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JIT Approaches to identifying improvement of process in operations

The origin of JIT approach has been traced to a Japanese company, Toyota motors reaction to the ‘Oil Shock’ of rising oil prices in the early 1970’s and the subsequent need for improved manufacturing efficiencies. (Slack et al, 2007),

This technique which applies mostly to repetitive manufacturing process (Tersine, R. J. 1985), with JIT techniques underpinning lean philosophy is beginning to find its application beyond the frontiers of repetitive processes to applicable areas of one –off processes, with its basic element remaining same in all its applications.

Current global trends; credit crunch, unstable oil prices and reality of competitive product and service delivery is forcing organizations to look inwards into their internal process with a view of identifying improvement process in their operations, which would make it survive in this current global market (Caroll, B.J. 2008), identification of such improvement processes is often followed by a means or technique to achieve it.

Different approaches to organizational improvement processes are most often being considered which includes; total overhauling of organizational process through business process re-engineering, which evaluates business functions within organizations, which though, develops variety of skills and specialization is being replaced by business process for more efficient service delivery and customer satisfaction, through product and process development (Peppard et al 1995), which proffers landslide business improvement through better internal organizational operations (Hammer et al 1993), total quality management, which often sets to provide a road map for organizations which are poised towards achieving optimum quality in their products (Kerzner, 1998), through a continuous improvement process, triggered by organization response to competition, customers demand, management decision, and situations which arises through settings up of new business or ventures within an existing organization to achieve long term business and common goals. (Oakland, 1989),

Also in search of improvement process, some organizations pursues proactive maintenance strategy, in form of preventive maintenance, which ensures optimum availability of production facilities (Cliffton, 1974), not only to maintain its original productive capacity, (Mann, 1983) , but also improving operational readiness and safety of all production facilities (Kelly, 1976), to guarantee profit for the business, as cost incurred to put machines and equipment back to operations in case of failure does not support a lean/jit approach, more that the quality of product would be affected if machines and production equipment breakdown more often, this would also impact on the continuous improvement drive of organization that want to move towards a lean/jit approach. ( Caroll, B.J. 2008) and operational downtime incurred

1.2 Lean/jit defined

In search of defining the lean concept, authors have taken a critically look at the elements of jit/lean, with (Slack, N., Chambers, S. & Johnson, R. 2007, Russell & Tailor 2006, Waters, C.D.J. 1995, and Tersine, R.J. 1985.) sharing inventory reduction, waste elimination and continuous improvement as key elements of jit/lean concept. Although, capacity utilization, involvement of everyone, flexibility and quality of products, with reduced time for production are also elements of lean/jit, but the later are not as widely shared among authors like the former. While, (Schonberger, R.J. 1982), stood out in defining element of jit/lean, seeing it only from the perspective of specified automation in a production line, this ensures reduction in lead time, work in progress, with just the right amount of feed inventories supplied and processes to finished goods. Either way which lean/jit is viewed, the underpinning factor is that it remains a continuous improvement strategy which organizations continually aim at.

Even though, lean/jit sets to reduce cost, eliminate waste and increase efficiency, school of thoughts have viewed it as another organizational fad, querying its application from the point that it is not different from other improvement processes such as total quality management, and it does not have internal mechanism to identify root cause of deficiency’s in organizational process, neither does it have an internal monitoring mechanism for processes measurement or performance evaluation (Naslund, D. 2008), nor does it have its application in change management or the frontiers of project management like the six sigma does; which is thought to give an holistic approach towards improvement methods, by taking a critical look at root problems in organizational process, incorporating all the elements mentioned, with other school of thought such as (Pettersen, J.2009) also downplaying the broad aspect of improvement areas lean sets to cover, claiming that the concept of total quality management (TQM), is stronger in delivering quality, involving everyone towards a continuous improvement, even though, while it seems to share a stronger view of convergence of concept with lean and TQM in that area of organizational systems, it was quick to add that TQM focuses more on internal structures and integration of functions within the organization than a lean approach, but nevertheless, applaud the lean concept in the supply chain angle, appreciating its synergy in internal production operations with involves the suppliers and end customer, with strong credence to the just in time (JIT) concept of lean.

