Usability Of Jit In Industries Jit In Business Accounting Essay

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    JIT manufacturing can be traced back to the late 1700's (Just In Time, Toyota).  Eli Whitney contributed his concept of interchangeable parts to the idea of JIT manufacturing in 1799.  This concept was developed when Whitney took a contract from the United States Army to manufacture 10,000 muskets at the low price of $13.40 each (Just In Time, Toyota).  Over the next several years manufactures overall focused on the development of individual technologies.  Through these years few people were concerned with the processes that each product went through during production (Just In Time, Toyota). 

    Early industrial engineers in 1890 began to be concerned with individual work methods, applying science to management, and all work elements.  Frederick Taylor contributed the idea of standardized work (Just In Time, Toyota).  Frank Gilbert conducted a motion study, which led to the development of process charting and organized labor tasks (Just In Time, Toyota). 

    In 1914 Henry Ford introduced the idea of the moving assembly line to the world while producing his Model-T Ford, this revolutionized manufacturing (Henry Ford, n.d.).  By 1916, Ford began to implement the idea of JIT manufacturing (Wren, 1999). This reduced the inventory needed from $60 million to $20 million dollars to produce the same number of vehicles (Wren, 1999). 

    The present idea of JIT manufacturing can be traced to Toyota motor company in Japan.  However, to begin use of JIT manufacturing in Japan, they first researched American production methods focusing on Ford's practices (Just In Time, Toyota).  In Japan JIT manufacturing is referred to as the Toyota Production System (Beasley, J. E., n.d.).  The realization for the new system came after World War II when the Japanese automotive manufactures knew they were far behind the American motor companies. The president of Toyota made a comment about the gap, "Catch up with America in three years, otherwise the automobile industry of Japan will not survive." (Beasley, J. E., n.d.) JIT manufacturing is a result of limited demand, space, and resources in Japan compared to America.  By assessing and solving these problems Toyota was able to increase efficiency and keep up with American auto manufacturing.  Ten years after the first introduction of the new production system Toyota successfully implemented this technique across the company.  This began started to be implemented into the western world during the late 1970's to early 1980's.

Philosophy

The philosophy of JIT is simple that inventory is waste. JIT inventory system expose hidden causes of inventory keeping, and are therefore not a simple solution for a company to adopt. The company must follow an array of new methods to manage the consequences of the change. The ideas in this way of working come from many different disciplines including statistics, industrial engineering, production management, and behavioral science. The JIT inventory philosophy defines how inventory is viewed and how it relates to management.

Inventory is seen as incurring costs, or waste, instead of adding and storing value, contrary to traditional accounting. This does not mean to say JIT is implemented without an awareness that removing inventory exposes pre-existing manufacturing issues. This way of working encourages businesses to eliminate inventory that does not compensate for manufacturing process issues, and to constantly improve those processes to require less inventory. Secondly, allowing any stock habituates management to stock keeping. Management may be tempted to keep stock to hide production problems. These problems include backups at work centers, machine reliability, process variability, lack of flexibility of employees and equipment, and inadequate capacity.

In short JIT focus is having "the right material, at the right time, at the right place, and in the exact amount", without the safety net of inventory. The JIT system has broad implications for implementers.

Keys to Implementation and Integration of JIT

    Just-in Time manufacturing is difficult to setup because each company needs to personalize for their type of company to fit their specific needs.  Although many companies seek help from consultant firms for the difficult task ahead, there are many key points that they they can address themselves (Just-In-Time Manufacturing).  Changing over the current output production in the companies factories to limited or constant quantity is a good start in the process to determine exactly how many resources are going into making a certain amount of products.  setup time is an issue that each company can look to improve its efficiency.  A good rule is to be able to change the setup in a single digit time frame.  Schedule meetings on a regular basis with the workers to gather information on problems as well as a possible possible solutions, and other suggestions (Beasley, J. E., n.d.).  This will make the workers feel involved in the implementation, and may result in a positive attitude about the change over.  This could mean redesigning several areas such as the product or the process itself.  Once a reduced setup time is achieve the system now has the ability to more efficiently produce smaller batches of products.  However, this will require deliveries of materials to be more often.  Reducing time in between the transportation of the individual parts can also improve the efficiency.  To accomplish this, work stations can be moved closer together. As well as the amount of time a part is waiting to be processed at an individual station can be lowered.  Finding  a supplier closer to the factory or convincing one to relocate closer will also reduce lead time.  Using down time is also another way to help with productivity and efficiency.  While a worker or machine is waiting for other parts of the system to be used maintenance can be performed on the machinery.  This makes the most of the workers time and can help to prevent future breakdowns do to lack of maintenance.  Provide the workers with more responsibilities and training.  This can include training on several machines, ability to maintain the machines, and perform correct inspection  This will make the the companies work force more versatile and can help with issues of absences.  Although the kanban system is not required in a JIT system it is a good organizational tool to help eliminate misunderstandings and increase communication.  These points are things the company can control and improve to help the successful integration of the JIT system.

