Just In Time.doc

AcknowledgementCompleting this dissertation has been the biggest milestone of my life. Many people have helped and supported me through this arduous endeavour. I wish to take this opportunity to express my gratitude to each and every one of them.First of all, I thank my school-Singapore Institute of Materials Management, Im fortunate I can enter this school. It takes me to enter new sector about logistics, make me deeply interest to logistics. To my family, I thank them for their love and support: my parents, my gratitude for their encouragement and support for spiritual strength. Thanks also my friends and classmates who have gave me great comfort and support as I was writing my dissertation.Last but not least, I would like to dedicate this dissertation to my lectures who had taught me. Mr.Yong, Mr. Tang Wei Ping, Mr. Eric Ong, Mr. Tommy Tang and Mr. Goh Seh Kai. They use full use of their experience to give me complete and professional knowledge.ABSTRACTJust in time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs. Just-in-time production method is also called the Toyota Production System. To meet JIT objectives, the process relies on signals or Kanban ,between different points in the process, which tell production 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. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organizations return on investment, quality, and efficiency. To achieve continuous improvement key areas of focus could be flow, employee involvement and quality.Table of contentsAcknowledgement.1Abstract.2Chapter 1 Just in time principle.5-131.1 Introduction.51.2 History.6-101.3 JIT philosophy.101.4 Elements of JIT.101.5 Benefits .111.6 Suppliers.11-13Chapter 2 Just in time manufacturing14-242.1 Definition142.2 Japanese terms14-152.3 Reconciling JIT and EOQ.15-202.4 General Motors.20-212.5 JIT outline points21-222.6 Case.22-24Chapter 3 Just in time inventory.25-333.1 Definition.253.2 A Tool to Improve Efficiency in Inventory Investment263.3 Inventory Control Methods.26-273.4 Just-In-Time Inventory & Financial Decision Making.273.5 JIT: A Brief Example in Profit.283.6 Inventory Turnover and Inventory Economics.28-293.7 Pros and Cons of a JIT System.303.8 Pivotal Factors That Affect JIT Systems.30-313.9 An Unexploited Scope for Innovation.31-33Chapter 4 JustinTime under Fire.34-444.1 Abstract34-354.2 External Obstacles.35-364.3 Global and Logistical Issues.36-374.4 Behavioral Constraints.37-394.5 Intractable Accounting Systems39-404.6 Small Supplier Difficulties.40-414.7 References.41-43Summary.44Chapter 1 Just in time principleIntroductionJust-in-time (JIT) is easy to grasp conceptually, everything happens just-in-time. For example consider my journey to work this morning, I could have left my house, just-in-time to catch a bus to the train station, just-in-time to catch the train, just-in-time to arrive at my office, just-in-time to pick up my lecture notes, just-in-time to walk into this lecture theatre to start the lecture. Conceptually there is no problem about this, however achieving it in practice is likely to be difficult!So too in a manufacturing operation component parts could conceptually arrive just-in-time to be picked up by a worker and used. So we would at a stroke eliminate any inventory of parts, they would simply arrive just-in-time! Similarly we could produce finished goods just-in-time to be handed to a customer who wants them. So, at a conceptual extreme, JIT has no need for inventory or stock, either of raw materials or work in progress or finished goods.Obviously any sensible person will appreciate that achieving the conceptual extreme outlined above might well be difficult, or impossible, or extremely expensive, in real-life. However that extreme does illustrate that, perhaps, we could move an existing system towards a system with more of a JIT element than it currently contains. For example, consider a manufacturing process - whilst we might not be able to have a JIT process in terms of handing finished goods to customers, so we would still need some inventory of finished goods, perhaps it might be possible to arrange raw material deliveries so that, for example, materials needed for one days production arrive at the start of the day and are consumed during the day - effectively reducing/eliminating raw material inventory.HistoryJIT originated in Japan. Its introduction as a recognised technique/philosophy/way of working is generally associated with the Toyota motor company, JIT being initially known as the Toyota Production System. Note the emphasis here - JIT is very much a mindset/way of looking at a production system that is distinctly different from what (traditionally) had been done previous to its conception.Within Toyota Taiichi Ohno is most commonly credited as the father/originator of this way of working. The beginnings of this production system are rooted in the historical situation that Toyota faced. After the Second World War the president of Toyota said Catch up with America in three years, otherwise the automobile industry of Japan will not survive. At that time one American worker produced approximately nine times as much as a Japanese worker. Taiichi Ohno examined the American industry and found that American manufacturers made great use of economic order quantities - the traditional idea that it is best to make a lot or batch of an item (such as a particular model of car or a particular component) before switching to a new item. They also made use of economic