and
worry.

(e)Partnership problems, financial and quality constraints are not easily attended or solved.

These questions were like a mini speech on anti JIT and the atmosphere in the auditorium got
charged up Mr. Sudhakar, the speaker, gave half hearted replies to questions for which Mr.
Joshi and his friends were not satisfied. Finally Mr. Sudhakar said:“The system which operate
successfully in Japan may not work equally well in other countries.” Only when Mr. Joshi took
his seat as he felt he has made his clear on practical problems than merely going through the
theory. Suddenly he seems to have won the admiration of the gathering. Prof. Rao who was
chairman of the technical session gave his concluding remarks. He appreciated the ideology of
JIT but advised executives to take it up step by step and ensure pragmatic views and do not
over depend on JIT to fail. This he told as Indian Industrial Environment is yet to mature to take
care of JIT systems in totality.

QUESTIONS

1.Explain why JIT purchase works well in the developing countries

2.Do you agree with Mr. Joshi’s views on constraints to JIT? Explain the correct problems in
northern and eastern India.

3.Write how you feel the JIT systems can be adopted in India with an example.

PLANT LOCATION PROBLEMS

Location of a plant has direct relevance to raw materials, market, human resources, civic
amenitiestransportation etc. However, in some countries the problem becomes complicated
due to (i) Inter-Statecompetitions and tussles, (ii) Regional development and (iii) Political
pressures and biased decision.Around 1970 Government of India mooted the idea of expanding
steel production under public sector units to be established at suitable locations. A committee
of eminent personalities was formed to gothrough claims of (i) Vijaynagar Steel plant near
Bellary in Karnataka, (ii) Salem Steel in TN and (iii)Vishakapatam steel plant in A.P. Since it was
under PSU the political pressure was going on and if it wasunder private sector, there would not
have been any kind of political pressure.The most important raw materials for steel plant are
iron core power and coal. Again in iron ore the iron percentage should be preferably more than
60% and ash content in coal should be less than 30%. Thesefactors enable production of iron
and steel at competitive price. From experts’ reports the following brief was available:(a)Vizag –
The Iron ore is rich with 65% Iron and coal can be arranged from MP and Bihar andVizag is well
connected by broad gauge railway line to all important cities and the place has sea port and
airport. Hence this place has more natural advantage than other cities.

(b)

Salem – Iron ore was having 60 to 65%. Iron content and hence be economically exploited.
Thecoal is in lignite form which is low quality coal. Hence this needs to be converted as coke for
use.The place has broad gauge line and Madras sea port and airport are nearby. This place
wasconsidered second preference.(c)Vijaynagar – Bellary belt has Iron ore of 60% iron but coal
has to come from AP (SingareniColliery). The place had meter gauge railway line and hence not
well connected to all India network. The seaport and airports were far away and hence this
place was not found suitable.As per the expert committee report steel plant work started Vizag
and Salem and these plants came up as per the plan and are doing well. However, to everyone’s
surprise the them PM, Smt. Indira Gandhi, didfoundation stone laying in 1971 at Toranagallu in
Bellary district for Vijaynagar steel plant also. Thisultimately proved to be an election gimmick
to please the votes, though the PSU unit did not come upthere at all. This is a clear example
how politicians try to fool gulliable voters by way of inaugurations/foundation stone
laying.Steel plants are quite huge with township having about 50,000 to 1,00,000 people.
Hence requirements of housing, electricity, water, hospitals, education, institutions,
entertainment facilities are very essential.The investment is huge and this helps to develop the
surrounding area quite well and there is abundantscope for ancillary units, engineering services
and employment inside and outside the steel plant. BothVizag and Salem got these advantages
and production standard as per the plan and these industriescontinue to run profitably.The
expert committee had made comment on Vijaynagar proposal that, the unit can be viable if it
useslatest foreign technology. In this method oxygen is injected to force oxidation of ores
instead of natural

air. Though PSU was not started a private enterprise JInal Group took interest and applied for
license tothe Central Government. By the year 1990 they obtained license and Vijaynagar Steel
plant with foreigntechnology and decided to make only sheet products, which fetch higher
prices. They also kept bareminimum workforce and executives to make it economical right from
inception. By this time broad gaugelines were formed and nearest seaport was Goa and hence
some problems were taken care. This unit became operative in about 3 years and is also
running profitably.