Benefits of implementing JIT

Main benefits of JIT are:

Reduced setup time.

The flow of goods from warehouse to shelves improves.

Employees with multiple skills are used more efficiently.

Production scheduling and work hour consistency synchronized with demand.

Increased emphasis on supplier relationships.

Supplies come in at regular intervals throughout the production day.

Problems within JIT

Just in time operation leaves suppliers and downstream consumers open to supply shocks and large supply or demand changes. For internal reasons, Ohno saw this as a feature rather than a bug. He used an analogy of lowering the water level in a river to expose the rocks to explain how removing inventory showed where production flow was interrupted. Once barriers were exposed, they could be removed. Since one of the main barriers was rework, lowering inventory forced each shop to improve its own quality or cause a holdup downstream. A key tool to manage this weakness is production levelling to remove these variations. Just-in-time is a means to improving performance of the system, not an end.

Very low stock levels means shipments of the same part can come in several times per day. This means Toyota is especially susceptible to flow interruption. For that reason, Toyota uses two suppliers for most assemblies. As noted in Liker (2003), there was an exception to this rule that put the entire company at risk because of the 1997 Aisin fire. However, since Toyota also makes a point of maintaining high quality relations with its entire supplier network, several other suppliers immediately took up production of the Aisin-built parts by using existing capability and documentation. Thus, a strong, long-term relationship with a few suppliers is better than short-term, price-based relationships with many competing suppliers. Toyota uses this long-term relationship to send Toyota staff to help suppliers improve their processes. These interventions have been going on for twenty years and have created a more reliable supply chain, improved margins for Toyota and suppliers, and lowered prices for customers. Toyota encourages their suppliers to use JIT with their own suppliers.

Advantages of JIT

Lower stock holding means a reduction in storage space which saves rent and insurance costs

As stock is only obtained when it is needed, less working capital is tied up in stock

There is less likelihood of stock perishing, becoming obsolete or out of date

Avoids the build-up of unsold finished product that can occur with sudden changes in demand

Less time is spent on checking and re-working the product of others as the emphasis is on getting the work right first time.

Possible increase in profits

Quality products

Quicker setup

Eliminates costs of storage facilities

More flexible employees

Quality relationships with suppliers

Elimination of waste

No down time

Disadvantages of JIT

There is little room for mistakes as minimal stock is kept for re-working faulty product

Production is very reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed

There is no spare finished product available to meet unexpected orders, because all product is made to meet actual orders - however, JIT is a very responsive method of production

Long term commitment

Possible large initial cost with no short term returns

Problems with supplier can cost company large amounts of money

Risk of never successfully implementing JIT

JIT success factors

Conclusion

Just-in-time manufacturing can be a positive influence on a company.  However there are many risks associated with attempting to implement JIT manufacturing techniques.  When looked at it appears to be a very simple, quick, and easy thing to do.  In reality it is a very complicated technique that takes long term commitment and a initial cost with no guarantee of success.  If implemented successfully it would eliminate waste, make the company more productive and more efficient.  It does this through shorter transportation and increased communication.  Although there are many companies that are successful, many companies are not.  Even though there are enormous risks many still consider implementing JIT for it many advantages.

Companies Currently using JIT

Harley Davidson

Toyota Motor Company

General Motors

Ford Motor Company

Manufacturing Magic

Hawthorne Management Consulting

Strategy Manufacturing Inc.

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