Introduction:

In today's competitive world shorter product life cycles, customers’ rapid demands and
quickly changing business environment is putting lot of pressures on manufacturers
for quicker response and shorter cycle times. Now the manufacturers put pressures
on their suppliers. One way to ensure quick turnaround is by holding inventory, but
inventory costs can easily become prohibitive. A wiser approach is to make your
production agile, able to adapt to changing customer demands. This can only be done
by Just In Time (JIT) philosophy. JIT is collection of management methods and
techniques used to eliminate waste (particularly inventory).

Philosophy:
The philosophy of JIT is simple: inventory is waste. JIT inventory systems 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 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, the just-in-time inventory system 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.

History:

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.”

They bought 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.

They followed the concept of "dock to factory floor" in which incoming

materials are not even stored or warehoused before going into production. This
paragraph also shows the need for an effective freight management system (FMS)
and Ford's Today and Tomorrow (1926) describes one.

The technique was subsequently adopted and publicized by Toyota Motor

Corporation of Japan as part of its Toyota Production System (TPS).

Japanese corporations could afford large amounts of land to warehouse finished

products and parts. Before the 1950s, this was thought to be a disadvantage because
it reduced the economic lot size. (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.) The undesirable result was poor return on investment for a
factory. Also at that time, Japanese companies had a bad reputation as far as quality of
manufacturing and car manufacturing in particular was concerned. 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 which would help them rebuild their economy. They also had
a strong working ethic which was concentrated on work rather than on leisure, and
this kind of motivation was what drove Japanese economy to succeed. Therefore
Japan’s wish to improve the quality of its production led to the worldwide launch of JIT method of
inventory

Historically, the JIT philosophy arose out of two other things:

• Japan's wish to improve its production quality. At that time, Japanese

companies had a bad reputation as far as quality of manufacturing and car
manufacturing in particular was concerned.
• Kaizen, also a Japanese method of continuous improvement.

The Just-in-time framework regards inventories as a poor excuse for bad planning,
inflexibility, wrong machinery, quality problems, etc. The target of JIT is to speed up
customer response while minimizing inventories at the same time. Inventories help to
respond quickly to changing customer demands, but inevitably cost money and
increase the needed working capital.

Features:
The following are the key features of JIT production.

• The production line is run on a demand pull basis, so that activity of each work
station is authorised by the demand of downstream work stations. Thus, parts
move through production system based on end unit demand, focusing on
maintaining a constant flow of parts rather than batches of WIP(Work in
Process).
 • Set-up time and manufacturing lead time are minimised. Demand-led
production may require manufacturing small quantities of the product and
producing small batches is economical only if set up time are small.

• The production line is stopped if parts are absent or defective work is

discovered. In absence of buffer stock emphasis is placed on ‘doing the job
right the first time’. The focus is on eliminating the root causes of defect, waste
or re-works. JIT goes hand in hand with ‘total quality’.

In a JIT environment:

• Absence of large amount of materials and work-in-progress

inventory enables to control inventory through personal observation;

• Work-in-progress constitutes, a lower percentage of total cost of

production;

• There is no need for an elaborate cost accounting system of

stores requisition, material transfer notes, rework accounting and so
forth.

All the above provide tremendous cost advantage to firms adopting JIT production.

In a JIT environment, EOQ model has lost its relevance because the focus is
on synchronising delivery and usage. Such synchronisation requires no stock be
purchased in large and kept in stores. Should a firm adopt JIT purchasing depends
on reduction in cost of quality, cost of delayed delivery, cost of early delivery, and
ordering costs. All these cost be compared with premium payable to suppliers (by
way of increase in cost of quality products for JIT supply). Firms using JIT purchasing
have reported significant saving in cost.

Toyota Motors:
The basic elements of JIT were developed by Toyota in the 1950's, and became
known as the Toyota Production System (TPS).The chief engineer Taiichi Ohno, a
former shop manager and eventually vice president of Toyota Motor Company at
Toyota in the 1950s examined accounting assumptions and realized that another
method was possible. The factory could be made more flexible, reducing the overhead
costs of retooling and reducing the economic lot size to the available warehouse
space.

Over a period of several years, Toyota engineers redesigned car models for
commonality of tooling for such production processes as paint-spraying and welding.
Toyota was one of the first to apply flexible robotic systems for these tasks. Some of
the changes were as simple as standardizing the hole sizes used to hang parts on
hooks. The number and types of fasteners were reduced in order to standardize
assembly steps and tools. In some cases, identical subassemblies could be used in
several models.
Toyota engineers then determined that the remaining critical bottleneck in the
retooling process was the time required to change the stamping dies used for body
parts. These were adjusted by hand, using crowbars and wrenches. It sometimes took
as long as several days to install a large (multiton) die set and adjust it for acceptable
quality. Further, these were usually installed one at a time by a team of experts, so
that the line was down for several weeks.