1.3 Lean/JIT as inventory reduction tool.

Critics who may have found lean/JIT approach short of delivering a broad continuous improvement in organization might be forced to take another in-depth look towards its strategy, which makes it different from other improvement processes, underpinned in the approach to lean production is the jus in time (JIT) principle, which aims at reducing inventory to its barest minimum, with this, only right amount of inventory is supplied for production, with no much raw materials in the production or construction floor, with these, conscious effort would be made my workers to ensure that right quality of products is been meet or also right standard of construction is meet, this approach would continue to result in quality product and specification standard through in a continuous approach, efforts would also be redoubled to ensure that materials are supplied are of required quality, this would ensure standardization of quality checks for inventory’s, in that the inventory are sizeable and are of utmost need, with this the quality aspect of inventory would be effectively and consistently monitored which guarantees the quality of final products, and final construction or repairs meeting specification. Just in time practices ensures inventory reduction, which (Claycomb et al, 1999), asserts to it in guaranteeing overall improvement and performance of systems, but quickly add that not without the support, participation and commitment of everyone in the organization.

Excessive inventory holdings, which also lures organization to overproduction and consequent storage of this products, has being seen to tie down capitals spent on storage of this inventories and holdings cost, to include insurance and security cost (Pheng et al, 2001), of final products for these production organizations, hence the need to reduce on this holdings and products which are not of direct usage by this organizations have continued to be put into retrospect, with applicable strategy being develop to manage this situation, in the sense that while this inventories may not be of immediate direct usage, the urgent need of this inventories may arise at any point for usage in the production or manufacturing lines, also with urgent need for production arising through demand from customers. This scenario continues to present a challenge in managing overproduction and waiting time for customer, which are basic elements in waste elimination, which (Russell et al, 2006), put forward for as elements for lean/JIT success.

The concept towards the introduction of lean by most organizations is driven by the need to eliminate waste through reduction in inventories kept for production ( Perez et al, 2001), to ensure reduced production cost delivery and improvement in their internal process (Emiliani, 2000), putting in view satisfaction or meeting customers finished goods inventories (Claycomb et al, 1999) at any point in time

These lean/JIT approaches of managing inventories have been looked beyond the frontiers of production cycles to project construction and project delivery environment by, with its applicable tools in these sectors, while this elements could be easily managed in a closed and controlled production environment, its application in a non routine construction and project delivery environment, though poses a challenge, but continue to find its application in timely and efficient material delivery from supplier to site (Pheng et al, 2001).

Defining this application for a lean production and the lean strategy in a project and construction environment, to deliver the specific materials needed at the right time and quantity gives a lead towards ensuring a coordinated and effective logistic arrangement for supplies of the right amount of the materials that would be needed on site, to meet inventory needs as at when needed, as large inventory is seen as by Slack et al 2007, as ‘blanket of obscurity’

In as much as inventory may be seen as a ‘blanket of obscurity’ by Slack et al 2007, it is important to constantly be driven by the basics and nature of organizational operations in deciding if inventories should not be kept at all in an jit/lean environment, while some operations can survive without an inventory holding, or where activities can be suspended while spares are being awaited, due to logistics issue, some other operations, such as; supply of power or gas to Hospitals where life saving operations are constantly done, powering of turbines which generates power for elevators in large commercial business houses or seat of governments, facilities which provides energy to run power to TV and radio stations which runs twenty four (24) hours, facilities which runs constant power or gases to country defense systems, and crude oil export terminals which process and pumps crude oil from storage tanks to crude loading platforms on a twenty four (24) hour non-stop basis, to also includes remote oil platforms where drilling or other offshore activities such as well completion are being carried out cannot afford to be run without holding a sizeable amount of inventory.

While (Balle, M. and Regnier, A. 2007), may have discussed lean application in the context of its application in the healthcare sector, its fundamentals was key, and most applicable to not only in a manufacturing or production environment, but also in project construction circles, as it stressed the need in getting the core principles right towards a lean implementation, which (Caroll, B.J. 2008), thought could be achieved thorough study and understanding of organizational process, either (Balle, M. and Regnier, A. 2007 or Caroll, B.J. 2008) idea are aimed towards proper application of lean and the concept of just in time (JIT), so it would not turn to another ‘fad’, with no measurable improvement to its process (Naslund, D. 2008).

