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TOPIC: Just-In-Time/Lean Production System: The Hidden Flaws and Constraints Contents Section Page Introduction----------------------------------------------------------------------3 Academic Journal

1: Just-in-Time Under Fire: The Five Major Constraints upon JIT Practices------------------------------------------------4 Academic Journal 2: The Darker Side of Lean: An Insiders Perspective on the Realities of the Toyota Production System--------------------------7 Academic Journal 3: The Effects of Lean Production on Worker Job Stress----------------------------------------------------------------------------10 Overall Conclusion------------------------------------------------------------11 References---------------------------------------------------------------------13 Introduction Just-in-time was first used by the Ford Motor Company as described explicitly by Henry Fords My Life and Work (1922). It was subsequently adopted and publicized by Toyota Motor Corp. of Japan as part of its Toyota Production System (TPS). The architects of the TPS, Ohno and Shingo define its essence in complementary ways. Basically, JIT/TPSs fundamental doctrine focuses on the elimination of waste where waste is defined as any activity that does not add to customer value. JIT operates with a balanced, synchronized material flow with minimal inventory. Over time, this approach served as a critical competitive edge for Toyota Motor Corp. Currently, Toyota and GM are the biggest automakers in the world with sales of $7.05million and $7.06 million respectively for this year [1]. It is very likely that Toyota will overtake GM as the No.1 automaker probably this year a title GM has owned for 76 years. Many research papers have reported how implementation of JIT can reduce costs, increase productivity, competitiveness and the multitudes of benefits that come with it. Historically, the literature has been rich with JIT philosophy advocacy, while it falls short with respect to skepticism. Though increasing usage of JIT practices is reported, many academics including Shapiro at Harvard Business School, Karmarkar at UCLA (Anderson) and Cusumano at MIT (Sloan) and many other practitioners have warned against the unrestricted pursuit of JIT practices. While the success of Toyota and JIT is undeniable, many do not understand that the system is appropriate only for certain economic environments. There are certain conditions or prerequisites to be fulfilled such as a compatible organizational culture, determined top management and willing suppliers. Every system has its own flaws and JIT is no exception. These flaws and pitfalls should be avoided as much as possible. My paper serves to analyze JIT specifically towards this aspect. Instead of looking into the advantages of JIT which will probably be something you would have read in many term papers due to the large interest and enthusiasm by fellow business students. My focus will be looking into certain legitimate constraints and implementation failures. In fact, JIT brings along other hidden problems that are not usually mentioned along with potential externalities, particularly the human cost at the expense of JIT. Ultimately, the decision whether to adopt JIT by any organization depends on the depth of comprehension towards the inner workings of the system. My paper will touch on 3 main academic journals along with a few journals as supporting documents. I will analyze each in order and will conclude with some experiences gained through my journey of knowledge in JIT. Just-in-Time under Fire: The Five Major Constraints upon JIT Practices (March 06) Dr. Tony Polito, East Carolina University, Greenville, North Carolina Dr. Kevin Watson, University of New Orleans, New Orleans, Louisiana This study concluded that there are five major constraints that should be described by academics and considered by practitioners prior to JIT implementation: customer-driven and economic conditions, logistics, organizational culture and conditions, intractable accounting and finance practices, and small supplier difficulties. I shall review the five constraints and evaluate their importance and relevance. Constraint 1: Customer-driven and Economic Conditions JIT does not fare well under raw material price fluctuations. Norris (1994) points out that JIT savings are based on the implicit assumption that additional inventory is always available for quick delivery at the same price as old inventories. Businesses that were excessively focused on JIT eventually reacted to the scarcity of finished goods with higher prices paid contributing to inflationary pressures and reactionary bond market. Furthermore, in a highly variable demand where customers continue to dictate ever-higher levels of responsiveness and customization, these types of demands are not well tolerated under JIT. Constraint 2: Logistics Interruption of material delivery along the supply chain can quickly cause manufacturing shutdowns when insufficient raw material buffer stock is maintained along the chain. Americans brief 1992 railroad strike is but one of many examples of this inherent risk within JIT. More recently, the lack of significant gasoline buffer stocks at the distributor level effected retail shortages almost immediately after Hurricane Katrina. Geographically close