Toyota implemented a program called Single Minute Exchange of Die (SMED). With
very simple fixtures, measurements were substituted for adjustments. Almost
immediately, die change times fell to about half an hour. At the same time, quality of
the stampings became controlled by a written recipe, reducing the skill required for the
change. Analysis showed that the remaining time was used to search for hand tools
and move dies. Procedural changes (such as moving the new die in place with the line
in operation) and dedicated tool-racks reduced the die-change times to as little as 40
seconds. Dies were changed in a ripple through the factory as a new product began
flowing.

After SMED, economic lot sizes fell to as little as one vehicle in some Toyota plants.
Carrying the process into parts-storage made it possible to store as little as one part in
each assembly station. When a part disappeared, that was used as a signal to
produce or order a replacement.

JIT was firmly in place in numerous Japanese plants by the early 1970's. JIT began
to be adopted in the U.S. in the 1980's.

Requirements:

JIT applies primarily to repetitive manufacturing processes in which the same products
and components are produced over and over again For Example Cars, Fast Food
Chains

The requirements for a proper just-in-time management are:

Standardization: Where the supplies are standardized and the suppliers are trustable
and close to the plant. As there is little buffer inventory between the workstations, so
the quality must be high and efforts are made to prevent machine breakdowns. Those
organizations that need to respond to customer demands regularly this system is also
being able to respond to changes in customer demands.

Software: For JIT to work efficiently Supply Chain Planning software, companies have in the
mean time extended Just-in-time manufacturing externally, by demanding from their suppliers to
deliver inventory to the factory only when it's needed for assembly, making JIT manufacturing,
ordering and delivery processes even speedier, more flexible and more efficient.

Multi-Functionality: In JIT workers are multifunctional and are required to perform

different tasks. Machines are also multifunction and are arranged in small U-shaped
work cells that enable parts to processed in a continuous flow through the cell.
Workers produce pars one at a time within cells and transport those parts between
cells in small lots.
Schedules: Schedules are prepared only for the final assembly line, in which several
different models are assembled at the same line. Requirements for the component
parts and subassemblies are then pulled through the system. The "PULL" element of
JIT will not work unless production is uniform and lot sizes are low. Pull system is also
used to order material from suppliers (fewer in numbers usually). They make be
requested to make multiple deliveries of the same item in the same day, so the
manufacturing system must be flexible.

Quality: Quality within JIT manufacturing is necessary, because without a quality

program in JIT, the JIT will fail. Here we think about quality at the source and the
Plan, Do, Check, Action with its statistical process control. Furthermore, techniques
are also very important. The JIT technique is a pull system rather than a pull system,
based on not producing things until they are needed. The well known Kanban card is
used as a signal to produce. Moreover, integration also plays a key role in JIT
systems. JIT integration can be found in four points of the manufacturing firm.

• Accounting side,
• Engineering side
• Customer side
• Supplier side

PROS AND CONS OF JUST-IN-TIME

Pros of Just-In-Time:

Goals of JIT can vary, but there are a few that should be constant in any JIT system:

1. Increasing the organization’s ability to compete with others and remain

competitive over the long run is very important.
2. The competitiveness of the firms is increased by the use of JIT manufacturing
process as they can develop a more optimal process for their firms.
3. The key is to identify and respond to consumers needs. Customers’ needs and
wants should be the most important focus for business today. This objective
will help the firm on what is demanded from customers, and what is required of
production.
4. Moreover, the optimal quality and cost relationship is also important. The
organization should focus on zero-defect production process. Although it
seems to be unrealistic in the long run, it will eliminate a huge amount of
resources and effort in inspecting, and reworking defected goods.
5. Another important goal should be to develop a reliable relationship between the
suppliers. A good and long-term relationship between an organization and its
suppliers helps to manage a more efficient process in inventory management,
material management, and delivery system. It will also assure that the supply
is stable and available when needed.
6. Moreover, adopt the idea of continuous improvement. If committed to a long-
term continuous improvement idea, it will help the organization to remain
competitive in the future.
Cons of Just-In-Time:

Regardless of the great benefits of JIT, it has its limitations:

1. For example cultural differences. The organizations cultures vary from firm to
firm. There are some cultures that tie to JIT’s success, but it is difficult for an
organization to change its cultures within a short time.
2. Also manufacturers that use the traditional approach which relies on storing up
large amounts of inventory for backing up during bad times may have problems
with getting use to the JIT system.
3. Also JIT is quite different for workers, in the sense that due to the shorter cycle
time, lots of pressure and stress is added on the workers.
4. Also the JIT system throws workers off in the sense that if a problem occurs,
they cannot use their own method of fixing the problem, but use methods that
have been previously defined.
5. Moreover, the JIT system only works best for medium to high range of
production volume manufacturers, thus leaving a question to whether it might
work for low volume companies.