This idea and basis should seen as reference to the right amount of inventory approach in a lean/jit implementation, while waste reduction is an element of lean/jit, the consequence of logistic flow in and out of the organization should be weighed in trying to reduce inventory holding, as a waste reduction strategy, as it’s consequence might not be limited to only unavailability of critical spares as at when needed, but the cost associated with the inbound and outbound logistics (Svensson, G. 2003).

1.4 Lean/JIT and Supply Chain.

While organizational approach to lean/JIT, involves commitment from the employees, strong ties also is needed to be built around its suppliers, with a view of reducing multiple suppliers to limited number of suppliers whose operations could be encouraged to move close to the site of the manufacturer (Cheng et al, 1993), the challenge in an effective lean/JIT implementation lies not in reduction of inventory, but in the whole network of activity which spans through material/inventory supplies through the production or project site through to the distribution networks for inventory to ensure a coordinated logistic flow for the inventories (Schniederjans, et al 1999)

Dependable logistic becomes imperative to an assured timely delivery of inventories in a lean/JIT environment, more that it ensures a certainty of a supply chain network, through the incorporation of transportation and distribution of inventories with other operations of the organization(Slack, et al, 2004), but according to (Russell et al, 2006), uncertainty to flow of inventories occasioned by unexpected snag in logistic flow should be guided against with a buffer inventory.

While credence may be given this idea by Russel et al, 2006, in that it sets a basis for managing logistic flow as a key element of a supply chain network in manufacturing or operational areas which are remote in location, as thought was given to uncertainty, which includes lateness and incomplete orders which might arise in an inventory of materials delivery to manufacturing or project site, hence a buffer stock is necessary to create allowance for incomplete or lateness delivery of these inventory in a lean/JIT application, its idea in an JIT delivery system might be put into question from (Sanchez et al, 2001), viewing it strongly from the production angle, of making available the exact amount of inventory needed at a particular point in time when it is needed as a measure of integration between the manufacturer and the supplier, which is a not only an indicator in moving to a lean/jit application, but also an element which leads to continuous improvement, through managing of exact and reduced inventory’s needed for production at any given point in time.

1.5 Lean/JIT and Quality Management (TQM and Six Sigma).

As organizational continually search to achieve business improvement aimed at customer satisfaction and also to survive within competitive business environment, approaches to achieve this objective within organization are mostly diverse based on organizational focus and business goals.

While some organization are driven by identification of internal process shortcomings in their operations, and the need to improve on those operational and production shortcomings for customer satisfaction and business survival, achieved through a coordinated business plans and goals, other organization just jump into any of this new perceived continuous improvement strategy’s without taking a critical look at the peculiarity of their operations and the form of improvement that needs to be pursued, while with fairness to other organization they set on their improvement processes based on the fact that such process have recorded positive record in other organizational processes or operations, and not as means for managers and executives of the company to continue to gain relevance.

Lean/JIT, focuses on waste elimination and inventory reduction as an improvement process strategy, and any of the organizational internal processes which does not add value to the process is perceived as waste in a lean environment, the focus of this waste elimination and reduction in inventory is aimed at optimizing profit through cost reduction, the just in time (JIT), approach of making inventory available exactly when needed is the strategy used in achieving a lean concept, Slack et al 2004, frowns at holding of inventory, in that buffer stocks hides machine downtime, hence slows down improvement drives, this machine downtime would be constantly exposed in a lean/JIT settings, but application of this improvement strategy in contrast with other improvement strategy’s has been subject of analysis by (Andersson et al, 2006), querying the application of this improvement strategy in situations when customer demands is unstable and unpredictable, but (Naslund, D. 2008), acknowledged the ‘pull production’ focus of a JIT systems which provides a cutting edge mechanism to expose production problems which may be hidden in a an overloaded inventory approach, which according to (Claycomb et al, 1999), also exposes quality problems which buffer inventories might not be able to discover. While (Andersson et al, 2006) also sees the six sigma improvement process strategy as comprehensive in identifying root problems that needs improvement in organizational processes, through control measure for day to day activities, and providing necessary measures to eliminate waste, it further downplayed the effectiveness of the Just in time strategy of lean, seeing it as burden on the supply chain network of organization, however, it does not see lean/JIT as totally ineffective, but lay more credence to the principle if it could compliment a six-sigma approach in organizational operations, this complementary idea of six sigma with other improvements process was also supported by (Kumar, et al 2008), with is view of six sigma effectiveness and sustenance if complemented with other continuous improvement initiatives such as lean/JIT and total quality Management.

