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Just-In-Time is a philosophy that is aimed at reducing the inventory, wastes and other carrying cost and the techniques adopted to achieve this in turn helps in maximizing the efficiency and productivity. There are prerequisites to the successful implementation of Just-In-Time and the organizations need to follow certain principles like Kanban, standardization, continuous flow etc. to be able to implement JIT successfully. Just-In-Time came into existence in United States but was later adopted by Taiichi Ohno of Toyota who gave it immense popularity. JIT strategy was enhanced and modified with introduction of Autonomation and SMED to be able to address the need of the company. Other global companies like Dell, McDonalds' were also hugely profited by the use of the Just-In-Time philosophy. JIT has been applied in Indian companies like Lukas TVS, Gontermann-Peipers Ind Ltd, Volkswagen India, Tata Motors and others but there is a scope for lot more customization to suit the Indian context. JIT has been extensively applied and proven successful for the automotive and other manufacturing sectors. There is tremendous scope to apply JIT principles in the other sectors like banking, agriculture, retail etc.
Just in time(JIT) is a an approach and set of activities designed to achieve high levels of efficiency and involving minimum inventories of raw material, finished goods and work in process. In other words, this philosophy aims at delivering the right product in the required quantity at the right time at minimum cost. It is a pull production system. This approach aims at continual reduction of waste and variance.
JIT is a management philosophy and it has been practiced since 1700's. After the Second World War, Toyota needed to overtake total production of American counterparts in order to survive. American firms produced approximately nine times that of Japanese companies. Ohno, then the president of Toyota studied American system of manufacturing and found out that it could not be applied in Toyota as the demand for automobiles in local markets was low. Accordingly he devised a new system of eliminating "waste" from production system. He identified several aspects, like transportation, overproduction, inventory, defects, etc where waste could be avoided. They also changed the layout of their plants for smoother flow during production. C:\Users\Aditya\Desktop\taiichi-ohno.jpg
Ohno introduced Kanban system. It is essentially information about the work to be done. It was basically a rectangular card which had information about the work that was needed to be performed by a worker. All movement throughout the company was controlled by it. Kanban was completely instituted in the production system of the company ten years after it was introduced. This whole process involved many hiccups and mistakes, but they learnt from those mistakes. It took nearly 10 years, but due to Toyota's high and more efficient production, the west started to take notice. The positive results were there for everyone to see.
Hence JIT is also referred as "Toyota Production System" and Taiichi Ohno is generally referred to as the father of JIT.
1.2 JIT and the world
In today's world of globalization, the competition in any sector is very high. So JIT initiatives help companies to gain that extra edge with respect to its competitors. JIT reviews and revamps every operation of the company which helps in the better working of a company. It involves planning from executives, workers, inventory etc. In other words it takes into account the operations of various departments in a company.
1.3 Just-In-Time Methodology:
1.3.1 Prerequisites of applying JIT in a company:
Strategic manufacturing plan
1.3.2 Goals of JIT
Various goals targeted by JIT are as given below:
Help the company to have an edge over its competitors.
It aims at minimizing defects occurring during production.
Attainment of customer satisfaction is one of its prime objectives.
It views stock inventory as waste, hence it aims at reducing this aspect in a production system.
This philosophy aims at reducing material handling during production.
Minimum setup time.
Techniques to minimize lead time are brain stormed.
A JIT applied production system should be less vulnerable to breakdowns.
Paperwork involved in the whole process should be reduced to minimum.
Produce products when they are needed and rate at which they are needed.
JIT aims at exposing hidden causes of inventory keeping. According to this philosophy, inventory is considered as waste and it incurs loss instead of adding value, as opposed to the notion that of traditional accounting concepts.
1.3.3 Elements of Just-In-Time Systems
People involvement: Applying JIT in a production system requires combined and committed efforts from each and every person who is directly or indirectly involved with the company. A successful institution of JIT is characterized by degree of people involvement.
Plant layout: A layout of a factory is one of the biggest factors affecting the efficiency of JIT, when applied to an industry.
Standardisation: There has to be standardisation in the components to be able to group activities.
Minimum volatility: There has to be minimum volatility in the cost of inputs and outputs. Also the qualities of the inputs are not expected to decrease over time. If there is cost increase and quality decrease, it might more than compensate for the reduction in expenditure on inventory management.
