Operational Management : JUST IN TIME

Inventories are a necessary part of doing business but, having too much inventory is not good. The successful inventory management requires a system to keep track of inventory transactional, accurate information about demand and leads time, realistic estimate of certain inventory related costs and allocating control efforts. Japanese companies establish the JIT inventory system in order to minimize the inventory cost. As name implies all the activity is done when the demand is placed. Just-in-time (JIT) purchasing is the purchase of materials (or goods) so that they are delivered just as needed for production (or sales). There will be no inventory involve in JIT. JIT is a part of the Toyota Production System and it should be implemented with the spirit and intent of the Toyota Production System, there should not be any inventory and wastage material in the system.

Just-in-time (JIT) production is a “demand-pull” manufacturing system that has the following features:

Ø  Organize production in manufacturing cells,

Ø  Hire and retain workers who are multi-skilled,

Ø  Aggressively pursue total quality management (TQM) to eliminate defects,

Ø  Place emphasis on reducing both setup time and manufacturing lead time, and

Ø  Carefully select suppliers who are capable of delivering quality materials in a timely manner.

The Ultimate Goals of Just-In-Time (JIT)

Ø  Identify and response to the consumers need and analyze how they are able to meet those demand.      

Ø  Production process is done when the demand is place. It force to company to be ready at any time to produce the product. It increase productivity.

Ø  To achieve high volume production using minimal inventories

Ø  To eliminate all the inventory cost and over stock of all waste

Ø  To develop a reliable relationship between the suppliers

Ø  JIT improves the quality control by increasing its efficiency of managing shop floor production and increasing its commitment to its suppliers

Ø  JIT can help organization remains competitive by offering consumers higher quality of products than their competitors. It helps on continuous improvement.

Definitely, there are number of industries/companies where JIT should not be applied. In such manufacturing firms where the product cannot be produced uniformly in practical amount. Depending upon the product and service that a company are producing they need to select best method of inventory. In Supply-chain management there is multiple number of tire and in each tire the responsible people must perform their work. If there is communication gap between the systems, JIT cannot be effective. JIT involves multiple suppliers, closer locations, or companies that can supply materials with little advance notice. Companies ordering smaller amounts of goods may encounter difficulty meeting minimum orders, requiring a different contract or a way to break up a large order over time or among several smaller manufacturers. All goods must meet quality requirements to avoid shutdown due to defects.

Conditions that should exist in order for a company to successfully adopt JIT:

Ø  Top management must be committed and provide the necessary leadership support to ensure a company-wide, coordinated effort.

Ø  A detailed system for integrating the sequential operations of the manufacturing process needs to be developed and implemented. Direct materials must arrive when needed for each subassembly so that the production process functions smoothly.

Ø  Products should be designed to maximize use of standardized parts to reduce manufacturing time and costs.

Ø  Reliable vendors who can deliver quality direct materials on time with minimum lead time must be obtained.

Advantages of JIT

Ø  It helps to eliminate the inventory cost. The inventory cost include holding, transactional and shortage cost. It helps to reducing lot sizes and reducing in safety stock.

Ø  As stock is only obtained when it is needed, less working capital is tied up in stock

Ø  It helps to make a good relationship with related party in the business process.

Ø  Avoids the build-up of unsold finished product that can occur with sudden changes in demand.

Ø  It helps to company to have competitive advantage as they are able to meet the demand with lower inventory cost. So they may able to serve the same product in some less price then other.

Ø  Less time is spent on checking and re-working the product of others as the emphasis is on getting the work right first time.

Drawbacks of Just-In-Time (JIT)

JIT processes can be risky to certain businesses and vulnerable to the supply chain in situations such as labor strikes, interrupted supply lines, market demand fluctuations, stock outs, and lack of communication upstream and downstream in the supply chain and unforeseen production interruptions. 

One of the biggest challenges for companies that have implemented a just-in-time inventory system is responding to periods of high demand. If the demand is very high the company will not able to meet the demand so the company must set up the ordering demand limit for their product to be effective. If they will not able to meet demand the customer may shift to order suppliers or dealer.

Just-in-time inventory systems are especially vulnerable to disruptions in supply. To make a finish good they need different type of raw material that may be exporting from different place. As there is no sufficient inventory, the production process will disturb if there will some problem occur with one of the supplier. In this case the company will not able to meet the demand. Another thing is if some disaster is happen on the supplier place, the company need to delay their production process. The company becomes dependent on supplier

There is a risk involved with JIT when there is a communication breakdown and the company cannot get the right amount of supplies needed to keep the just-in-time system running smoothly. The reliance on technology can lead to breakdowns in the IT systems that can be costly to work around and go back to the 'pencil and paper' methods of doing supply/inventory demand calculations. Companies should always have backup systems in place to help the possibility of technology or communication breakdown. 

Because just-in-time manufacturers do not stockpile raw materials, they can be affected more drastically by the effects of changing prices. Traditional inventory purchasing for goods in volatile markets should increase for periods where prices are expected to be low and decrease in periods where prices are expected to be high. For just-in-time customers, purchases occur when orders occur, so in theory, purchasing is occurring when demand is high. Therefore, the company is forced to pay a higher price on average. This difficulty can be controlled somewhat by entering into long-term supply agreements with suppliers where loyalty is rewarded through price breaks.There is no room for mistakes as minimal stock is kept for re-working faulty product. Labor strikes, stock outs, and port lockouts can quickly disrupt an entire supply chain while JIT processes are in place.

Some commonly mentioned goals of Lean are:

The importance of Lean Manufacturing System is better comprehended when its impact of change on economics is thoroughly understood. The manufacturing engineering philosophy is pivoted on designing a manufacturing system that perfectly blends together the fundamentals of minimizing cost and maximizing profit. These fundamentals are Man (Labor), Material and Machines (Equipment) - called the 3 Ms of manufacturing. 

Ø  Maximum utilization of resources to obtain high level of productivity. It assure the smooth flow of resources.

Ø  It helps to company to improve their quality continuously. The company are implementing different strategy to obtain the six sigma quality. There are trying to understand the consumer demand and they are indeed to improve quality.

Ø  It minimize the cost. And helps to build the desire system in the organization. It makes flow of work smoothly to minimize cost, a company must produce only to customer demand. Overproduction increases a company’s inventory costs because of storage needs

The ultimate goals of lean are to ensure there is continuous flow from raw materials to the finished goods, to produce only the quantity needed, to ensure the production lead time is shorter than the demand lead time. Thus, organizations striving to become lean would benefit from a systematic approach towards building and managing their supply chain system.