Total Quality Management sets to provide a roadmap for organizations which are poised towards achieving optimum quality in their products (Kerner, 1998), through a continuous improvement process, triggered by organization response to competition, customers demand, management decision, and situations which arises through settings up of new business or ventures within an existing organization to achieve long term business and common goals. (Oakland, 1989)

In the quest to deliver on Total Quality management, as a continuous improvement strategy, organizations has been forced to review entirely or part of its internal processes, in order to provide much needed standard for its products and services, through moving from a reactive quality system, such as inspection, which does little to finding the root cause of defective product, to more proactive approaches such as quality control and quality assurances, elementary data logging, introduction of approaches such as FMEA, supported with basic quality manuals, procedures, and quality documentations, which cut across all aspect of organizational process (Leonard et al, 2002), but in (Cassidy, 1996) opinion, activities under a total quality implementation should be streamlined to guarantee its effectiveness.

Wastages as become a menace in production circles, and organization which tends to move towards total quality systems are constantly developing strategies to reduce wastages in production, while most wastages have been directly linked to defects in production process, some have been linked to wastes due to deteriorated quality of raw materials for production through storages, this has forced many organizations to look at various ways directed at ensuring that right quantities of raw materials for production are purchased and also right amount of products produce to guard against reduction in the integrity of final products which may also be stored in the warehouse for too long time.. Continuous improvements approaches such as just –in –time, which aims at producing or operate to meet the exact requirements of customers without wastes (Oakland, 1993), among other processes such as kanban systems, which pulls parts and components through production systems only when they are needed becomes tested tools to mitigate against these wastages, these are frameworks considered for effective total quality implementation (Wiele, 1997). While (Andersson et al, 2006), considers lean and six sigma as concept and tools that supports the objectives of TQM. This idea supports the opinion that improvements strategy’s such as six sigma with lean/jit are covered under the framework of total quality management.

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1.5 Cost of improvement process

In as much as organization view such improvement initiatives as lean/jit, six sigma and TQM as value adding process which reduces wastages and guarantees cost reduction for customer satisfaction and business survival, there is added cost to implementing this initiatives. This added cost is on the overall viewed as the cost of quality.

As organizations moves to achieve total quality management in their internal production/operation, through continuous improvement, set to achieve quality production operations and services to satisfy customers demands and reduce wastages, through prevention of poor product quality and services. Cost of quality provides an overall cost framework for tracking not only cost associated with preventing defective product and services, such as inspection and testing, but cost that could be gained through implementing an effective total quality management which includes lean/jit , by continuous improvement to achieve best product quality, through adequate facilities installation, production planning, operations and control, delivery and service (Dale, 1994), added with reduction of wastages and inventory controls

As the effectiveness of continuous improvement activities which includes lean/JIT, could adequately be measured through effective cost reporting, (Sower et al, 2003), the challenge for many organizations is the unavailability of well structured internal approaches to track the cost associated with quality, to include cost of quality and cost of poor quality, but with bench mark structures to evaluate cost of quality evolving and its effectiveness being expresses in the language of money that everyone understands, organizations are fast moving to implement and adopt effective cost control measures in the light of its difficulty and complexities. (Evans et al, 2002).