QUESTIONS

1.What are essential factors for locating a Steel plant and why?2.Explain how political pressures
and pulls effect decision making and delays in starting industries.3.Explain how it was possible
to make Vijaynagar plant visible.4.Technology, HR, natural facilities play vital role to start new
enterprise. Explain your views
 MANUFACTURING GOES VIRTUAL

Audi A3, manufactured by the German Luxury car major AudiAG, rolled off the Ingolstadt
assembly plant only six months after the A3’s market launch. Only four months into production,
Audi was turning out the A3 at maximum capacity, the so-called ‘watershed’ of 680 vehicles per
day. For Audi AG, the A3 represents a major milestone, with the entire manufacturingsimulated
from the start to the finish. In fact, Audi began to break new ground from the moment
planningon manufacturing process and production went ahead.With the aid of simulation and
assurance of production processes and plant in the virtual world, problemareas were identified
many months ahead and dealt with before series of production started. The result: No need for
expensive and time-consuming modifications in the production plants, noticeably shorter
planning time and right from the start of production, Audi was producing cars to the highest
qualitystandards and ultimately recorded the most rapid and successful production start up in
its history. Audiofficials attribute these successes to what they call the Digital factory principle.
Today, Audi is able toassure reliable production at an early stage and simulate all the products
processes at one and the sametime.Projects currently in process are the ‘virtual press shop’,
‘virtual tool-making’, ‘virtual body shop’,‘virtual paint shop’, ‘virtual logistics’. In parallel with
this, Audi is undertaking virtual productdevelopment, i.e. the simulation and assurance of a
complete Audi model and its technology incyberspace. Using these vehicles data, the digital
factory can be set up to produce a new model even inthe conceptual stage.

The principles

Audi AG’s Digital Factory validates the concept of Virtual Manufacturing, which first came into
prominence in the early 1990s as a result of the US Department of Defence Virtual
Manufacturinginitiative. Both the concept and the term have now gained wide international
acceptance, and havesomewhat broadened in scope. Virtual Manufacturing refers to the use of
reality and related technologiesto simulate the prototyping and manufacture of a proposed
product before a commitment is made to its physical production. Global virtual manufacturing
extends this definition to include and emphasise theuse of Internet/Intranet global
communications networks for virtual component sourcing, and multi-sitemulti-organization
virtual collaborative design and testing environment. Here, we will emphasise on
themanufacturing aspect.Automation technologies, such as CAD/CAM and CAE, shortened the
time required to design productssubstantially. Virtual Manufacturing will have a similar effect
on the manufacturing phase.In fact, the evolution of CAD systems beyond simple on-line
drafting tools, the maturity of FEA for simple systems, coupled with the desire to reduce the
cost of actual production is driving the developmentefforts of virtual manufacturing
environments and systems.Virtual manufacturing is an effort to create environment that are
able to model and simulate many, if noall, of the steps in a given production process. Digital
computers with powerful application software define the product geometry, test the product,
design the process steps, analyze and simulate manufacturing operations, simulate the
ergonomics, and develop control code for the automation. With virtual manufacturing, one can
predict the performance of a manufacturing process or a system without building the process
or the system given set of manufacturing conditions.In addition to shortening the time required
to bring products to market, Virtual Manufacturing will also reduce the cost of tooling,
eliminate the need for multiple physical prototype, and reduce material waste, because you can
“get it right the first time.” In short, it will provide a manufacturer the confidence of knowing
that they can deliver quality products to market on time and within budget. The project
manager of the digital factory at Audi, “The number of model versions is complexity and scope
of development work, but less time is available for development. A near model needs to be on
the market as fast and in as great a volume as possible, right from the start. Without virtual
planning methods, it would not be possible to realize several model projects every year.”Virtual
Manufacturing is one element, albeit it is a large and significant one, needed to fully address
the issues involved in creating a workable on-line product development system. From a
business perspective, it is clear that small improvements in manufacturing can have dramatic
and profound effects in terms of cost and quality. For example, if it were possible to reduce,
even slightly, the thickness of a given material, say the metal used to form the hood of an
automobile, while at the same time maintaining, or even improving, its structural integrity,
then, the potential cost savings would be enormous.