proximity with suppliers was a requirement to minimize transportation costs to deliver on short lead times. Constraint 3: Organizational Culture and Conditions The success of JIT is based on the implementation of Theory Z approach toward the management of labor (Keys, 1991; Ouchi, 1981). Theory Z, coined by William Ouchi, a professor at UCLAs Anderson School of Management, embraces worker-based collective decision-making, implicit trust between workers and management, informal worker control combined with explicit worker responsibility. These are the basic conditions that must occur and any motivation or incentive rewards must revolve around this behavior. Any conversion or incompatibility against this culture faces great difficulties in the implementation of JIT especially in the early years. This will be discussed in subsequent journals. Constraint 4: Intractable Accounting and Finance Practices

Traditional cost accounting systems can confound attempts to implement JIT practices in various ways. Such systems focus upon measuring manufacturing variances, but contribute little in terms of measuring efforts toward resolving their underlying causes (Wise 1990), hence directing efforts toward the management of variances before the resolution of causes. In addition, the short term focus of financial measure such as ROI and quarterly earnings often deter executive commitment to the longer term goals of JIT. JIT takes at least 2 years to be considered operational, and do not normally achieve optimum results until five to ten years. Constraint 5: Small Supplier Difficulties Small companies cannot reap the same scale of benefits from JIT since they lack the economies of scale that their high volume repetitive manufacturing customers possess. Over a third of small JIT suppliers must tolerate higher FGI, and 40% report higher WIP and higher raw material inventories. In addition, 75% report some increase in both transportation and manufacturing costs. Again, it might be well argued that a significant portion of an organizations savings due to JIT are captured, not as efficiencies but as externalities passed to suppliers. The five constraints mentioned highlight some of the key constraints and stress that JIT is not universal in applicability. There is a need to consider the rising and fluctuating prices of raw materials along with the demand variability from customers. Consequently, many firms are looking towards delayed differentiation of products. Eventually, the focus must be that the benefits from savings in incremental inventory costs do not outweigh the losses involved in stock outs and any reduced customer responsiveness. For an individual firm, it must consider the nature of its business in terms of the fluctuations in demand and supply. One implementation failure would be GE Appliances, which used JIT but realized that low inventories of some critical parts prevented it from filling customer orders and reverted to an increased lead time for inventories by 25%. Another example was Bollinger Industries, a sports and fitness equipment manufacturer, after successfully implementing a JIT environment reverted to an increase of 30% in certain finished good inventories after finding JIT was not sufficiently flexible in an environment of rising customer demand. Logistics is becoming increasingly relevant and a problem for JIT. Where suppliers are not geographically close, firms face issues with rising transportation costs. Many businesses have relied on JIT delivery of inventory and components to improve efficiency and reduce lead times. But now, the physical limits of the global distribution network are being tested. The shipment in small quantities increases shipment costs and traffic congestions. Even Toyotas own industrial growth in its Toyoda City and Aichi Prefecture areas created similar congestion. Another recent example was the July 07 earthquake [2] that crippled Japans car production and caused damage to a key suppliers plant. Honda, Mitsubishi, Nissan and Toyota stopped production due to damage to Riken, a piston ring and seal manufacturer. The automakers use just-in-time delivery so assembly plants maintain very few parts in stock. While the damage was not as strong as previous disasters, it highlights the vulnerabilities within JIT systems. Indeed, inventory carrying costs savings from JIT must outweigh transportation costs along with the potential vulnerabilities due to unpredictable events before JIT can be considered. Globalization has resulted in the influx of foreign workers. JITs successes depended largely on theory Z as mentioned above. Back then, Toyotas main workforce comprised of mainly locals. As a result of lifetime employment practice common in the past, a community of fate develops among employees, resulting in an intense loyalty to the first. These claims have created a pervasive belief that in Japan, employees work in an environment which functions more like a nurturing family than like a highly competitive profit-making entity (Cole 1979), (Abbeglen 1958). This resulted in effective, committed and disciplined teams that were willing to work and help each other. Now, talented Japanese labor is avoiding manufacturing work. Companies are forced to import less-skilled foreign labor. This change in turn, negatively impacts quality and productivity. In fact, internal language