1.6 Quality Cost Classification

What constitute quality cost within organizations as been a subject of discussion, while (Crosby, 1984) viewed it as the price associated with non-conformance; which involves prices when standard production or service procedures are not flowed which result in having to redo the work or warranty cost incurred due to late clearing of inventory in a lean/jit operations,with conformance price that includes cost of training, raw materials or product inspection spent to make things right. Dale, 1994, view it beyond quality assurance and laboratory cost to cost involved in introducing and sustaining continuous improvement as a perquisite to overall total quality management, this cost ends not only with cost associated with designing, implementing, operating and maintaining total quality, but also cost gained in terms of appraisal cost as a result of reducing failures and wastages in production process, while Crosby, 1995 viewed it further as a tool being used mischievously by many chief executives for measuring performance through measuring their production capabilities by reduction in cost of quality to present a scenario that the company is faring well, though called the attention of management in using quality cost data’s to review production process to obtain good quality, an track quality improvement over time (Evans et al) , capped with Deming 1986, critically expressing cost associated with machine downtime, an element frowned at in a lean/jit settings. The underpinning factor in trying to evaluate cost of quality lies in the effective or ineffective approach to total quality management principles.

1.7. Total Quality Management and Cost of Quality.

The concept of total quality management which is geared towards overall effectiveness of an organizational process to cut across function, with management commitment and involvement of everyone underpinning continuous improvement process aimed at overall product or service quality, in meeting these objectives through the content of Deming’s 14 points to TQM (Omachonu et al 2004; Evans et al 2005) is an approach defined to eliminate the need for inspection by building in quality into a production or service operations, and also instituting training on the job to have a workforce which will continue to create consistent purpose towards product and service improvement, which will in turn reduce or eliminate cost spent to prevent poor quality in product or service, by also improving on a constant basis the system of production and service (Dale 1994), cost associated with measuring, evaluating, or auditing products or service to ensure conformance to quality standards would also be considerably reduced. The source of product raw materials is also essential to good product quality, Deming’s principle also emphasizes the need to move towards a single supplier, for any one item on a long term, this helps build relationship and hence trust to the standard or quality of product raw materials supplied, this in turn would guarantee final product conforming to customer needs, prior to delivery or shipment or cost associated with products not conforming with customer requirements after delivery (Sower et al, 2003).

These total quality initiatives towards cost of quality have shaped the development of cost of quality into four categories to include according to (Feigenbaum, A 1991; Sower et al, 2003; Evans et al, 2005) to include:

1. Prevention cost: cost of all activities specifically designed to prevent poor quality in products or service, to include cost spent on analyzing production process and implementing process control plans with the cost expended on information system to develop data requirements and measurements, it also includes training and general management cost

2. Appraisal cost: which is the cost associated with measuring, evaluating or auditing products or services to assure conformance to quality standards and performance requirements, it includes test and inspection cost, instrument maintenance and process measurement and control cost

3. Internal failure cost: cost of services not conforming to requirements or customer needs i.e cost of scraps, reworking, re-inspection and re-design prior to product delivery, downgrading cost and process failure cost.

4. External failure cost: cost resulting from products or services not conforming to requirements or customer needs after delivery or shipment of product, i.e cost of claims against warranty and replacements, with product liability cost, resulting from legal actions and settlement

1.8. Implementing Cost of Quality

Quality issues which result in quality cost is not a sole burden of the quality department, as most of the quality problems originated from the process units cut across functions within the organization, though the quality department takes a lead in driving a positive attitude towards achieving a simplified approach to evaluating quality through conformance, report result, and reduce on wastages and cost which evolves from not doing jobs right at the first time (Evans et al, 2005)

As the achievement of TQM is hinged not only in satisfying customer’s requirement through continuous improvement process, but also in achieving reduced cost of quality (Thompson, V. et al), this associated cost of quality would have been unnecessary if system have been designed to eliminate quality problems, but as system remains imperfect, the need to track quality cost and its effect within organization with a view of reducing the cost to the barest minimum becomes imperative. But this will not be achieved if organizations do not define what constitute cost of quality. If systems were so designed properly with adequate TQM approach to eliminate quality problems unnecessary cost associated with internal and external failures which is cost of poor quality would have been saved, this gives a view that cost of quality is not only cost incurred as a result of poor quality, but also cost incurred in the product prevention and appraisal (Sower et al, 2003), with cost that would have been saved if there were no non conformances.

Most organizations could not identify areas that need urgent improvement in their operations due to their inability to generate quality cost as a result of lack of required tool necessary to measure it, or the complexity and difficulty many organization encounter when trying to do so.

