Jit

Definition • Just In Time (JIT) is an inventory strategy implemented to improve the return on investment of a business by reducing inprocess inventory and its associated carrying costs

Philosophy • The philosophy of JIT is simple - inventory is defined to be waste. JIT inventory systems expose the hidden causes of inventory keeping and are therefore not a simple solution a company can adopt; there is a whole new way of working the company must follow in order to manage its consequences. The ideas in this way of working come from many different disciplines including statistics, industrial engineering, production management and behavioral science. In the JIT inventory philosophy there are views with respect to how inventory is looked upon, what it says about the management within the company, and the main principle behind JIT.

Philosophy •

Inventory is seen as incurring costs, or waste, instead of adding 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. Under this way of working, businesses are encouraged to eliminate inventory that does not compensate for manufacturing issues, and then to constantly improve processes so that less inventory can be kept. Secondly, allowing any stock habituates the management to stock keeping and it can then be a bit like a narcotic. Management are then tempted to keep stock there to hide problems within the production system. These problems include backups at work centres, machine reliability, process variability, lack of flexibility of employees and equipment, and inadequate capacity among other things.

Equation • In short, the just-in-time inventory system is all about having “the right material, at the right time, at the right place, and in the exact amount” without the safety net of Inventory, the implications of which are broad for the implementors.

Principle • The process is driven by a series of signals, which can be Kanban, that tell production processes when to make the next part. Kanban are usually 'tickets' but can be simple visual signals, such as the presence or absence of a part on a shelf. When implemented correctly, JIT can lead to dramatic improvements in a manufacturing organization's return on investment, quality, and efficiency.

Evolution • The technique was first used by the Ford Motor Company as described explicitly by Henry Ford's My Life and Work (1922): "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."

Toyota • When a process problem or bad parts surfaced on the production line, the entire production line had to be slowed or even stopped. No inventory meant that a line could not operate from in-process inventory while a production problem was fixed. Many people in Toyota confidently predicted that the initiative would be abandoned for this reason. In the first week, line stops occurred almost hourly. But by the end of the first month, the rate had fallen to a few line stops per day. After six months, line stops had so little economic effect that Toyota installed an overhead pull-line, similar to a bus bell-pull, that permitted any worker on the production line to order a line stop for a process or quality problem. Even with this, line stops fell to a few per week.

Non Manufacturing • The Just in Time philosophy was also applied to other segments of the supply chain in several types of industries. In the commercial sector, it meant eliminating one or all of the warehouses in the link between a factory and a retail establishment.

• The major problem with Just In Time operation is that it leaves the supplier and downstream consumers open to supply shocks and large supply or demand changes. For internal reasons, this was seen as a feature rather than a bug by Ohno, who used the analogy of lowering the level of water in a river in order to expose the rocks to explain how removing inventory showed where flow of production was interrupted. Once the 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 in the next downstream area.

-• Of course, the mining of iron and making of steel is still not done specifically because somebody orders a particular car. Recognising JIT could be driven back up the supply chain has reaped Toyota huge benefits and a world dominating position in the auto industry.

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Advantages of JIT

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* 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

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-• 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

Summary •

jit in time is a ‘pull’ system of production, so actual orders provide a signal for when a product should be manufactured. Demand-pull enables a firm to produce only what is required, in the correct quantity and at the correct time.

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This means that stock levels of raw materials, components, work in progress and finished goods can be kept to a minimum. This requires a carefully planned scheduling and flow of resources through the production process. Modern manufacturing firms use sophisticated production scheduling software to plan production for each period of time, which includes ordering the correct stock. Information is exchanged with suppliers and customers through EDI (Electronic Data Interchange) to help ensure that every detail is correct.

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Supplies are delivered right to the production line only when they are needed. For example, a car manufacturing plant might receive exactly the right number and type of tyres for one day’s production, and the supplier would be expected to deliver them to the correct loading bay on the production line within a very narrow time slot.

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Just In Time and The Toyota Production System

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The Allied victory and the massive quantities of material behind it (see "A Bomber An Hour") caught the attention of Japanese industrialists. They studied American production methods with particular attention to Ford practices and the Statistical Quality Control practices of Ishikawa, Edwards Deming, and Joseph Juran.

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ohnoAt Toyota Motor Company, Taichii Ohno and Shigeo Shingo, began to incorporate Ford production and other techniques into an approach called Toyota Production System or Just In Time . They recognized the central role of inventory.

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The Toyota people also recognized that the Ford system had contradictions and shortcomings, particularly with respect to employees. With General Douglas MacAurthur actively promoting labor unions in the occupation years, Ford's harsh attitudes and demeaning job structures were unworkable in post-war Japan. They were also unworkable in the American context, but that would not be evident for some years. America's "Greatest Generation" carried over attitudes from the Great Depression that made the system work in spite of its defects.

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Toyota soon discovered that factory workers had far more to contribute than just muscle power. This discovery probably originated in the Quality Circle movement. Ishikawa, Deming, and Juran all made major contributions to the quality movement. It culminated in team development and cellular manufacturing.

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Another key discovery involved product variety. The Ford system was built around a single, never changing product. It did not cope well with multiple or new products.

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shingoShingo, at Ohno's suggestion, went to work on the setup and changeover problem. Reducing setups to minutes and seconds allowed small batches and an almost continuous flow like the original Ford concept. It introduced a flexibility that Henry Ford thought he did not need.

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All of this took place between about 1949 and 1975. To some extent it spread to other Japanese companies. When the productivity and quality gains became evident to the outside world, American executives traveled to Japan to study it.

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They brought back, mostly, the superficial aspects like kanban cards and quality circles. Most early attempts to emulate Toyota failed because they were not integrated into a complete system and because few understood the underlying principles.

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Norman Bodek first published the works of Shingo and Ohno in English. He did much to transfer this knowledge and build awareness in the Western world. Robert Hall and Richard Schonberger also wrote popular books.