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Just In Time Manufacturing: Toyota

4779 words (19 pages) Essay in Marketing

17/05/17 Marketing Reference this

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As we’ve known that, Toyota Corporation is one of the most successful brands using “Just in Time” philosophy today. Their success is based on low production costs, maintains high quality, producing a lot of different automobile types, while as having very competitive price setting and high profit margins. Small amounts of raw material inventory must be kept at each node in production, so that production can take place for any product. These parts are then replenished when they are used. Accuracy of forecasting is important so the correct amount of raw materials can be stocked. So, what is Just in Time? And how Toyota applied this philosophy in their production process?

Toyota and the development of Just-in-Time and Toyota Production System:

Just-in-time (JIT) is an inventory strategy that strives to improve a business’s return on investment by reducing in-process inventory and associated carrying costs [1] . This philosophy was first developed and perfected within the Toyota Corporation by Taiichi Ohno as a means of meeting consumer demands with minimum delays. Taiichi Ohno is frequently referred to as the father of JIT.

After JIT introduced by Toyota, many companies followed up and around mid 1970s’, it gained extended support and widely used by many companies. Besides that, one motivated reason for developing JIT and some other better production techniques was that after World War II, Japanese people had a very strong incentive to develop a good manufacturing technique to help them rebuilding the economy. They also had a strong working ethnic which was concentrated on work rather than leisure, seeks continuous improvement, life commitment to work, group conscious rather than individualism and achieved common goal. These kinds of motivation had driven Japanese economy to succeed.

The Just-In-Time (JIT) Manufacture Philosophy:

Quick response to the market empowers and sustains competitive advantages of Toyota and other leading companies. Application of JIT can reduce the elapse time of the order-to-delivery cycle. Gaither and Frazier state that Just-in-Time is a weapon of choice in speeding market responsiveness (2002). Two main components of JIT philosophy are planning elimination of all waste and continuous improvement of productivity [2] . Just-in-Time primarily requires inventories when needed; improve quality without any defect; cut off unnecessary parts of manufacturing lead times; revise the operations themselves to make improvements. It is also very important to achieve those things at a minimum cost (Gaither & Frazier, 2002).

Figure 1: Principles of Just-in-Time Manufacturing

JIT Manufacturing Benefits:

With the growth of economy JIT, many modern companies use JIT as a competitive advantage. It also helps service organizations become more efficient and its benefits. Gaither and Frazier (2002) state that, these are benefit of JIT:

Avoid wasting inventory in production as well as reduce the cost of scarp.

Find out the problems and correcting the causes of production problems to make a problem-free zone.

Facility that scheduling production most effective

Product quality meets the standard and makes improvement.

Inventory levels are significantly reduced

Lead time and Setup time are drastically reduced. Toyota can engage time-based competition, using speed as the weapon to capture the market share.

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Saving cost of storage and materials handling equipment.

Workers work closer and can communicate more easily, work out problem effectively, learn from each other, and switch jobs when needed.

Part II

JUST-IN-TIME AND TOYOTA PRODUCTION SYSTEM

At Toyota Motor Company, Taichii Ohno and Shigeo Shingo are fathers of Toyota Production System or Just-in-Time philosophy which emphasises the central role of employees and inventories [3] .

The reason for Toyota to apply Just-in-Time and Toyota Production System

In 1950 Toyota corporation in Japan they could not predict how large their warehouse to store their finish products, parts and this undesirable result made Toyota in trouble and caused disadvantage. That is reduction of Toyota their economic lot size. The reason for this reduction is that, before shipping their product to customer, they have to use large warehouse to store that could be required a lot of money.

If Toyota has applied JIT in their production system earlier before the start of production that could have changed their economic lot size increase and take the competitive advantages [4] . Those advantages we will discuss later in this part.

Avoid overproduction: They just produce what they are required through the contract or the order list.

Purchase or order enough material from suppliers that could save their budget at the minimum levels

Take competitive advantage: by saving budget they can use the source of that budget to invest or research new technology to apply for their products.

After failure, Toyota has gained experience and JIT was applied by Toyota Motor Corporation of Japan as part of its Toyota Production System (TPS).

Toyota’s objective is producing a lot of cars in the most effective production process. The production process designed to avoid any waste that not necessary from overproduction, product defects, employees’ mistake or storage of unneeded inventories.

The concept of Toyota Production System

Toyota decided use 2 pillars in Toyota Production System: Just in time (JIT) and “jidoka” [5] . Both of them are committed to the mutual goals of Toyota production system are highest quality, lowest cost and shortest lead time.