1.9. Calculating Cost of Quality Measurement

Decision making process in organizations which includes continuous improvement initiatives are largely supported using cost of quality, but arguments have always being triggered by technocrats and organizational managers in trying to define what really constitute quality cost in order to aid the calculation, although, broadly quality cost has being defined to be the sum of conformance plus the sum of non-conformance (Thompson, V. et al, 2005), but the constituents of this cost which includes prevention, appraisal, internal and external failure has also being viewed by experts, not as independent cost of quality but as associated cost to aid improvement actions to meet customers expectation through a holistic total quality management approach. The concept of calculating the cost of quality has also being indirectly arrived at by organizations which actually aims at measuring revenues increase as a result of customer satisfaction in its products, (Sower et al, 2003) using quality cost associated in improvement of its products as a basis, this tracks the revenue values as a form of return on investment ( ROI ) for such organizations.

It is also being viewed by other experts that calculating this cost is a luxury, and that this cost could actually be free if organizations channel overall quality management system, which would help in reducing product defects to the barest minimum, to result in high product quality.

Cost drivers within organization includes other cost outside cost of quality, and as an accounting need, not only for cost accounting for external reporting, but for cost management within the organization, which underpins the need to manage cost in order to balance resource needs for other organizational objectives outside quality, such a marketing, research for new products, reduced development cycle time (Thompson, V. et al), to be met. This resource management need often time create a need for Managers who though want to implement quality in totality, but have to determine trade-off points between the level of conformance and non-conformance.

Cost of conformance and non-conformance is being used as Croby’s model to define the cost of quality among other models, but the Prevention-Appraisal- Failure (P-A-F) classification remains the mostly used model to derive the cost of quality, with the overall objective to minimize cost of quality.

Lack of understanding of the concept and principle of quality costing within the management team, combined with lack of management support of quality costing and inadequate information as regards to how much as being expended on quality costing continues to be a potential pitfalls for many organizations in adopting cost of quality. (Tiwari et al, 2007; Dale et al 1996; Thompson, V. et al, 2005), among other factors such as lack of adequate use of system available software’s accounting process, with lack of knowledge to track benefits to cost of quality with the fact that company is making presently making profit, hence no immediate gains of the need for this by some organizations.

The potential problems militating against the holistic implementation of cost of quality as a vital component of TQM, could be overcome with training and education of both management and staff in quality principles combined with the knowledge of change management within the management group, with this training the organizational workforce will be able to identify quality related issues, and translate into a business language with value of currency’s attached to it, with modern information systems principle attached to it, quality cost could be easily tracked, with the increase in overall organizational skill to better understand the concept , implementation and measure of cost of quality, appreciable amount would be saved and translated in monetary value.( Sower et al, 2003; Thompson, V. et al, 2005), the enormous advantages of implementing cost of quality cannot be overemphasized, with the measurement of implementing COQ, in monetary terms, management would be attracted based on what could be saved in monetary terms if COQ is implemented, and show overall commitment to it, as any other vital quality activities or otherwise that can impact and improve on company’s performance (Besterfield, D.H 2004; Bounds, G 1994;), which would also support budget process and control, and track performance over time.

2.0 Business Process Re-engineering

The need by organizations and businesses to improve on their internal process performance in this challenging business environment for more efficient and timely service delivery calls for new and efficient business innovations and approaches.

Business process reengineering looks at ways in which business functions within an organization, though as it may, develop different skills and specialization is being replaced with new business process, which focuses on more time efficient service delivery for breakthrough of business operations and customer satisfaction (Peppard, P. et al 1993; Rowland, P.et al 1995). BPR, also challenges the functional way of business processes and proffers ways of better operations through a landslide business improvement (Hammer, M. et al 1995).

Implementing business process reengineering as an improvement process initiative within businesses and organizations as called for or raise question by key players in such organization, such questions relates to that fact that if BPR is not such a reframed versions of another process techniques such as organizations and methods (O&M), total quality management (TQM), and just in time (JIT) ( Burke, G. et al 1995), but this thinking might as being proved wrong as BPR seeks to generate ‘ ideal process’’ from a existing but irregular process ( Peppard, J. et al 1995).

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