The evolution

Prior to the digital revolution of the late 70s; the realization of the designer’s styling concepts,
the definition of body sheet-metal, and the design and construction of stamping and assembly
tooling relied entirely on physical models. Other models were used for the construction of
assembly and checking fixtures. It took a while before the automotive and aerospace industries
accepted CAD. Even then, it was used more like an ‘electronic pencil’ than a design system,
simply computerizing the existing methodology. It took years for design to evolve to the point
where the CAD drawing was an output rather than the input to the process. Today, the process
has evolved much further to a situation where 3-D geometry is now the basis of the design
process. It is not surprising to see the design department in a typical automotive OEM using
digitals tools to model vehicle shapes of new vehicles concepts. Here, sketching tools emulate
paper, pen and paint. Photorealistic modelers give the designer an almost true to life view of
the new model. In fact, today, vehicle component design is done entirely in A CAD. Digital
assembly of the vehicle insures that the parts will fit and function together. Standard parts and
steels are used from the CAD library. The finished design is inspected and adjusted in 3D CAD
environment before build begins. Even here, assembly systems, manual work stations,
conveyors, piping, and safety work envelopes are maintainedwithin a CAD facility layout of the
entire plant.

Benefits

•Reduced time-to-market

•Reduced cost of tooling

•Elimination of multiple physical prototypes

•Reduced material waste

•Confidence in the process

•Lowe overall manufacturing cost

•Improved quality Discrete event simulation of the plant includes things like the conveyor
speeds, production through put, and machine downtime. These parameters assist in
understanding causes of bottlenecks and the impact of new technology in the plant.

Tool are in place

The current scenario can be summarized this:

•The realistic simulation of products and process generally begins with a three dimensional
model. Finite Element Modelling and dynamic simulation tools are helping reduce the cost
while improving the performance of manufacturing tooling.

•The advantages of concurrent engineering are already felt

•The concept of ‘virtual prototyping’ of products, if not yet manufacturing processed, is widely
accepted. Rapid prototyping tools are helping streamline the tooling development process
further, by eliminating steps in the manufacturing process.

•The mathematics of non linear simulations are well understood and confirmed by tests

•Database tools provide quicker and easier access to digital designs and equipment
performance histories.

•The factory floor is getting populated with intelligent devices that are helping to reduce if not
eliminate variability. Leading edge companies have demonstrated the successful use of virtual
manufacturing techniques. For example, the Boeing 777 is the first paper-less airplane
produced, involving co-ordination with 250 cross-functional teams in diverse locations.
Furthermore, the rapid development in computing power has meant that virtual manufacturing
is not restricted to large companies like Boeing who can afford powerful mainframes. Today,
virtual manufacturing software operate on work stations running any of the popular

operating systems. With all the tools conducive to virtual manufacturing in place, it may not be
over-optimistic to claim the virtual manufacturing will soon be a business requirement for all
manufacturing companies.

QUESTIONS

1.Explain the methods adopted to speed of new model development

2.Compare how there are delays in product development in developing countries and speed at
developing countries

3.What is the current scenario to product development

4.If you were M.D. of Maruti Udyog Ltd. what steps would you take to improve new product
development in terms of time and cost.

Case study 1 - Boeing brings its customers on board Arguably the most innovative new
passenger aircraft to enter service over the last few years was the Boeing 777, a new twin-
engined aircraft, in the 300-plus seats category, to compete with established models from
McDonnell and Airbus. The existence of established competitor products is important. When
Boeing developed the 747 ‘Jumbo’ jet aircraft, it had no direct competitors. The company’s
customers either wanted the product or they didn’t. Not so for the 777; Boeing knew that it
must consider its customers’ requirements. The company had to take a new course – to
understand its customers’ needs and then to transform that knowledge into an aircraft that
could best meet those needs. Boeing has always maintained close involvement with its
customers, but this project called for a new depth of listening and understanding. Initially, eight
large potential customers (including British Airways, Japan Airlines and Qantas) were invited to
participate in creating the design concepts. It soon became clear that the customers did have
important requirements, the most vital of which was that the aircraft should be around 25 per
cent wider than the 767. In fact Boeing had originally hoped to lengthen the 767 fuselage to
give the extra capacity, so avoiding some of the costs involved in a completely new fuselage.
The customers also wanted much more flexibility in the configuration of the passenger space.
Conventionally, cabin space had been divided up into sections, separated by fixed galleys and
toilets at predetermined positions, fixing the ratio of passenger capacities of each class.
However, the airlines all indicated that they wanted to be able to configure the cabin to their
own requirements. Finally, the airlines insisted that the new design should be free of the usual
level of minor, but irritating, faults which had bugged the early operations of some of the other
aircraft. Boeing did meet its customers’ requirements and even improved upon them in some
ways. They achieved this by using design/build teams, and by a particularly powerful computer-
aided design (CAD) system. Customers were closely involved right from the start of the design.
They even came up with some good suggestions. For example, one airline suggested a new
layout for the rear galley which allowed an extra 12 seats to be included in the aircraft.