They use Just in Time (JIT) method to produce what are needed at the right time, right place, and right amount to eliminate wastes.

Jidoka is including “build in quality”, which means focusing on production quality and identifying abnormalities to correct; and “flexible man power”, which refers the right of workers to point out the problem of production process and allowance to stop it. In order to perform “jidoka”, Toyota must encourage their worker to not hesitate to stop production processes if there is any problem happens (respects of people). That means workers are allowed to press the alarm “andon” if they finds any error in their process. After that, leaders and groups of engineers will start “process of 5 why” by asking why, they will known directly the reason cause problem that unpredictable and those step make their plan success than expected.

Figure2: Toyota Production System Concept Structure (Hiranabe, 2008)

In this case, Toyota very creativity, plus, by applying JIT they also can design their own a group of engineers of “process of 5 why” to finding error and solving by asking “5 why”. Another method “jidoka” assists their worker to find problems as soon as possible. If there is any problem, they will press the alarm and the process of production will immediately stop and “searching “begin after the “ring ring”. Those step is complex but very necessary, they can prevent to produce “defective products”. However, those steps are required large amount of time to finding and solving. Moreover, they can interrupt the Production process and effect to the productivity of Toyota and take more delaying/ waiting time.

Prerequisites for JIT in Toyota:

Just-In-Time Philosophy is applied in the way Toyota factories are managed to achieve its goals. These changes in Toyota factories ensure JIT can benefit the outcomes.

Figure 3: Prerequisites for JIT Manufacturing (Gaither & Frazier, 2002)

Master Production Schedule

In Toyota Motor Company, the production schedule is arranged stable and levelled by the master production schedule (MPS). MPS provides that the same products are produced in the same quantities in the same sequence every day of the month (Gaither& Frazier, 2002).

Increase production capacities

Gaither and Frazier (2002) state that another requirement for Toyota JIT is reducing manufacturing lead times by increasing production capacities in two ways:

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Increasing production rates

Reducing setup times at work centres.

Reducing setup time is decreasing the elapse time for adjusting machine settings, replacing materials, changing tools, and all processes of changing over from producing one product to a different one at work center.

Cross-training of workers

Cross-training is applied to enable Toyota workers to perform competently in several jobs and master different required skills.

Reduce equipment breakdowns

Toyota can reduce equipment breakdowns by adopting total preventive maintenance program to avoid interruption to production.

Develop long-term supplier relations

Toyota establishes and strengthens its supplier relations to have a stable and reliable material flows from supplier. Consequently, interruptions to production are minimized.

Improve product quality:

Customer expectation determines the specification standard of new Toyota products and services.

Materials are examined to ensure that they approach appropriate specifications which are determined by customer expectations: strengths, sizes, colours, finish, appearance, chemical content, weight, and so on.

Monitoring the production process helps Toyota improve product quality and correct undesirable trends to meet

Studying finished products and service to ensure that Toyota products and services meet customer expectation.

Figure 4: Product quality control (Gaither and Frazier, 2002)

Elements of Toyota JIT Manufacturing:

Respect for people (workers, customers, suppliers, managers):

In Toyota Production System, the value of people’s trust is more important than physical strength (Gaither and Frazier, 2002). Moreover, JIT philosophy emphasizes that employees, suppliers and customers determine the flow and quality of production processes. They also are great impact on reducing cost and time and in all phases of TPS. [6] Therefore, Toyota develops a culture of mutual trust and teamwork to commit to Toyota’s success.

Loyalty of workers increases when Toyota manages to take care of employment lifetime of employees. That means Toyota focuses on increasing job security for employees besides protecting their rights and benefits. Also, the payroll levels are equal. As a result, employees can improve productivity when they completely are loyal toward Toyota.

Subcontractor network: Toyota wants to stabilize and develop long-term relationships with specialize customers and suppliers. That is difficult but is necessary in today intense competition.

Bottom-round management refers decentralization in decision making in Toyota. This means Toyota allows its employees from lower levels to upper levels contribute to make decisions for company’s projects. Workers also are encouraged to suggest better solutions and methods for Toyota’s projects from small suggestion to strategic issues.

Behavioral pattern: JIT is all about empowering people. In factories with JIT system, workers are allowed to stop the production line using the Andon system under the principle of Jidoka (Jason Perez, 2010). Toyota needs employees who have adequate skills to identify errors in the production process and responsible enough to call a stop to correct errors. Group of worker are encouraged to work together to quickly make the production working again.