barriers are the current greatest barriers to effective JIT implementation. It seems that JITs success was also mainly due to the previous conditions of a more homogenous workforce in Japan which cultivated nationalistic and a united front for the workers. As globalization continues, to realize JIT, firms must explore more ways to improve the social harmony and increase communication in an increasingly diversified workforce to inculcate the appropriate organizational culture and conditions for JIT to work. The rise of new systems such as JIT further highlights incompatibilities with traditional cost accounting. Consequently, new accounting methods such as activitybased accounting are increasingly popular. A switch towards JIT does not only change the manufacturing behavior but the company as a whole, including accounting methods. Companies have come to realize that as there are recent evidence that accounting systems are beginning to respond and adapt to these issues. New companies switching to JIT must not neglect this area so that management has the right performance indicators to make critical decisions. It is interesting to see how the savings incurred by an organization is actually passed over as an externality to suppliers. This effect was investigated by Newman (1993) who found that on average suppliers in Japan charged JIT customers a 5% price premium. Before any successful implementation of JIT, key suppliers must be consulted and to assess their willingness to commit to their new system. My discussions above highlight the major constraints that exist with regard to the JIT philosophy. There are many issues managers must give due considerations before

committing themselves to JIT. As we move on to my 2nd journal review, my discussion will touch on the hidden costs behind JIT that has not been widely discussed in todays world. The Darker Side of Lean: An Insiders Perspective on the Realities of the Toyota Production System (May 06) Darius Mehri, University of California-Berkeley Darius Mehri is an American-born computer stimulation engineer who worked in a Toyota group company for three years, observing this system firsthand and conducting his own qualitative research on what he considers the true impact of JIT: the human cost. His assessment is guided by a distinction which is fundamental to understanding Japanese culture and business: tatemae[12] (what you are supposed to feel or do) and honne[12] (what you actually feel or do). Mehri argues that western observers fail to discern the honne within the tatemae. The journal lifts the curtain of formality and addresses the realities. As a westerner himself, his insights reveal a great degree as he was able to work in a different culture and able to reveal facts that might have been covered up by locals. He also conducted over 75 interviews with employees, politicians, lawyers, labor scholars and members of the community. For the sake of objective discussion, I will try to avoid any subjective components that he might have mentioned and reassess his view points as a Singaporean myself, who is taught between the East and the West. Some of the main areas of concern underlying the JIT system are limited potential for creativity and innovation, dangerous conditions on the production line, accident cover-ups, excessive overtime, and poor quality of life for workers. Due to the space constraint in this term paper, I will focus on 2 main points to discuss. 1. Product Development: Innovation from Without From the journal, it was found that the approach to solving problems in a JIT environment particularly the Toyota Way was rather interesting. To arrive at the best design, the engineers would gather huge amounts of information during weekly meetings. Designers think and reason amongst sets of alternatives. In fact, comparing one design to another was considered the best way to evaluate the advantages of each. This approach, codified as The Vision Method, was actually an elaborate system which benchmarks existing products and attempting to improve upon their existing design within a cost margin. The journal highlighted examples where Western consulting firms were hired to obtain design technology. Clearly, the problem-solving approach engaged was an inductive process contrary to deduction and abstract ideas. The JIT environment within the Japanese was concerned very much with hard data over abstract components. When it came to the details of a design, the Japanese were brilliant, but when it came to creativity, they were disappointing. Even interviewed Japanese engineers themselves agreed that they were good at manufacturing products, but terrible at innovation. The emphasis of incremental improvement based on relentless pursuit in new technology and benchmarking was notable yet it did not address the importance of engineering breakthroughs in a JIT environment. 