Just In Time

Just In Time

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Just-In-Time (JIT) is a Japanese manufacturing management method that was developed in the 1970’s. It was first adopted by Toyota manufacturing plants by Taiichi Ohno. One motivated reason for developing JIT was a need of a better production technique after World War II. Japanese people had a very strong incentive to develop a good manufacturing technique to help them rebuild the economy. They also had a strong working ethnic which was concentrated on work that caused continuous improvement. These kinds of motivation had driven Japanese economies to succeed. Because of the natural constraints and the economy constraints after World War II, Japanese Manufacturers looked for a way to gain the most efficient use of limited resources. The Toyota Company implemented this into their plant and turned the management and accounting principles around to effectively and efficiently move inventory in and out very quickly while also concentrating on the manufacturing aspects of their cars. After the first introduction of JIT by Toyota, many companies followed up and around mid 1970s’and it gained extended support and widely used by many companies around the world.
Just in Time is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated carrying costs. JIT can lead to dramatic improvements in a manufacturing organization's return on investment, quality, and efficiency. Just-in-time means, quite literally, that an assembler on a line receives his consignment of parts "just in time" to use them. The system is based on an ideal situation in which a part arrives just in time to be used. The system also operates on the strength of very small lot quantities of replacement parts. This type of system produces only quantities necessary to fulfill the demands of the next operation. The quantity is pulled when it is needed, where it is needed, and in the exact quantity which is needed. The company will also need to ensure that the process has adequate response time to maintain an uninterrupted schedule. Companies can make great strides in JIT by reducing setup and changeover times for machinery. JIT recognizes that any motion which does not add value to a product increases the no value added cost of the product. Reduction of setup and changeover time reduces the no value added costs attached to a product.
With Just in Time management, a company can dramatically improve its product quality.