JIT philosophy focuses on teamwork. Toyota employees are the best example for how they see each other as a coworker to coordinate for Toyota’s success. According to Gaither and Frazier (2002), workers, suppliers, managers and customers must all be committed and motivated to teamwork for the most effective perform of JIT manufacturing.

Figure 5: Respect for people in JIT philosophy in Toyota

Elimination of waste:

Sevens wastes in production are indentified by Shigeo Shingo (Gaither and Frazier, 2002). JIT manufacturing involves pointing out and cut off non- value- adding activities in designs, productions, supply chain management and dealing with customers to save all resource (including time). Obviously, Toyota successfully performs elimination of seven wastes to be where it is today, including: overproduction, waiting time, transportation, unneeded production, WIP inventories, unnecessary motion and effort, and defective products. This element focuses on how Toyota manages its production performance from the very beginning of the processes to avoid errors and easily to identify problems and correct as soon as possible. Following figure illustrates how JIT can overcome and eliminate those wastes. [7] 

Figure 6: The Seven Wastes in JIT Philosophy (Leansigmavn Website, 2008)

In our opinion, these are benefits of elimination of seven wastes in TPS.

. Figure 7: Elimination of seven wastes in Toyota Lean Manufacturing

Enforce Problem Solving and Continuous Improvement:

Toyota JIT is a system of enforced problem solving. According to Gaither and Frazier (2002), all materials, processes, workers are expected to meet quality and quantity standard at the right place, right time with exact amount, without any safety net. Moreover, WIP inventories are reduced incrementally in small steps, in order to discover different production problem (Shareslide website, 2010). After that, Toyota managers and workers can correct errors and eliminate the problems.

Toyota also practices Kaizen continuous improvement in every phase of manufacturing. Employees are encouraged to reduce in-process inventories to observe if any problem can occur. Thus, those problems are target to be eliminated.

Figure 8: Uncovering Production by reducing in-process inventories (Shareslide Website, 2010)

Furthermore, Toyota uses single minute exchange of dies (SMED) to have all set up take less than a minute. SMED can reduce amount of resource (stock, inventories, time, motions…) and increase production capacity and flexibility as well as improve quality of production. [8] 

According to Hubpages Website, in article “Lean Manufacturing: SMED and JIT Production”, “Shigeo Shingo created 8 techniques that need to be used if you are implementing SMED:

Separate your internal and external operations

Convert internal steps to external setup

Standardize function instead of shape

Use functional clamps and eliminate fasteners altogether

Use intermediate jigs

Adopt parallel operations

Eliminate adjustments

Mechanization

There are 4 conceptual stages that also needed to be followed as you implement SMED. First, you must ensure that the external setup applications are performed as the machine is in process. Second, All the internal and external actions need to be separated to ensure that the parts function properly and are efficient in transporting the die and other necessary parts. Third, you must convert internal setup actions to be external ones. Fourth, the final stage is to improve all the setup actions.”

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Figure 9: Benefits of SMED in enforced problem solving of Toyota JIT (Hubpages, 2008)

Total Quality Management

JIT manufacturing depends on a system of total quality management (TQM) being in place (Gaither and Frazier, 2002). We can consider that JIT manufacturing in Toyota has to be loyal companion with TQM. That means Toyota is totally committed to producing products of perfect quality as well as producing products for fast delivery to customers. Obviously, in TPS, the implementation of TQM and JIT aim to an overall goal of satisfied customer.

Parallel Processing

Toyota operation is formed in parallel (simultaneously) can save large amount of manufacturing lead time.

There is a parallel between standard manufacturing and JIT. By perform many operations can be made simultaneous through scheduling, as production is scheduled to occur at the same time at one or more operations. However, significant reduction in manufacturing lead times can offset the additional costs.

Kanban Production Control

Just-in-Time is a pull system of production planning and control. In a pull system, we focus on forecasting every next stage of production and only produce what we need. Therefore, batches of products go directly from upstream stages of production to downstream stages without being stored in inventory. But in a large manufacture, it will be hard to know when the downstream workstation is ready for the upstream station to produce another batch of parts (Hiranabe, 2008). In Toyota, they have a system called Kanban.

Kanban (card Production control) in Japanese means card or marquee. In Toyota, series of signals which is also called Kanban drive the process by informing production processes to make the next part. Kanban card which is the most common use usually performs as simple visual signals such as the presence or absence of a part on a shelf.

There are 2 types of Kanban:

A conveyance card is C-Kanban

A production card is P-Kanban.

