Importance of JIT in Modern Organisation Essay

The philosophy of just-in-time (JIT) originated in Japan 50 years ago at Toyota Motor Co. The goal is to create a production environment driven by demand that holds only a small amount of inventory and products at any given time. Organizations in the manufacturing, service and public sectors are implementing a wide variety of innovative managerial tools and JIT philosophy to help them deal with the highly competitive, customer-driven environments in which they must operate. External relationships, for example with vendors and transportation carriers, become critical for effective support of JIT systems. Co-ordinate such relationships and interactions introduces additional complexity into the system. Many companies now operate in a global environment that offers both threats and opportunities to their very survival. This global environment changes at an ever increasing rate and manufacturing organisations need to be able to adapt to those changes very quickly or they will succumb to their competitors. This paper clarifies the basic features of JIT and their benefits to organizations. The paper illustrates some advantages of using JIT system in order to emphasis the importance of adopt this system. Therefore, the purpose of this article is to advocate the JIT systems through analyse the current problems in most organizations. INTRODUCTION JIT manufacturing has the capacity, when properly adapted to the organisation, to strengthen the organisation’s competitiveness in the marketplace substantially by reducing wastes and improving product quality and efficiency of production. â€Å"JIT manufacturing is a philosophy by which an organization seeks continually to improve its products and processes by eliminating waste† (Ptak, 1997). It is a systems approach to reduce stock and eliminate waste, thus to produces only necessary items in necessary quantities at necessary times. It has been widely implemented in manufacturing industries as a survival strategy against global market competition. JIT offers various benefits, such as  greater throughput, higher productivity and better quality. In this paper, the author will start from the basic elements of JIT, and batch size discussion will be followed in section 2. Section 3 will clarify two basic methods of JIT which can be used to overcome the â€Å"local versus company-wide† dilemma. The relationship of ERP and JIT will be mentioned in Section 4. Section 5 will illustrate outcomes of JIT to a supply chain of company. 1. FUNDAMENTAL FEATURES OF JIT JIT composes of ten basic elements which are: Flexible resources Cellular layouts Pull production system Kanban production control Small-lot production Quick setups Uniform production levels Quality at the source Total productive maintenance Supplier network The author will illustrate each of these elements and their outcomes for JIT system. _Flexible Resources_ It is recognized as a key element of JIT which requires workers with the ability to perform more than one job and general-purpose machines with the ability to perform several basic functions. With single workers operating multiple machines, the machines themselves also required some adjustments. Extra tools and fixtures were purchased and placed at their point of use so that operators did not have to leave their stations to retrieve them when needed. The company uses of JIT system can reduce the waste of movement to other machines, setting up other machines and waiting at other machines can also be eliminated. _Cellular layouts_ It creates manufacturing cells that comprise of dissimilar machines brought together to manufacture a family of parts. The layout of machines within the cell resembles a small assembly line and is usually U-shaped. Work is moved within the cell which in normally in one direction and experiences little waiting. In a one-person cell, the cycle time of the cell is determined by the time it takes for the worker to complete his or her path through the cell. It means even different items produced may take different time to complete; the time between successive items leaving the cell remains virtually the same because the worker’s path remains the same. _Pull system_ It emphasizes the supermarket approach and relies on customer requests to pull products/components through the system. Workers take only those parts or materials they need and can process immediately. The system avoids overproduction and; only necessary quantities are produced. _Kanban Production Control System_ â€Å"Kanban is a ‘pull’ system which is driven by the demand at the lowest point in the chain.†(Christopher, p186, 1998) A kanban contains such information as part number, description, type of container, unit load, preceding  station, and subsequent station. In a Kanban system the aim would be to produce only that quantity needed for immediate demand. It provides a simple and understandable process, quick and precise information with lower cost, avoid overproduction and delegate the responsibilities to line workers. _Small-lot production_ It requires less space and capital investment. Incorporate the production of small amounts at a time can allow processes to be moved closer together and transportation between stations can be simplified. The quality problems are easier to detect in small-lot production. Lower inventory levels make processes more dependent on each other. In short, small-lot production will help people to discover the errors and solve the problems quickly. _Quick Setups_ It incorporates a system called SMED (single minute exchange of dies) that focuses on the principles for quick set-ups. The system differentiates between internal and external set-up, where internal set-up can be performed only when the machine is stopped, and external set-up can be performed while the machine is operating. It convert internal set-up to external set-up. _Uniform Production Levels_ It is achieved by smoothing the production requirements on the final assembly line. It aims to reduce variability through more accurate forecasts, smoothing of demand and incorporating mixed-model assembly steadying component production. _Quality at the Source_ One of the most important issues of just-in-time is quality. Just-in-time companies should follow the concept of quality at the source, or doing it right the first time throughout all areas of the organization. Just-in-time can only be successful in a company that is already producing quality goods.  