order quantities in terms of ordering and stocking the many parts needed to assemble a car. Ohno felt that such methods would not work in Japan - total domestic demand was low and the domestic marketplace demanded production of small quantities of many different models. Accordingly Ohno devised a new system of production based on the elimination of waste. In his system waste was eliminated by: just-in-time - items only move through the production system as and when they are needed autonomation - (spelt correctly in case you have never met the word before) - automating the production system so as to include inspection - human attention only being needed when a defect is automatically detected whereupon the system will stop and not proceed until the problem has been solved In this system inventory (stock) is regarded as an unnecessary waste as too is having to deal with defects.Ohno regarded waste as a general term including time and resources as well as materials. He identified a number of sources of waste that he felt should be eliminated: overproduction - waste from producing more than is needed time spent waiting - waste such as that associated with a worker being idle whilst waiting for another worker to pass him an item he needs (e.g. such as may occur in a sequential line production process) transportation/movement - waste such as that associated with transporting/moving items around a factory processing time - waste such as that associated with spending more time than is necessary processing an item on a machine inventory - waste associated with keeping stocks defects - waste associated with defective items At the time car prices in the USA where typically set using selling price = cost plus profit mark-up. However in Japan low demand meant that manufacturers faced price resistance, so if the selling price is fixed how can one increase the profit mark-up? Obviously by reducing costs and hence a large focus of the system that Toyota implemented was to do with cost reduction.To aid in cost reduction Toyota instituted production levelling - eliminating unevenness in the flow of items. So if a component which required assembly had an associated requirement of 100 during a 25 day working month then 4 were assembled per day, one every two hours in an eight hour working day. Levelling was also applied to the flow of finished goods out of the factory and to the flow of raw materials into the factory.Toyota changed their factory layout. Previously all machines of the same type, e.g. presses, were together in the same area of the factory. This meant that items had to be transported back and forth as they needed processing on different machines. To eliminate this transportation different machines were clustered together so items could move smoothly from one machine to another as they were processed. This meant that workers had to become skilled on more than one machine - previously workers were skilled at operating just one type of machine. Although this initially met resistance from the workforce it was eventually overcome.Whilst we may think today that Japan has harmonious industrial relations with management and workers working together for the common good the fact is that, in the past, this has not been true. In the immediate post Second World War period, for example, Japan had one of the worse strike records in the world. Toyota had a strike in 1950 for example. In 1953 the car maker Nissan suffered a four month strike - involving a lockout and barbed wire barricades to prevent workers returning to work. That dispute ended with the formation of a company backed union, formed initially by members of the Nissan accounting department. Striking workers who joined this new union received payment for the time spent on strike, a powerful financial inventive to leave their old union during such a long dispute. The slogan of this new union was Those who truly love their union love their company.In order to help the workforce to adapt to what was a very different production environment Ohno introduced the analogy of teamwork in a baton relay race. As you are probably aware typically in such races four runners pass a baton between themselves and the winning team is the one that crosses the finishing line first carrying the baton and having made valid baton exchanges between runners. Within the newly rearranged factory floor workers were encouraged to think of themselves as members of a team - passing the baton (processed items) between themselves with the goal of reaching the finishing line appropriately. If one worker flagged (e.g. had an off day) then the other workers could help him, perhaps setting a machine up for him so that the team output was unaffected.In order to have a method of controlling production (the flow of items) in this new environment Toyota introduced the kanban. The kanban is essentially information as to what has to be done. Within Toyota the most common form of kanban was a rectangular piece of paper within a transparent vinyl envelope. The information listed on the paper basically tells a worker what to do - which items to collect or which items to produce. In Toyota two types of kanban are distinguished for controlling the flow of items: a withdrawal kanban - which details the items which should be withdrawn from the preceding step in the process a production ordering kanban - which details the items to be produced All movement throughout the factory is controlled by these kanbans - in addition since the kanbans specify item