Case in which JIT has failed

JIT production allows companies to reduce both inventory and the entire production
chain. It encourages the removal of all surplus, including surplus factories. Under
normal business conditions this is not a problem. However, if there is any disruption at
any given point in the supply chain, then all production grinds to a halt.

Evidence of the problem with JITproduction became clear in the wake of Hurricane
Katrina and Hurricane Rita, both of which hit the US Gulf coast in 2005. At that time,
no new oil refineries had been built in the US since 1976. During that time period,
companies actually shut down several refineries to reduce capacity. The old refineries
still operating ran at full capacity, so no new refineries were needed according to JIT
theory since they would only produce surplus gasoline. However, most of these
refineries were clustered around the Gulf coast. When the Katrina hit, 15 oil refineries
in Mississippi and Louisiana representing 20% of US refining capacity was shut down.
Rita damaged another 16 refineries in Texas, accounting for 2.3 million barrels per
day of capacity shut down.

The lack of surplus in oil refining caused a shock to the United States. Gasoline prices
surged. Had companies not shut down refineries in order to reduce capacity according
to JIT theory, particularly refineries on the west coast, then it is likely that gasoline
prices would have remained stable.

US regular grade gasoline prices were $2.154 per gallon on November 28, 2005,
down from a spike of $3.09 on September 19, 2005 in the immediate aftermath of the
hurricane Katrina disaster

Just in Time in Indian Companies:

The Indian automotive component industry has shown tremendous growth
over the last decade. Today it has 480 companies, employees more than
2,50,000 people and has an estimated turnover of approximately Rs
45,000 crore (US$ 10 billion).Just-in-Time has been widely adopted in the
Indian companies especially in Indian automobile and manufacturing
industry.

List of Indian companies using Just in Time:

Following is the list of some of the companies which are using Just In Time
techniques.

• Lukas-TVS
• Tata Motors
• Gontermann-Peipers (India) Limited (GPI)
• IFB
• Volkswagen India

Lucas-TVS:
To deliver the quality product to the customer at the minimum cost Lucas-TVS,
employed techniques like Total Quality Management (TQM). Quality Assurance
methods like Advanced Product Quality Planning, Statistical Process Control
Techniques, Effective Tool Management System, Process Capability Improvements.

In its continuous pursuit of both technological as well as methodological excellence,

Lucas-TVS has adopted the Cellular Manufacturing System / Just In Time and also
extending the same to its Suppliers. By the implementation of this system components
from its suppliers are delivered on a pull basis with First In First Out concept
supported by simple visual controls and supplied to the line on an hourly basis with
KANBAN system.

International Awards: Following is the list of awards won by the company in JIT

• JIT Innovation Award from JIT Management Lab, Tokyo (2001 & 2004)
• JIT Grand Prix Award from JIT Management Lab, Tokyo (2002, 2005 & 2006)
• Deming Application Prize 2004

Gontermann-Peipers (India) Limited (GPI):

It is a leading Cast Roll and Forge Roll manufacturing company, has posted excellent
results for the second successive quarter. GPI’s net profit for the third quarter of this
fiscal zoomed by 119% to Rs.358.54 lacs as compared to Rs.163.92 lacs in the
corresponding period of the last fiscal.

GPI’s profit has been higher because of tight cost control, better realization, better
operating efficiency etc. To achieve the maximum performance efficiency, company
has undertaken modern management initiatives such as Six Sigma, Total Productive
Maintenance (TPM), Activity Based Costing, Just-In-Time (JIT) in consultation with
leading consultants in their respective fields.
Volkswagen India:
On the launch of the Polo from its US$700 million facility in Chakkan, near Pune in
western India. Thomas Dahlem, Volkswagen India director of manufacturing
engineering said: "As a global player, we realize the importance of India. We know
that it will become the fifth-largest auto market by 2016. We understand that it is a
price-sensitive market where it is tough to sell, but we are keen on it. Using just-in-
time techniques, we will build an auto environ here, controlling quality and
technological inputs following a global sourcing model."