A quality at the source (jidoka) program must be implemented to give workers the personal responsibility for the quality of the work they do, and the authority to stop production when something goes wrong. _Total Productive Maintenance_ It refers to the practice of preventive maintenance with the concepts of total quality – employee involvement, decisions based on data, zero defects, and a strategic focus. The goal of TPM is zero breakdowns. _Supplier Networks_ A network of reliable suppliers is also essential to JIT. An organization will reap many benefits in terms of costs and time savings by reducing the number of suppliers and improving relationships with these valued partners in the JIT manufacturing process. The company and the supplier both benefit from just in time systems. The company benefits because of reduced cost. The supplier benefits by long-term business relationships with companies as long as they continue to supply quality products on time. 2. BATCH SIZE DELEMMA Large batch size can reduce set-up cost per unit, however, the carrying cost of it must be higher due to the higher inventory. Large batch inventory may hide many quality problems and only become visible when downstream customers try to use and it does not fit. A large batch size will tend to create long waiting time delays as large jobs wait in queue behind large jobs being processed. Thus, a longer average job queuing time will result from either batch size that are too small (an excessive amount of machine time is consumed by setups), or batch size that are too large (large jobs waiting in queue behind other large jobs). It means large batch can result of a number of difficulties, including: lengthy setups, long queues at work centers, material waiting to be moved to the next operation, long distances between work centers, uneven loads from one period to the next, equipment and workers with limited flexibility, unexpected equipment failure, and large  safety stocks to cover possible scrap. Let’s consider how the JIT approach can solve some of these difficulties. â€Å"JIT philosophy the requirement is for small shipments to be made more frequently and to meet the precise time requirements of the customer.† (Christopher, p188, 1998) Smaller batch sizes are desirable because they lead to such benefits as shorter lead times, less work in process, fewer space requirements, and less scrap and rework. With all the machines located close together in the cell, material handling is greatly reduced. Moreover, control of parts flows and scheduling within the cell are simplified, as is tracking the status of jobs. Also, small batch size leads to lower inventory, which will make it easier to discover the problems. Lower inventory makes reliable continuous flow delivery. Although small batch size usually needs more money on set-up cost per unit, the carrying cost of it must be lower due to the small-lot production. 3. JIT OVERCOMES THE â€Å"LOCAL VERSUS COMPANY-WIDE† DILEMMA JIT focuses on total employee involvement, not on the local or departmental resources, This principle can be found through analyzing the two basic elements of JIT-Kaizen and Group Technology. Kaizen is the Japanese term for continuous improvement. It is both a rigorous, scientific method using statistical quality control (SQC) and an adaptive framework of organizational values and beliefs that keep workers and management alike focused on zero defects. It is a philosophy of never being satisfied with what was accomplished last week or last year. It is the team responsibility to improve current systems and procedures. Management, staff, and labor must participate. It need total employee involvement, that is, participation of every employee at every level. To be able to establish a JIT manufacturing system, every department should have some commitment to align with a common goal. The company’s top management must also support this goal in order to have resources and time allocated to developing the necessary systems and procedures. The Kaizen cycle has four steps: Establish a plan to change whatever needs to be improved. Carrying out changes on a small scale. Observe the results, Evaluate both the results and the process and determine what has been learned. Group technology seeks to improve productivity by grouping parts and products with similar characteristics into families and forming production cells with a group of dissimilar machines and processes.† The aim of group technology is to makes it possible for a firm to achieve higher levels of flexibility without increasing production costs or sacrificing product quality, thus leading to an improved competitive position for the firm. GT is the concept of exploiting similarities to achieve manufacturing and design efficiencies. For instance, the cells group dissimilar machines together to process a family of parts with similar shapes, the worked paths are given at the same time. The cycle time is also prescribed by the workers paths. The flexibility of this layout must be very much efficient. It is the group technology which makes the works independent to a department. 4. JIT SYSTEM & ERP ERP is an account-oriented information system for identifying and planning the enterprise wide resources needed to take, make, ship, and account for customers’ orders. â€Å"The use of the system has the potential to convert supply chains into demand chains in the sense that the system can now respond to known demand rather than having to anticipate that demand through a forecast.