Because Toyota employed kanban signs in place of the cards for use in production processes, the method came to be called the “kanban system”. At Toyota, when a process goes to the preceding process to retrieve parts, it uses a kanban to communicate what parts have been used [9] .

Figure 10: Flow of Kanban Cards and Containers between Two work Centers (Gaither$ Frazier, 2002)

Figure 11: Conceptual Diagram of the Kanban System in TPS (Toyota Website, 2010)

According to Gaither and Frazier (2008), this is how Kanban in Toyota operates. When a worker on the shop floor at downstream Work Center #2 needs a container of parts for his operation, he does the following:

He finds a C-Kanban in the pocket on the side of container that he just emptied at his work center; this card is his authorization to replace the empty container with a full one from the storage.

Next, he takes the C-kanban and finds a full container of the needed parts in storage.

Then he places the C-Kanban in the full container.

Next, he remove the P-Kanban from the full container and places it on a post or marquee at the upstream Work Center #1; this P-Kanban is the authorization for Work Center #1 to produce another container of the parts.

Finally, he takes the full container of parts with its C-Kanban to his downstream Work Center #2.

With Kanban system, the quantity of product is produced exactly match with the needed. This is the reason why Toyota looks at Kanban as an efficient pull system to reduce in-process of parts between workstations.

JIT Purchasing

JIT Purchasing is a same pull-type approach in JIT but it is applied to purchasing shipments of parts from suppliers. By apply the same principle of JIT to suppliers, JIT not only reduces in process inventories, but raw-materials are also reduced (Gaither & Frazier, 2002).

Because the quality of Toyota’s product relies on outside suppliers for most of the parts and materials in the vehicles we make, so Toyota is very strict in choosing their suppliers. Toyota set high standards for their suppliers [10] . They try to looking for suppliers who have the will and the ability to become active partners with them and posses world-class competiveness in term of quality, cost, delivery and technological capabilities (Toyota Suppliers website, 2010)

Suppliers have to offer materials that have a competitive cost with high quality. In addition, according to Toyota Suppliers website (2010) they not only have to remain the low cost but also continuously reduce costs and to translate their reductions into lower prices .Moreover, their material and energy are not harmful to the environment.

Price is important but quality is the most basis thing for supplier selection. If product has low quality, Toyota will lose customer satisfaction. When customers do not believe in quality of products anymore, it will hard for Toyota to take back their fame. This is the reason Toyota want to eliminate defective raw materials. Defect-free materials will lead to perfect products. Toyota’s suppliers have to prevent defects of their product.

Delivery is another important condition that suppliers need to have. The order quantity always varies, so Toyota wants their partners to be flexible. If suppliers want to delivery exactly match the use rate of buying firm, they need to produce product with small lot sizes so that they can more flexible and delivery shipments match the quantity the buying firm require, no more no less. Moreover, producing products in small lot sizes, the quality of purchased materials tends to be higher (Toyota Supplier Website, 2010). Suppliers have to have a reliable and timely delivery. That’s why location of suppliers need to be near the buying firm’s manufacture to reduce the time of shipments make it more reliable. And we can see in this map, most of suppliers of Toyota are located near from Toyota’s manufactures to delivery shipments more timely and reliable

.

Figure 12: Map of Toyota distributions and suppliers

In addition, delivered material is of near-perfect quality if suppliers have a long-term relationship with the buying firms (Gaither & Frazier, 2002). This is the reason why Toyota has a community connection program that named “Toyota and Suppliers Reaching Out” to make the relationship with their suppliers more unshakeable. The main objective of this program is donating to local charities in their suppliers’ communities. Since 1999, they have donated $1,006,500 at 58 different events in 21 states (Toyota Supplier Website, 2010). Through “Toyota and Suppliers Reaching Out”, the goodwill of Toyota is promoted so that Toyota can build more new relationships with local communities and government where their suppliers are located. And the most important things Toyota gain in this program is the partnerships with its suppliers are deepened.

E-commerce and JIT Purchasing:

Technology not only makes our life more convenient but it also creates an obvious advance in operation and quality management. Technology helps develop products and translate concepts into products more quickly (Toyota Supplier Website, 2010). Today, we can order a large quantity of product with on “click” on the computer mouse. Technology reduces paper-works and through this, makes transactions faster and more accuracy. That’s why technology is also considered as a competitive advantage to choose suppliers. Moreover, e-commerce transaction is automated process, so labor cost are reduced as well. Because of the dramatic reduction in this cost, the price of products can be more competitive.

