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Just-in-Time System Outline: 1. Abstract; 2. Just-in-Time (JIT) supply system: some historical facts. JIT enabled companies. 3. Kanban as an integral part of JIT system. 4. Toyota's initial results from using JIT 5.
JIT advantages 6. JIT weak points 1. Abstract: In the modern technological market the companies become more and more competitive, mostly due to the pressure from Japan manufacturers. Therefore these companies are forced to seek for innovative ways to decrease costs and compete. Just-in-Time supply system became widespread over the past few decades and gained the acceptance in the business community as it lets companies who implemented it cut the inventory maintenance costs. It can be gained by following the basic principle of JIT: companies must have the right material at the right moment, in the exact amount and in the right place, without keeping any inventory. 2.
Just-in-Time is a relatively new supplying technique used by the companies in many countries of the world nowadays. The most famous of them are: Toyota Motor Company, Ford Motor Company, Dell, Harley Davidson, General Motors, Manufacturing Magic, Hawthorne Management Consulting, Strategy Manufacturing Inc. and others. Some people consider Just-in-Time to be a Japanese invention.
In fact, the name Just In Time was first used by Toyota. Originally, it described how material should be produced and delivered to the factory in order to arrive "just in time" for the next operation. But the one who used the technique for the first time was American Ford Motor Company. In 1922 Henry Ford in My Life and Work wrote: "We have found in buying materials that it is not worthwhile to buy for other than immediate needs. We buy only enough to fit into the plan of production, taking into consideration the state of transportation at the time. If transportation were perfect and an even flow of materials could be assured, it would not be necessary to carry any stock whatsoever.
The carloads of raw materials would arrive on schedule and in the planned order and amounts, and go from the railway cars into production. That would save a great deal of money, for it would give a very rapid turnover and thus decrease the amount of money tied up in materials. With bad transportation one has to carry larger stocks. " Later the technique was adopted and developed by Japanese Toyota Motor Corporation as a part of its Toyota Production System. Due to the limited amount of land and therefore the lack of production spaces in Japan, it is hard for Japanese factories to keep in warehouses the produced details and the parts of not finished products. Thus, in the 1950 s Toyota's chief engineer Taiichi Ohno examined accounting assumptions and realized that another method was possible. The factory could implement JIT which would require it to be made more flexible and reduce the high costs of retooling and thereby reduce the economic lot size to fit the available warehouse space (an economic lot size is the number of identical products that should be produced, given the cost of changing the production process over to another product. ). 3.
Carrying the process into parts-storage made it possible to store as little as one part in each assembly station. When a part disappear, it is used as a signal to produce or order a replacement. The system of signals within the Just-in-Time production process is called Kanban (in Japanese kan means visual and ban means card or board). As its name suggests, Kanban originally uses cards to signal the need of an item. However, other devices such as plastic markers or balls or an empty part-transport trolley or floor location can also be used to make a start to the movement, production, or supply of a unit in a factory. Many manufacturers have implemented electronic kanban systems.
Electronic kanban systems help to avoid common problems such as manual entry errors and lost cards. E-Kanban systems can be integrated into enterprise resource planning systems which allows for real-time demand signaling across the supply chain and improved visibility. Data pulled from E-Kanban systems can be used to optimize inventory levels by better tracking supplier lead and replenishment times. Thus, the just-in-time inventory system means having the right material, at the right time, at the right place, and in the exact amount without keeping a safety net of inventory. 4.
The first experience with JIT system at Toyota was horrible. When a process problem or bad parts appeared on the production line, the entire production process had to be slowed or even stopped. No inventory meant that a line could not operate from in-process inventory and wait for when a production problem is fixed. In the first week, line stops happened almost hourly. But by the end of the first month, the number of line stops had fallen to a few per day. After six months, line stops had so little economic effect that Toyota installed an overhead pull-line, that permitted any worker on the production line to order a line stop for a process or quality problem.
Even despite this, the number of line stope's fell to a few per week. Even suffering from the first negative experience with JIT and continuous line stops Toyota obtained a great amount of cash because of the in-process inventory was all built out or sold. Another unexpected effect was that the response time of the factory fell to about a day. This improved customer satisfaction by providing vehicles usually within a day or two of the minimum economic shipping delay.