2. The Price of JIT: Worker Health and Safety The journal highlighted how safety prioritized as number one was mentioned everywhere including Safety Number One arm badges. Clearly, the tatemae will be the feeling of a safe working environment. But the journal further revealed the honne which is largely contrasting. Commitment to safety is proclaimed in every corner but in reality, it represented little more than a public relations gesture, or worse, a way of shifting responsibility for safety onto workers and away from management. According to Shuzo Sasaki of the Aichi Labor Institute, an organization with more than 30 years of experience studying Toyota and their group-related companies, the largest contribution to accidents on the line is the fast line speeds, an inherent nature of JIT systems. Fast line speeds contribute greatly to work-related accidents and health problems such as high blood pressure rate, hearing problems, work related injuries and even death. The Institute has record line speeds as fast as 58 seconds per minute with barely a second to rest. In addition, the use of flexible manufacturing, another inherent competitive advantage of JIT systems requires each worker to use a number of skills in the course of the day. But it also makes working with fast line speeds more dangerous because it increases the overall time necessary to finish days quota. Sometimes, employees are required to work on products they dont make often and for which they have received little training, and this, too, creates safety problems. With factory layouts that saved space aggressively, the workplace was crowded and stocked with poorly designed equipment, so there wasnt enough room to move around on the line. Many incidents documented in the journal highlighted how workers triggered machine buttons accidentally and ended up hurting or even crippling themselves. In fact, one of Toyotas automobile companies was ranked the 3rd most dangerous in Japan in 2006. The idea of preventive maintenance and danger awareness training only became tools that the company used to put injury blames on the worker instead of the company which was further highlighted in the journal. According to Dr. Shinya Yamada, a Japanese labor specialist who is emeritus professor of the Faculty of Medicine at Nagoya University and one of Japans leading occupational health and safety experts, hiding injuries is a long-standing pervasive, and hidden rule at most corporations. This is further amplified in JIT systems common in Japan where injury rates are higher due to its inherent nature. From the 2 critical points discussed above, the real cost of JIT can be clearly and empirically seen in its adverse impact on employees the human cost that extends beyond cultural relativism. My analysis zoomed into Toyota as it was the pioneer of JIT and it shows that many positive ideas of working

environment and innovative teams may not necessarily be as wonderful as outsiders think. The discernment between tatemae and honne is critical to knowing the inner workings behind JIT. Surely, JIT prides itself to be successful, but at what price? As I read through the above journal for the 2nd time, I felt that it is very unfair to simply put down JIT due to the issues mentioned above. Could it be that other non-JIT manufacturing environments faced issues as serious, if not, worse than JIT systems? My 3rd journal which I selected carefully looks into quantitative data on the effects of lean production on worker job stress. There is a need to find any possible correlation isolating lean production as the factor that is causing the problems discussed above. The Effects of Lean Production on Worker Job Stress (2006) Robert Conti, School of Management, Bryant University, Smithfield, Rhode Island, USA Jannis Angelis, Warwick Business School, Conventry, UK Cary Cooper, Lancaster University Management School, Lancaster University, Lancaster, UK Brian Faragher, Manchester Business School, Manchester, UK Colin Gill, Institute for Manufacturing, University of Cambridge, Cambridge, UK This empirical paper seeks to address the neglected work condition aspect of lean production (LP) implementation, specifically the relationship between lean production and work job stress. This is the first known multi-industry empirical study of the relationship of job stress to a range of lean practices and to the degree of lean implementation. The team made 21 hypotheses relating certain variable factors with job stress and took a scientific approach in analyzing and looking for any correlation between the factors to substantiate their hypothesis. Their initial findings out of 1,670 workers responding at 16 plants revealed that lean workers reported the greatest job stress, the heaviest and fastest workloads and the most difficulty getting time off or changing job features. My discussion will touch on the key hypotheses that proved to be accurate based on their findings and consider its impact on JIT systems. One of their main hypotheses assumes that the intensity and repetitiveness of work will increase over the full range of lean implementations with job stress increasing accordingly. Instead, the stress response below exhibits the non-linear stages. The study further highlighted that implementation level appears to be a reasonable surrogate for implementation time as they are directly related. This could be due to the LP exposing workers to new technologies, working relationships, and expectations about productivity and quality. This report further reinforces one key pre-requisite required to fully exploit JIT utmost commitment. It is seen from the graph below that the initial period is faced with great dissatisfaction from workers. The true benefits can only be reaped when the system stabilizes into the organization. Thus, any implementation of JIT must be complete