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Using JIT, a company only holds enough inventories for current production, zero defects must be maintained. Once parts are put into production, attention to quality must continue since no finished goods inventory will be held. JIT is generally recognized that the implementation of JIT will result in significant reduction in inventory. Inventory levels are a key measurement of the JIT process. The JIT philosophy on inventory management is simple. It includes: strive for a level of zero inventories, produce items at a rate required by the customer, eliminate all unnecessary lead times, reduce setup costs to achieve the smallest economical lot size, optimize material flow from suppliers through the production process to the point of sale of the finished product, so that inventories are minimized, ensure high quality just-in-time delivery from suppliers, minimize safety stocks, implement a total quality control program which will minimize scrap, rework, and resultant delays in production. In the JIT manufacturing environment, inventory is "demand" pulled into and through the process on a part-by-part basis in small quantities. The movement of inventories is no longer from the storeroom to a work center, to a storeroom, to another work center and so on. JIT accounting systems are similar to process costing; the vehicle for collecting costs is the time in the system, not a work order.
There was a major need for this process because before the introduction of JIT, there were a lot of manufacturing defects for the existing system at that time. This included inventory problem, product defects, risen cost, and large lot production and delivery delays. The inventory problems included the unused accumulated inventory that was not only unproductive, but also required a lot of effort in storing and managing them. Other implied problems such as parts storage, equipment breakdowns, and uneven production levels. For the product defects, manufacturers knew that only one single product defects can destroy the producer’s creditability. They must create a "defect-free" process. Instead of large lot production - producing one type of products, they awarded that they should produce more diversified goods. Lastly, the system before JIT did not manage well for fast delivery request, so, there was a need to have a faster and reliable delivery system in order to handle customers’ needs. Thus, JIT manufacturing management was developed based on these problems.
JIT was highly needed especially in the automotive industry that’s why Toyota was the first company to use it. In order to have an efficient production system in the automotive industry, there were many issues that needed to be solved. The first main problem was that the automotive industry is a typical mass production assembly type where each vehicle is assembled from several thousand parts that have undergone numerous processes. Therefore, a trouble in any of the processes will have a large overall effect. The second issue was there are very many different models with numerous variations and with large fluctuation in the demand of each variation. The last issue is every few years, the vehicles are completely remodeled and there are also often changes at a part level. The ordinary production control system in such an industry consists of fulfilling the production schedules by holding work-in-process inventory over all processes as a means of absorbing troubles in the processes and changes in demand. However, such a system in practice often creates excessive unbalance of stock between the processes, which often leads to dead stock. On the other hand, it can easily fall into the condition of having excessive equipment and surplus of workers, which is not conformable to Toyotas' recognition. In order to avoid such problems as inventory unbalance and surplus equipment and workers, Toyota recognized necessity of schemes adjustable to conform to changes due to troubles and demand fluctuations. For this purpose, they put their efforts in development of a production system which is able to shorten the lead time from the entry of materials to the completion of vehicle. This is where Just in Time was needed. The just-in-time production is a method whereby the production lead time is greatly shortened by maintaining the conformity to changes by having “all processes produce the necessary parts at the necessary time and have on hand only the minimum stock necessary to hold the processes together". In addition, by checking the degree of inventory quantity and production lead time as policy variables, this production method discloses existence of surplus equipment and workers. This was the starting point of the Toyota Production System.
There are many advantages in using the Just in Time inventory. One major benefit of JIT is the elimination of separate raw materials and work-in-process inventory accounts. These accounts are replaced by one account called Raw and in-Process Inventory. All materials and conversion costs are charged to this account. Due to the reduction of in-process inventories, the computation of equivalent units of production is simplified. Some other advantages include minimizing raw material, minimize defects goods, simplify the production process, and create a timely, multi-skilled work force. By using the JIT production planning approach, managers reduce inventory to a minimum level, keeping on hand only the amount needed in production until the next order arrives. This approach eliminates the double handling of products which occurs when storage is relocated to the work area or shipping area. The JIT production stage is driven by having continuous delivery of items. The use of production planning eliminates the need for material requirements planning (MRP) as a production planning tool. In contrast to the JIT system, a MRT system is a "push-through" system driven by forecasted demand. It examines the finished goods requirements before determining the demand for raw materials, components, and subassemblies. JIT is an attempt to change the manufacturing process and to eliminate non-value-added activities in order to judge the cost high or low. This method can also help organization tremendously.
There are also some disadvantages that JIT can bring. The JIT systems can be disastrously affected by outside forces. September 11, 2001 caused massive amount of financial damage to companies operating JIT Inventory or Production systems because so many large transport systems like Fed-Ex, United Parcel Service (UPS), and the Post Office could not get the goods delivered. It also affected the other transportation industries. With the increased security at the U.S. border crossings with Canada and Mexico as well as at U.S. ports, trucks reportedly waited 18 to 20 hours at some crossing points. Not only did crossing times increase but, more importantly for JIT systems, they became unpredictable problems and increased financial losses especially in perishable products.
There is a definite downside to JIT. In the JIT system often a sole supplier is used for products for the manufacturing process. A company becomes vulnerable if that sole supplier shuts down for some reason. The General Motors Corporation recently faced such a problem. When the Lordstown body stamping and fabrication plant went on strike, the GM Saturn division was forced to shut down. Lordstown is the sole supplier for about 300 Saturn parts. Eight more GM plants followed suit within days, at a daily cost to GM of between $8 and $10 million in pretax profits. It is easy to see that a JIT inventory management system intensifies the impact of a strike. General Motors plight painfully illustrates the risk of a JIT strategy: It puts a company at the mercy of its key suppliers.
Companies that use JIT principles are frequently used by large regional companies, or companies that expand nationally or even globally. Take for instance Sears Department store. Whenever a sale is made, that information is transferred to the computer and stored, to later be submitted to various computers that use the information to update inventory, calculate sales and create other statistical reports. Another example would be a restaurant such as Applebee’s. When food is ordered, the waiter submits this into a computer. At the present time, the information is used for the cooks and for check calculation. Later, the stored information is used in reports for management to clearly see what items have been sold and need to be reordered. The uses span far, as management can also use this data to see sale progressions of certain items and to see what sells the most at various times of the day, week or month. Other companies such as, The Quincy, Ill., plant of Quincy Compressor, Inc. has reduced its inventory to $4 million from $21 million over 10 years. Quincy uses JIT techniques to speed up delivery time for its large industrial air compressors, used in service stations, factory machinery, and climate-control systems. "We are producing more than we ever did, with less people," says David Irick, traffic manager. "When I started here 13 years ago, if you called for a basic air compressor, we quoted you nine months' delivery time. Now we quote 10 days, and we are averaging about five. That's just the way the market is. Nobody carries any inventory."
The JIT inventory method is now being used just about anywhere. It is a common practice that many companies have adopted and many more are realizing the need to pursue the concept. This method is becoming the most effective and efficient in operations today. Eliminating waste, which is the most of important in JIT, can be used for all levels of operation in a company, not just inventory. More and more uses of JIT will be introduced and implemented as businesses seek to maximize the quality of their operations.
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