It became possible to produce to order many vehicles. It gave Toyota the guarantee that they would be sold and so, eliminated the major source of risk. The result was a factory that eventually became the envy of the industrialized world and the object of imitation. 5. The strong points of JIT Inventory System can be outlined as follows: Set up times are significantly reduced in the factory.
Cutting down the set up time to be more productive allows companies to improve their bottom line to look more efficient and focus time spent on other areas that may need improvement. This allows the reduction or elimination of the inventory held to cover the changeover time of equipment. The flows of goods from warehouse to shelves are improved. Having employees focused on specific areas of the system allows them to produce goods faster instead of having them tired because of doing too many jobs at once and simplifies the tasks at hand. Small or individual piece lot sizes reduce lot delay inventories which simplifies inventory flow and its management. Employees who possess multiple skills are utilized more efficiently.
Having employees trained to work on different parts of the inventory cycle system allows companies to use workers in situations where they are needed when there is a shortage of workers and a high demand for a particular product. Better consistency of scheduling and consistency of employee work hours. If there is no demand for a product at the time, workers dont have to be working. This can save the company money by not having to pay workers for a job not completed or could have them focus on other jobs around the warehouse. Increased emphasis on supplier relationships.
No company wants a break in their inventory system that would create a shortage of supplies while not having inventory in warehouse. Having a reliable supplier relationship means that you can rely on goods being there when you need them in order to satisfy the company and keep the company name in good standing with the public. Twenty-four-hour supplies keep workers productive and businesses focused on turnover. Having management focused on meeting deadlines makes employees work hard to meet the company goals to see benefits in terms of job satisfaction, promotion or even higher pay.
JIT has many important advantages, but there are also some weak sides of the technique. First of all, as everything in JIT supply chain is interdependent and every element is linked to something else, problems with one element might cause the interruption of the entire production system. For example, such situations like labour strikes, broken supply lines, market demand fluctuations, stock outages, lack of communication upstream and downstream in the chain can cause great problems and large expenses for the company. Labour strikes, stock outages and port lockouts can easily disrupt the whole system or force the company to search for an expensive solution in the circumstances of emergency. Keeping no inventory is pointed to reduce costs, but at the same time it exposes companies to the risk of bearing even greater expenses in case it needs to find an urgent solution and prevent the supply chain from stopping. For example, in the U.
S. A. , the 1992 railway strikes resulted in General Motors having to idle a 75000 -worker plant because they had no supplies coming in. Every year markets experience seasonal demand fluctuations as well as fluctuations due to demand from disasters or other unforeseen events. That can cause negative consequences for the companies relying exceptionally on JIT systems, because it would leave supply chains in shock due to the great seasonal market demand at different times of the year for seasonal products. Then, when natural calamity and other disasters happen, the enterprises without any buffer stock suffer the major losses. For example, Toyota suffered a major supplier failure as a result of the 1997 Again fire which rendered one of its suppliers incapable of fulfilling Toyota's orders.
There are some kinds of goods that are impossible to produce with the JIT system. Custom made items will not work well with JIT as JIT systems respond best to mass produced and highly automated production items. Communication plays an essential role in a JIT rich supply chain. A communication breakdown in the company can lead to impossibility to get the right amount of supplies needed to keep the Just-in-Time system running smoothly. Technology is playing a great role in JIT, however, the reliance on technology can lead to breakdowns in the IT systems, it is especially grave for companies using electronic kanban systems. Companies should always have backup systems ready to help to frustrate the possibility of technology or communication breakdown.
Although JIT has its weaknesses and disadvantages, in most cases, the benefits outweigh the risks to the companies who implemented JIT. Planning for and recognizing when things may go wrong with the JIT system are vital for the success of JIT implementation through all areas of supply chains. Bibliography / Reference list: Broyles D. , Beims J. , Frank J. , Bergman M. , April, 2005, Just-In-Time Inventory Management Strategy & Lean Manufacturing, Academic Mind, retrieved May, 12 2008 web Frazier, Scott C, 2004, JIT Manufacturing Just-in-Time, retrieved May, 11 2008 web Just-in-Time (Business), Wikipedia, the Free Encyclopedia, retrieved May, 10 2008 web JUST-IN-TIME (JIT) PRODUCTION, January 27, 2006, retrieved May, 11 2008 web Just-in-Time/Kanban, March, 2008, United States Environment Protection Agency, retrieved May, 12 2008 web
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