1.3.4 Principles of JIT:
One piece flow: It is also known as Single piece flow or continuous flow. In short it aims at moving the parts from step to step such that there is no wastage in between. It is best suited for a cellular layout where all necessary machines are located in a U-shaped cell in required sequence. This system is mainly used for low mix, high volume manufacturing environments.
Machines in order of process: Machines should be located in such a way that it minimizes material handling. Also the machines should be placed sequentially with respect to the processes the input undergoes.
Small and inexpensive equipments: The whole point of JIT is to maximize productivity and thus reduce overall cost.
Multi process handling workers: This principles aims at combining various processes so that it minimizes material handling.
Easy moving operations: Simple techniques can be used like slides so that it decreases on overall cost of the operations.
Definition of standard operations: This principle helps in attaining high quality as it predefines standard way of performing operations. This results in decrease in probability of defect during processing.
Rate at which customer buys a product: Inventory is ordered, dispatched and handled as and when it is required. This results in minimum stock in the cycle.
Use of KANBAN system: This technique was invented by Toyota motor company. It aims at controlling all the operations that are performed by use of signalling cards (Kanban).It helps in quick notification and reduces delay and ambiguity in the production line.
Single minute exchange of dies
Statistical process control
Use of standard containers
Doable schedule with adequate visibility
Tools where they are needed.
Total productive maintenance
Following diagrams shows how to go about implementing JIT in a company
1.3.6 Misconceptions of JIT:
JIT is a Japanese technique.
Inventory is a major part while applying this philosophy, but it is not the only aspect in JIT. If JIT in applied as inventory control alone, chances are that it might fail.
JIT systems are not just quality control programs. It is more of an operating philosophy.
1.3.7 Advantages of JIT:
Low ordering cost for inventory.
Better output quality.
Reduction in handling cost of material.
Efficient space utilisation.
Reduction in losses due to obsolescence of available material.
Quality becomes responsibility of the worker and not just the quality inspector.
Smoother production flow.
Easy to trace defects.
Higher worker participation.
Workforce becomes more skilled in the process.
Vendor development as he gets long and guaranteed contracts at a steady price.
Quality of material sent by vendor is improved.
Sales cost savings.
1.3.8 Limitations of JIT:
Implementation JIT will be expensive initially.
It takes a lot of time to give results.
Chances of losses in the process.
It requires continuous effort and lapse in the intensity can harm the process of implementation.
Its implementation varies for every organisation. There is no fixed way of implementing it.
Its success is also varied from industry to industry.
Companies relying on safety stock can have a problem in implementing this methodology.
It adds pressure on workers.
Due to standardization of processes, workers are not able to find out of the box of solutions for a problem.
JIT implementation also depends on management-workers relations. The two parties being at loggerheads don't help the cause.
JIT involves change. It has been found out that normally people are resistant to change.
Employees need to commit to this philosophy in order for it to be successful.
JIT is best suited to only medium and high volume of production.
1.4 Application of JIT in Industry:
Hospital Industry: With the application of JIT, hospitals are reducing the inventory stock and are placing orders at a more regular interval. Nurses were scheduled in permanent shifts to improve the nursing quality.
Retail Industry: With the help of Information Technology, sales information is relayed to the vendors instantly. This helps in better monitoring of the stock level and reordering at the threshold time. It helps in reducing the inventory stock pile up and also at the same time enable a quick response to a change in demand.Wal-Mart has shown good profits after the implementation of JIT.
Information Technology Industry: The IT industry has started following the Just in Time to improve the human resource utilisation.The traditional practice used to be to hire resources in advance in the anticipation of future projects. Now the trend is to hire resources as and when the projects are in hand. TCS and Wipro are adopting JIT to reduce the manpower utilization.
Manufacturing Industry: The objective is to maximize the manufacturing capacity and at the same time maintain high quality. This is done by maintaining limited number of high quality suppliers but ensuring the relationship is very reliable between the customer and supplier. The next step is to optimize each step in production line and to make parts with no defects. Also the production should be in line with the demands of the consumers.
Global Scenario and Trends
2.1 The Toyota Way
Henry Ford applied JIT in Ford to manage the inventory in the early years of 20th Century. But the basic elements of JIT were developed by Toyota in 1950's. The Chief Engineer Taiichi Onho of Toyota Manufacturing Company examined accounting assumptions and realized that another method named JIT was possible. It was mainly made with an aim of achieving competitive advantage post World War II period in Japan.