in terms of depth and committed with an unwavering focus as strong resistance will be expected. [pic][pic] Many hypotheses concluded show that worker stress was significant in LP. Examples include the inherent nature of JIT where pace/intensity duration due to high speed lines is continuous throughout each cycle. There is also a positive relationship between decreasing cycle times and stress. Psychological job demands may also increase from feelings of resentment due to the need to cover up work for absent workers which mentioned in the previous journal. The strength of the blame relationship with the stress is noteworthy considering the low frequency of defects in LP. These blame feelings persist long after actual defect episodes, perhaps due to lingering apprehension about future defects. The relationship between lack of proper tools and stress is supported. A lack of tools is a stressful absence of technical support and also increases the physical demands of meeting time standards and overcoming ergonomic difficulties. All in all, this study has shown that LP imposes significant managerial effect on stress levels. The cited studies clearly demonstrate the potential of LP to create a hostile, high stress environment. Overall Conclusion My paper has examined the major constraints and the hidden human costs and externalities both in qualitative and quantitative forms. Ultimately, is lean mean? Is it still worth implementing considering so many potential problems and issues behind the scenes? It depends heavily on management choices in designing and operating lean systems. Many pitfalls and potential flaws highlighted can be avoided if there is a good understanding of JIT. In fact, academic journal 3 mentioned that LP is not inherently stressful and worker well-being is not deterministic. While there are quantitative data to prove certain correlation between stress and LP, it would be naive to simply conclude that JIT harms the health of workers directly. As discussed above, the limitations of my research are intended to revolve around the constraints and pitfalls behind a JIT system. It does not address the advantages which in any case, will definitely be discussed by my fellow tutorial members in their term papers. The general consensus is that JIT brought into our world a new set of philosophy in operations management and provided many insights. More research will be needed to find out additional hidden flaws or vulnerabilities behind implementing a JIT system. In the foreseeable future, it is very likely that JIT will extend its arms beyond the manufacturing industry into the service industry. Most importantly, one must not treat JIT as a universal holy grail. To fully exploit JIT in reaping maximum benefits, it is imperative that individual organizations understand their firms nature, needs and its primary objectives instead of attempting to replicate past successes of other firms JIT systems. References [1] Edmunds AutoObserver last accessed 22 Oct 07 [2] Edmunds AutoObserver last accessed 15 Sep 07 [3] David Broyles, Jennifer

Beims, James Franko, & Michelle Bergman, Kansas State University, Just-In-Time Inventory Management Strategy & Lean Manufacturing, last accessed 15 Sep 07 [4] Wikipedia, last accessed 15 Sep 07 [5] Tony Polito, Kevin Watson, Just-inTime under Fire: The Five Major Constraints upon JIT Practices, Journal of American Academy of Business, Cambridge; Mar 06, Vol. 9, Num. 1 [6] The Darker Side of Lean: An Insiders Perspective on the Realities of the Toyota Production System, Darius Mehri, University of California-Berkeley, Academy of Management Perspective; May 06 [7] Keys, D.E. (Jan 1991). Five critical barriers to successful implementation of JIT and total quality control. Industrial Engineering, 23, 22-25. [8] Newman, G (1991). As just-in-time goes by Across the Board, 30(8), 7-8 [9] Norris, F. (1994, July 31). Inventories are rising for the right reasons. New York Times, pp. F1. [10] Ouchi, W. G. (1981). Theory Z: How American business can meet the Japanese challenge. Reading, Massachusetts: AddisonWesley [11] Wise, R. (1990, March 5). Why arent quality programs boosting industry profits? Electronic Business, 16, 38-39. [12] An example in point: Imagine getting a haircut in Japan. When the barber begins cutting, you notice he is making many mistakes. When he is finished, your hair looks terrible. Yet when the barber asks How is your haircut? you respond, It looks great. You refrain from criticizing or confronting the barber because it is bad behavior in Japan to embarrass someone in public. You leave the barbershop and swear you will never return again. In this case the tatemae was your response that the hair looks great when in fact, your true feeling, the honne, is that you are furious because it looks awful. [13] Kakuro Amasak (2007). Applying New JIT Toyotas global production strategy: Epoch-making innovation of the work environment. Robotics and Computer-Integrated Manufacturing 23 (2007) 285293. [14] Kaneko, J., Nojiri, W., The logistics of Just-in-Time between parts suppliers and car assemblers in Japan, J Transp. Geography. (2007), doi:10.1016/j.jtrangeo.2007.06.001 [15] Conti R., Angelis J., Cooper C., Faragher B., Gill C., The effects of lean production on worker job stress, International Journal of Operations & Production Management Vol. 26 No. 9, 2006.