Case Study 2 - Cadbury Schweppes Production Method Cadbury Schweppes is a multinational

soft drinks (beverages) and confectionery business that is based in the UK. The business is a
public limited company. It is involved in the manufacture, marketing and distribution of its
many branded products. Cadbury Schweppes now employs over 40000 people and its products
are available in almost 200 countries. The company’s products can be divided into: • Beverages
(carbonated soft drinks and non carbonated soft drinks (waters and fruit juices) • Confectionery
(chocolate products, sugar products, chewing gum) Much of Cadbury Schweppes’
manufacturing still takes place in the UK, Australia and North Africa. However, in the 1990s the
company moved some of its production to Russia, Poland, Argentina and China, countries with
emerging economies. To satisfy most of its shareholders, Cadbury Schweppes’ has set out a
strategy to help achieve its objective. This strategy consists of: • Creating strong regional
positions through organic growth, acquisitions and disposals • Developing strong brands
through marketing Page 5 of 7 • Expanding its marketing share through innovation in products
and packaging • Regularly updating its product portfolio Production Despite manufacturing its
goods in large quantities, Cadbury Schweppes uses batch rather than flow production methods.
The company must ensure the products are of high quality. Not only are there strict laws about
how foodstuff is made, but also Cadbury Schweppes would not want to damage its reputation
by allowing inferior products to be sold. Cadbury Schweppes undertakes extensive research and
development (R&D) to develop new products and to find ways of manufacturing existing brands
more efficiently. Cadbury Schweppes uses the services of a specialist R&D business based at
Reading for its UK confectionery business.
Case Study 3 - Inventory management at Flame Electrical Inventory management in some
operations is more than just a part of their responsibility; it is their very reason for being in
business. Flame Electrical, South Africa’s largest independent supplier and distributor of lamps,
is such a business. It stocks over 2900 different types of lamp, which are sourced from 14
countries and distributed to customers throughout the country. ‘In effect our customers are
using us to manage their stocks of lighting sources for them,’ says Jeff Schaffer, the Managing
Director of Flame Electrical. ‘They could, if they wanted to, hold their own stock but might not
want to devote the time, space, money or effort to doing so. Using us they get the widest range
of products to choose from, and an accurate, fast and dependable service.’ Central to the
company’s ability to provide the service its customers expect is its computerized stock
management system. The system holds information on all of Flame’s customers, the type of
lamps they may order, the quality and brand of lamps they prefer, the price to be charged and
the location of each item in the warehouse. When a customer phones in to order, the computer
system immediately accesses all this information, which is confirmed to the customer. This
leaves only the quantity of each lamp required by the customer to be keyed in. The system then
generates an instruction to the warehouse to pick up and dispatch the order. This instruction
includes the shelf location of each item. The system even calculates the location of each item in
the warehouse which will minimize the movement of stock for warehouse staff. Orders for the
replenishment of stocks in the warehouse are triggered by a re-order point system. The re-
order point is set for each stocked item depending on the likely demand for the product during
the order lead time (forecast from the equivalent period’s orders the previous year), the order
lead time for the item (which varies from 24 hours to four months) and the variability of the
lead time (from previous experience). The size of the replenishment order depends on the lamp
being ordered. Flame prefers most orders to be for a whole number of container loads (the
shipping costs for part-container loads being more expensive). However, lower order quantities
of small or expensive lamps may be used. The order quantity for each lamp is based on its
demand, its value and the cost of transportation from the suppliers. However, all this can be
overridden in an emergency. If a customer, such as a hospital, urgently needs a particular lamp
which is not in stock, the company will even use a fast courier to fly the item in from overseas –
all for the sake of maintaining its reputation for high service levels. ‘We have to get the balance
right,’ says Jeff Schaffer. ‘Excellent service is the foundation of our success. But we could not
survive if we did not control stocks tightly. After all we are carrying the cost of every lamp in our
warehouse until the customer Page 6 of 7 eventually pays for it. If stock levels were too high we