The automobile industry in Japan faced a serious crisis of existence after World War II and companies like Toyota were in constant try to benchmark their thriving American Counterparts. The productivity of American counterparts was 9 times higher than that of the Japanese counterparts.
So, Taiichi Onho wanted to frame a strategy that could help them achieve their aim. But, there were serious challenges on their way.
American Car manufacturers had a practice of producing a LOT or BATCH of a model or component before switching over to a new model or component. But, this was not suited for Japanese Car manufacturers where manufacturing in small quantities was required due to a smaller market.
Contrary to the American Car Industry, low demand in Japan led to price resistance. So, higher profits could be realized only by reducing the manufacturing costs.
So, to overcome the above 2 challenges, Taiichi could identify that the waste that is generated can be reutilized. The categories of waste identified were:-
Inventory or waste associated with keeping dead stock
Time spent by workers waiting for materials to appear in the assembly line
Time spend on transportation or movement
Workers spending more time than necessary processing an item
Waste associated with defective items
So, this is when JIT strategy was identified mainly to eliminate the wastes and make them responsible for higher production and profits.
2.1.3 How Toyota Implemented JIT:
Preliminary Stage: - Toyota JIT manufacturing strategy mainly concentrated on changing factory layout to eliminate transporting items to different machines but rather arrange machines at strategic locations which can make the items move smoothly from one machine to another. This idea encouraged the introduction of KanBan which is also understood as the information on what to do that can control all movements throughout the factory.
The two types of KanBan in Toyota are:
Production KanBan to detail the items to be produced
Withdrawal KanBan that marked the withdrawal of the products from the preceding steps.
Implementation of JIT: Autonomation
The origin of KanBan effected precise specifications of item quantities without any defect. To ensure that no defective component enter the assembly line, Toyota introduced Autonomation or automating the production system and allowing human intervention only in the matter of higher defects. According to this system, it will detect the defect automatically and would not proceed ahead till the defect is fixed. Its implementation made the whole line stop till the problem gets solved. In the first week, almost every hour, the line used to stop, but within 6 months to make the line stop just a few in month and that too without any economic impact on the company.
Implementation of JIT: SMED
The major initiative taken by Toyota as a part of JIT was re-engineering machines and processes that could reduce the set up time required before processing new items. Toyota engineers also identified that the critical problems and delays were made in changing dyes used for body parts. This problem was adjusted by using crowbars and wrenches. This made Toyota launch "The Single Minute Exchange of Die" (SMED), which easily substituted measurements for adjustments and controlling the quality of stampings through a written recipe. This has drastically reduced the dye changing time to just half an hour and facilitated economic lot sizes of even 1 vehicle. Carrying the process into storage parts made it store as little as 1 part in each assembly station. The disappearance of part was the signal to produce or order the replacement.
Few Other implementations of JIT:
Some of the other changes were as simple as standardized the hole sizes used to hang parts. The number and types of fasteners were also reduced to keep the assembly steps and tools standard.
Material flow between two people was also designed strategically. Here the 2 people worked sequentially in the process and the space between them was just a single square. An empty square instructed the request by the customer for the supplier to move 1 part forward. A part in the square served as a signal not to send any part. This binary 'send -- don't send' signal also provided a built-in-test as to whether the supplier was working faster or slower than what his immediate customer actually needed.
2.1.4 Challenges Faced:
The major challenges included are:
Multi-skilling the work force who could operate multiple machines based on such flows.
Redesigning every part of the vehicle to eliminate tolerance as assembly lines were not given choices of which parts to use and every part had to fit perfectly.
Testing and Training the suppliers for quality assurance and delivery in Time.
The implementation of JIT met with a remarkable success at Toyota. The sale of work in progress inventory generated huge cash, response time decreased to just 1 day and customer satisfaction increased due to increase in product quality and most of the vehicles built to order, so less chances of vehicles not to be sold. This also created huge equity returns of the company.
Dell has used JIT to assist its manufacturing process to a great extent. Dell has used a different approach in which it has leveraged its suppliers to achieve the JIT goal. Dell is able to provide their customers' short lead times by making the suppliers carry the inventory ant not themselves. By this they can simply assemble the components so that the products can reach the customers quickly.