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Reducing Inventories through Setup Reduction

Central idea of JIT is aiming at the reduction of production lot sizes so that inventories are reduced (Gaither & Frazier, 2002). Toyota invests large sums of money in JIT systems to reduce setup times to avoid problems of small lot size. Toyota engineers develop programs for reducing setup times; workers are trained to master more efficient and flexible in performance; and automatic device are attached to the machines. Consequently, the setup time in TPS is reduced.

According to Gaither and Frazier (2002), many JIT firms like Toyota use the same EOQ formula to analyze lot sizes, but they turn it around. Eventually, Toyota can set the production lot sizes very low and use the result of setup times as target for engineers to study and develop programs.

Moreover, setup reduction is continuing process in Toyota, and the role of workers at each work station is very important in this process. Because these workers are the user of the machines, they can give the best ideas for setup time reduction. This is very close to the central value of culture of Toyota “respects for people”.

Working toward Repetitive Manufacturing:

Toyota automobile factories are performing as JIT repetitive manufacturing. In these factories, the continuous flow of products makes planning and control rather simple, and JIT works best in these shop-floor situations (Gaither & Frazier, 2002).

Toyota focuses on standardized production. This system intends to make continuous flow of production with a direct route until finished, with the least interruption in process.

Toyota is successful in reducing setup time and production lot sizes. They also install flexible manufacturing system (FMS) to accommodate product variety without the necessity of worker-performed machine changeovers. Standardized parts in Toyota design to reduce the number of parts and the number of changeovers. Toyota adopts cross-training for worker to improve their capacity and flexibility to perform in different jobs when needed, as well as that can help Toyota balance the work load in the factory. Furthermore, Toyota installs effective quality control programs so that defective products do not interrupt production flows. Preventive maintenance programs are installed and effective in prevent machines from breakdowns. Finally, Toyota develops an effective subcontractor network to support in-house schedules and prevent interruption in production process.

Part III

JUST-IN-TIME IN THE FUTURE

Just-in-time has many benefits and its main benefits include:

Setup time is reduced.

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.

Emphasis on supplier relationships is increased.

Supplies come in at regular intervals throughout the production day.

With above benefits that Just-in-time brings, it seems to be a perfect system. Many automobile companies around the world are applying Just-in-time in their manufacturing operation at the present time. Besides its advantages, Just-in-time still has many big disadvantages that we have to admit. Being difficult to implement is the biggest disadvantage of Just-in-time manufacturing.

One of primary elements of Just-in-Time is to have only the required inventory when needed. It requires sources and channels of suppliers have to be reliable, dependable and timely delivery at all times. We only have an efficient network of suppliers when we have a long-term supply contracts and relationship with our suppliers and besides, our suppliers need to extend Just-in-Time methods to their own business. In the absence of good supplier relations, Just-in-Time increased the risk of inventory shortage because we just buy more inventories when we need, if our suppliers cannot delivery on time, the operation of company can be interrupted.

People are the core of all business and Just-in-time is no exception to this rule. Just-in-Time is a system of enforced problem solving, employees in this system have to work together to solve production. Therefore, company need to have a special training and reorganization of policies and procedures to implement Just-in-Time. This is the reason why setup cost of Just-in-Time is high.

JIT also depends on the culture of company. To Toyota, a Japanese company, JIT is suitable with the tradition of Japanese. The core of JIT is people. Japanese employers are very faithful. When they have a job, they try their effort to keep it. It is not strange when you heard three generation of a Japanese family work for only one company. Every one employer has experiences in their job so that they can know clearly about their process. In an environment like American, employers usually change their job. It will hard for the new ones to work well in a new manufacture, new environment and new process.

In our opinion, with these disadvantages we mentioned above, only large company such as Toyota, IBM, GE, Motorola, etc have enough condition to overcome and apply Just-in-Time for their operation. Moreover, with the problem of culture difference, JIT is hard to apply popular. In addition, with the development of technology, we believe that JIT will be improved its weaknesses. E-Kanban (Kanban with help of technology) is faster, more efficient and accuracy.

Part IV

CONCLUSION

Toyota uses JIT manufacturing as a key to successful in the motor market in the world. Quick response to the market empowers and sustains competitive advantages of Toyota and other leading companies. Two main components of JIT philosophy are planning elimination of all waste and continuous improvement of productivity. Undeniable, the philosophy has been rooted in the working culture and belief of Toyota. These changes that JIT bring about to Toyota also happen to many leading company in the world. However, there are still many problem and errors in JIT system. Therefore, JIT is studied to make development and improvement in the future. A firm who can hold the future of JIT in the industry can exceed its market share in global market.

Part V

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