just could not operate profitably. It is for that reason that we go as far as to pay incentives to
the relevant staff based on how well they keep our working capital and stocks under control.’
Case Study 4 - The Benetton supply chain One of the best known examples of how an
organization can use its supply chain to achieve a competitive advantage is the Benetton Group.
Founded by the Benetton family in the 1960s, the company is now one of the largest garment
retailers, with stores which bear its name located in almost all parts of the world. Part of the
reason for its success has been the way it has organized both the supply side and the demand
side of its supply chain. Although Benetton does manufacture much of its production itself, on
its supply side the company relies heavily on ‘contractors’. Contractors are companies (many of
which are owned, or part-owned, by Benetton employees) that provide services to the
Benetton factories by knitting and assembling Benetton’s garments. These contractors, in turn,
use the services of sub-contractors to perform some of the manufacturing tasks. Benetton’s
manufacturing operations gain two advantages from this. First, its production costs for woollen
items are significantly below some of its competitors because the small supply companies have
lower costs themselves. Second, the arrangement allows Benetton to absorb fluctuation in
demand by adjusting its supply arrangements, without itself feeling the full effect of demand
fluctuations. On the demand side of the chain, Benetton operates through a number of agents,
each of whom is responsible for their own geographical area. These agents are responsible for
developing the stores in their area. Indeed, many of the agents actually own some stores in
their area. Products are shipped from Italy to the individual stores where they are often put
directly onto the shelves. Benetton stores have always been designed with relatively limited
storage space so that the garments (which, typically, are brightly coloured) can be stored in the
shop itself, adding colour and ambience to the appearance of the store. Because there is such
limited space for inventory in the stores, store owners require that deliveries of garments are
fast and dependable. Benetton factories achieve this partly through their famous policy of
manufacturing garments, where possible, in greggio, or in grey, and then dyeing them only
when demand for particular colours is evident. This is a slightly more expensive process than
knitting directly from coloured yarn, but their supply-side economies allow them to absorb the
cost of this extra flexibility, which in turn allows them to achieve relatively fast deliveries to the
stores. Caser Study 5 - Xerox benchmarking Possibly the best-known pioneer of benchmarking
in Europe is Rank Xerox, the document and imaging company, which created the original
market for copiers. The virtual monopoly the company had in its sector almost became its
undoing, however. Spurred by the threat from the emerging Japanese copier companies, an in-
depth study within the company recognized that fundamental changes were needed. To
understand how it should change, the company decided to evaluate itself externally – a process
which became known as competitive benchmarking. The results of this study shocked the
company. Its Japanese rivals were selling machines for about what it cost Xerox to make them.
Nor could this be explained by differences in quality. The study found that, when compared
with its Japanese rivals, the company had nine times more suppliers, was rejecting 10 times as
many machines on the production line and taking twice as Page 7 of 7 long to get products to
market. Benchmarking also showed that productivity would need to grow 18 per cent per year
over five years if it was to catch up with its rivals. Rank Xerox sees benchmarking as helping it
achieve two objectives. At a strategic level it helps set standards of performance, while at an
operational level it helps the company understand the best practices and operations methods
which can help it achieve its performance objectives. The benchmarking process developed by
Rank Xerox has five phases. Its experience of using this approach has led Xerox to a number of
conclusions: • The first phase, planning, is crucial to the success of the whole process. A good
plan will identify a realistic objective for the benchmarking study, which is achievable and
clearly aligned with business priorities. • A prerequisite for benchmarking success is to
understand thoroughly your own processes. Without this it is difficult to compare your
processes against those of other companies. • Look at what is already available. A lot of
information is already in the public domain. Published accounts, journals, conferences and
professional associations can all provide information which is useful for benchmarking
purposes. • Be sensitive in asking for information from other companies. The golden rule is:
‘Don’t ask any questions that we would not like to be asked