Effects of JIT on Dell's performance:
First we need to see why low inventory would have such a great effect on Dell's performance. The reason behind this is that computers depreciate at a very high rate."The longer you keep it, the faster it deteriorates, you can literally see the stuff rot", Kevin Rollins said it in an interview with Fast Company. Computer components depreciate anywhere between half to full point a week. That is the reason cutting inventory is a financial imperative. The inventory turnover (COGS/Value of Inventory) for Dell for 10 years.
Dell's Inventory Turnover Data
During 1993 Dell was losing around 10% per computer made due to depreciation, by 2001 it reduced to 1%.And from there onwards Dell has continued to lower its inventory.
McDonalds uses JIT system in which it doesn't begin to cook (reheat and assemble) its orders until the order is being placed. Initially it used to preheat a batch of hamburgers and let them be under heat lamps for as long as possible. And eventually the burgers that were not sold were discarded. A special order had to be made to get a fresh burger during the old system. McDonalds has now developed new burger making technology which assists in making burgers faster. The inventory of the finished product is kept for as short time as possible and they also see to it that the customer gets the product as quickly as possible.
Benefits for McDonalds:
McDonalds has used JIT in such a way that helps them achieve improved quality and that to at lower costs.
Improved Quality: They have an advantage when it comes to freshness and taste of the product. The other advantages include firstly, McDonalds is that they don't fear having a special order, as they have an experience of making burgers as and when ordered. McDonald's ability to actually produce faster helps them achieve customer satisfaction. Without this ability, McDonalds ordering costs would be very high as they would have to bare the loss of customers tired of waiting for long durations. Second, McDonalds can adapt to demands in a better and a faster way because of JIT systems. As the preparation time is very low McDonalds doesn't need to worry about their inventories falling short of the demand.
Lower Costs: Spoilage costs for burger parts are fairly high and lead to high holding costs. This is the reason a burger has a short shelf life and needs to be sold within fifteen minutes or so. But now because of its ability to decrease the inventory and serve the customer faster has lead to significant decrease in the costs.
Just In Time in Indian Scenario:
The lifestyle, values and beliefs that are influenced by traditions in societies have a direct impact on the work culture along with technological forces. The JIT methodology imposes requisites that are not necessarily aligned with this work culture. Managerial styles and practices vary from country to country depending on their cultural norms. Thus, JIT implementation and its success depend greatly on work culture. Taking this thought forward, the implementation of JIT in India would be different from its implementation in its western counterparts. Hence, using a generic implementation strategy might lead to issues not faced in other parts of the world.
The last decade has witnessed a great deal of growth in the Indian automobile sector. The Indian Automobile industry is the seventh largest in the world, the fourth largest exporter in Asia and has produced over 2.6 million units in 2009.
JIT methodology has been widely implemented in the Indian enterprises, especially in Indian automobile and manufacturing companies.
Some of the Indian companies which are using JIT techniques include Lukas TVS, Gontermann-Peipers Ind Ltd, Volkswagen India, Tata Motors, and IFB etc.
Lucas-TVS are a major player in Auto Electricals in India today with almost fifty years experience in design and manufacturing. 80% of vehicles rolled out daily are fitted with Lucas-TVS products. In order to deliver products at low cost and high quality, Lucas-TVS employed techniques like Total Quality Management (TQM) and Quality Assurance methods like Advanced Product Quality Planning, Statistical Process Control Techniques, Effective Tool Management System, and Process Capability Improvements.
Stage I (1963-85):
Traditional (Batch mode, functionally organized) manufacturing methods.
Stage II (1985-95):
Introduction of cellular (Lean) manufacturing - Formation of cells and product units.
Stage III (1995-99):
Introduction of single piece flow manufacturing.
TQM Initiatives QS 9000
Stage IV (1999-2004):
Advanced JIT - Chaku Chaku. Large Cells
Challenging Deming Application Prize by 2004.
Stage V (2005 onwards):
Advanced JIT, Mixed Model Line, Jidoka.
Challenging Japanese Quality medal by 2009.
In its pursuit of technological as well as methodological excellence, Lucas-TVS has adopted the Cellular Manufacturing System and Just in Time and also helped suppliers to adopt the same. With the implementation of this system, components from suppliers are delivered to it on a pull basis using FIFO concept and assisted by simple visual controls and using KANBAN system, supplied to the line on an hourly basis.