† (Christopher, p199, 1998) For many users, an ERP is a â€Å"do it all† system that performs everything from entry of sales orders to customer service The system integrated operations and reporting to initiate, monitor, and track critical activities such as order fulfilment and replenishment  processing. It is a method for the effective planning and control of all resources needed to take, make, ship and account for customers orders in a manufacturing, distribution, or service company. It attempts to integrate all departments and functions across a company onto a single computer syste m that can serve all those different departments’ particular needs. JIT (just in time) is a philosophy based on the elimination of waste, an important component of JIT is kanbans which is a technique based on replacing material that has been used but has no forward visibility. ERP systems improve efficiency of organizations and allow for more accurate information for decision makers to utilize. In connection with JIT process, ERP systems help to flatten an organization across the entire global enterprise by identifying business areas that are not adding value. Within the pull system, the production of a certain product starts on the demand or at the request of the buyer. It has been determined that the computer is the best source for determining when an order should be placed. Companies use ERP information system can link the replenishment of product in the market place with their upstream operations and those of their suppliers through the use of shared information. The system monitors and measures all aspects of production as the order proceeds through the various steps of the production cycle. The work order provides a complete â€Å"audit trail† which will come in handy later down the road. Presently, ERP is considered the price of entry for running a business and for being connected to other enterprises in a network economy. As the business scale becomes global, and technology such as the Internet allows speedy and inexpensive communication, the use of ERP systems will be critical to an organization’s success. e-commerce and supply chain management techniques, along with JIT, will be a push toward better information systems to better manage the organization and support customers and suppliers along the supply chain. In this growing global economy, the business that provides better product with better customer service will be the business that survives the increased competitiveness. Businesses can better provide for their customers by integrating the online shopping experience with automated ERP systems. 5. JIT IN A COMPANY _Quick Response_ QR has been defined as a philosophical business umbrella, by which retailers decrease inventory levels while gaining greater customer delivery, through innovative use of technology and business partnerships. There are many tools are used to create QR environment, which include bar code, POS and EDI. Manufacturers have turned to just-in-time (JIT) as their answer to the problem of managing inventories. They look to JIT to reduce lead time, eliminate waste, produce to customer demand, and develop long-term relationships with suppliers. In turn this will help manufacturers to satisfy the customers’ requirements with minimum levels of inventory and increase productivity. Retailers, struggling for survival, also must find ways to substantially reduce their cost while improving customer service. One major coat incurred by retailers is the cost associated with carrying and handling inventory, which serves to satisfy customer demand. The volume of inventory the retailer carries is proportional to the sizes, styles, prices, models, colors, and so forth of the products and their total lead time. If lead time were zero, the inventory would be zero. Even though this is not practical, the shorter the lead time, the smaller total the inventory. Retailers are now adopting the philosophy that is referred to as Quick Response (QR). Quick response can be considered as a process that uses real-time or near-real-time signals to trigger replenishment responses in the supply chain for manufacturers or retailers. This will improve inventory turns, product allocation and replenishment times and helps retailers avoid running out of important stock. â€Å"The basic idea behind quick response (QR) is that in order to reap the advantages of time-based competition it is necessary to develop systems that are responsive and fast. Hence QR is the umbrella term for the information systems and the JIT systems that combine to provide ‘the right product in the right place at the right time.† (Christopher, p192, 1998) In short, QR is the retailer sends a replenishment order to the supplier or manufacturer via electronic data interchange (EDI). _Vendor relationship_ Companies with just in time production systems depend on suppliers to deliver quality goods on time. An organization will reap many benefits in terms of costs and time savings by reducing the number of suppliers and improving relationships with these valued partners in the JIT manufacturing process. Suppliers must deliver goods as frequently as required. Suppliers must make numerous deliveries each day in the exact quantity specified. Because of frequent deliveries, central receiving areas and warehouses are not needed. Several suppliers may combine their loads on one truck that will tour the supplier plants to pick up itmes for delivery to the customer. Meanwhile, the small warehouses could be used for frequently delivered items, and the consolidation warehouses could become load-switching points when geographic distances between supplier and customer prohibit daily deliveries. Generally materials are delivered straight to the area of the production process. The JIT approach presents a very different perspective on the relationship. The JIT purchaser-supplier relationship is one of a partnership-in-profit creation. The cooperative relationship, on the supplier’s side, insulates them from the full force of competition in the supply segment of the market chain. This is particularly noticeable when the supplier is committed to only one, or at most, a few purchasers. The buyer, on the other hand, can benefit from the non-investment and low risks of this â€Å"vertical integration†. Companies must build relationships with suppliers. The company and the supplier both benefit from just in time systems. The company benefits because of reduced cost. The supplier benefits by long-term business relationships with companies as long as they continue to supply quality products on time. CONCLUSION Hence we can see that to have a Total JIT manufacturing system, a company-wide commitment, proper materials, quality, people and equipments must always be made available when needed. In addition; the policies and procedures developed for an internal JIT structure should also be extended into the company’s supplier and customer base to establish the identification of duplication of effort and performance feedback review to continuously reduced wastage and improve quality. Reference Christopher, M., (1998), Logistics and supply chain management – strategies for reducing cost and improving service (2nd Edition). Prentice Hall. Ptak, C., 1987, MRP and Beyond: A Toolbox for Integrating People and Systems, Irwin, Chicago, IL.