quantities precisely no defects can be tolerated - e.g. if a defective component is found when processing a production ordering kanban then obviously the quantity specified on the kanban cannot be produced. Hence the importance of autonomation (as referred to above) - the system must detect and highlight defective items so that the problem that caused the defect to occur can be resolved.Another aspect of the Toyota Production System is the reduction of setup time. Machines and processes must be re-engineered so as to reduce the setup time required before processing of a new item can start.Ohno has written that Toyota was only able to institute kanbans on a company wide basis in 1962, ten years after they first embarked on the introduction of their new production system. Although, obviously, as the originators of the approach Toyota had much to learn and no doubt made mistakes, this illustrates the time that can be required to successfully implement a JIT system in a large company. Moreover you can reflect on the management time/effort/cost that was consumed in the development and implementation of their JIT system.JIT philosophy elimination of waste in its many forms belief that ordering/holding costs can be reduced continuous improvement, always striving to improveElements of JIT regular meetings of the workforce (e.g. daily/weekly) discuss work practices, confront and solve problems an emphasis on consultation and cooperation (i.e. involving the workforce) rather than confrontation modify machinery, e.g. to reduce setup time reduce buffer stock expose problems, rather than have them covered up reveal bad practices take away the security blanket of stock JIT need not be applied to all stages of the process. For example we could keep large stocks of raw material but operate our production process internally in a JIT fashion (hence eliminating work-in-progress stocks).BenefitsThe benefits of JIT are: better quality products quality the responsibility of every worker, not just quality control inspectors reduced scrap and rework reduced cycle times lower setup times smoother production flow less inventory, of raw materials, work-in-progress and finished goods cost savings higher productivity higher worker participation more skilled workforce, able and wiling to switch roles reduced space requirements improved relationships with suppliers However you should be absolutely clear that implementing a JIT system is a task that cannot be undertaken lightly. It will be expensive in terms of management time and effort, both in terms of the initial implementation and in terms of the continuing effort required to run the system over time.SuppliersSuppliers can be crucial to JIT success Supplier gets: long-term, guaranteed, contract a good price steady demand minimal paperwork (e.g. use electronic means to order - such as email or Web or electronic data interchange, EDI) In return the supplier agrees to quality components (e.g. zero defects) guaranteed delivery times a partnership with its customer contingency plans to cope with disruptions, common disruptions might be: o the effect of bad weather o a truck drivers strike blocking roads/ports o a flu outbreak reducing the suppliers workforce Supplier selection criteria: close to production plant (else potential transportation delays) good industrial relations (involvement, value, dignity, ownership), no strike deals you believe that the supplier can met their promises with respect to the list of factors given above that that they are agreeing to With suppliers satisfying these criteria you can reduce the total number of suppliers, indeed it seems logical so to do. If you had five suppliers meeting all these criteria why do you need five? Obviously you might decide to have more than one supplier for safety reasons. Even the best run supplier can suffer a factory fire or an earthquake, but probably no more than two or three suppliers.As an illustration of this in 1997 Toyota was affected by a fire at a supplier of brake parts that cost the company an estimated $195 million and 70,000 units of production. The fire was at a plant that was the sole supplier of brake parts for all but two Toyota models and forced the company to shut its 18 assembly plants in Japan for a number of days. As a result Toyota embarked on a review of components that were sourced from a single supplier.Having a single supplier may be attractive in cost terms, but one does need to balance the risk (albeit a low probability risk - perhaps a fire every 100-250 years say) against the cost savings.Chapter 2 Just in time manufacturingDefinitionJust-in-time manufacturing is a strategy used in the business manufacturing process to reduce costs by reducing the in-process inventory level. It is driven by a series of signals that tell the production line to make the next piece for the product as and when it is needed. The signals used are usually simple visual signals, such as the absence or presence of a piece needed in the manufacturing process.Just-in-time manufacturing can lead to huge improvements in quality and efficiency. It can also lead to higher profits and a larger return in investment. A reorder level is set and new stock is ordered when that level is reached. There is no overstocking of parts. This saves on space in the warehouse.Just-in-time manufacturing was first used by Henry Ford of the Ford Motor Company. Ford only bought materials for his immediate needs in the manufacturing process. He bought only the amount of material needed to fit