Following are the JIT related International awards won by the company:
JIT Innovation Award by JIT Management Lab, Tokyo (2001 & 2004)
JIT Grand Prix Award by JIT Management Lab, Tokyo (2002, 2005 & 2006)
Deming Application Prize 2004
3.2 Gontermann-Peipers India Limited:
GPI has created a niche in the Cast Roll and Forge Roll manufacturing sector. It is the only company in India to achieve TPM Level I. With a view to enhance the operational efficiency of the employees at all levels extensive training programs such as Six Sigma, Total Productive Maintenance, Just In Time, Performance Management System have been infused into the HR policies related to training in the Company.
GPI, using techniques such as tight control on cost, better realization and operating efficiency etc has been able to maintain an enviable bottom line. To achieve the maximum performance efficiency, it has adopted modern management techniques like Just-In-Time, Total Productive Maintenance, and Activity Based Costing in consultation with leading consultants in the mentioned fields.
3.3 Volkswagen India:
Volkswagen India is headquartered in Pune and recently launched its $700 million manufacturing plant for Polo in Chakkan. Volkswagen acknowledges India as a important hub for manufacturing and expects India to be in the top five auto markets by 2016. The challenge in India is the price sensitivity and the dependent need to keep operational costs low. Using techniques like Just in Time, the company plans to control quality and technological inflow by following a global sourcing model in the Indian context.
3.4 Learning and Recommendation:
JIT is beneficial in reducing operational inefficiencies, leveraging on effectiveness and quality processes in organizations. At the same time, some of its key elements are difficult to implement in the present Indian production settings. In order to maximize the usefulness of JIT, Indian enterprises need to modify their operational procedures accordingly. Before entering into JIT based manufacturing, companies need to train their employees in order to establish an organizational culture, set up new procedures for supply chain management, study of operations in order to identify possible avenues for standardizing, simplifying, automating and reengineering of processes and procedures in operations. Failure to meet these prerequisites will lead to problems with human resources and on the supplier end. Although it has been proved that JIT has its benefits in the Indian scenario, it still has ample scope of being customized for the country to reap full dividends.
Future Trend and Opportunity
The challenge faced by the most of the companies today is to get the visibility of the type of work which is coming down the pike, so that they can keep their internal resources trained and prepare for the work so that they are the experts when they do show up.
They best way to manage and automate the intellectuals who support the professional services lifecycle is JIT methodology to keep the skills in balance with the innumerable project requirements and obligations. With this we can, at that right moment, bring on a new employee, go to a third-party contractor to fulfill that demand, or we give ourselves enough advanced notice to cross-train our existing resources on new technologies, new products, so that we can work across our portfolio and not just focus on one particular area.
JIT techniques have migrated to non-manufacturing environments. It has successfully moved from factory floor to other environments. We can increase the adoption of JIT techniques within the service sector. This can be done by modifying the JIT terminologies to encompass service processes more naturally, by emphasizing the applicability of JIT techniques to service operations in operations management courses, by developing a framework for the study of JIT in services, by applying manufacturing oriented studies to services and by developing appropriate models for analyzing cost and benefits to service operations for JIT implementation.
Agriculture Industry: Agriculture industry needs a new mode of thinking. Traditional methods have created a lot of wastes and is not so efficient. According to some researches more than 20% of agricultural products go waste before it reaches the end consumer in few countries. This offers JIT a good opportunity to explore the possibilities of implementing the JIT concepts in this area. Even if we can reduce this waste by half we will be reducing the number of people dying due to starvation.
Just in time manufacturing may not be possible in the field of agriculture. But the distribution, handling methods etc can be improved with the techniques like JIT and kaizen. By educating people and using simple technology waste can be reduced dramatically. Effectively connecting the manufacturers, distributors, wholesalers and retailers up to the customer is very necessary to improve the effectiveness of the process.
Banking Industry: Banks can use JIT to get rid of lots of unnecessary files, forms, supplies, and filing cabinets.
Retail Industry: Also, JIT can be used in retail industry by monitoring the sales pattern weekly and order garments just before the stores are likely to need them. This way they can avoid the excess inventory. Also, to gain cost leadership in the market, big players can minimize costs by developing supply chain infrastructure. Warehouses, distribution centers and transportation will modernize in the form of Enterprise Resource Planning (ERP), Just in Time (JIT) and IT automation.