JUST IN TIME
There is a cost associated with each and everything in this world. Businesses rise or fall if they don’t do the right estimation of the costs incurred for each of the element which contributes to building their profits and functioning of their organization.
With the changing time our world has also evolved; the hunger for power and money has always been there in this world which led to wars, politics and disaster. However, one of the biggest disasters led to the invention of a technique/process which has become an integral part of all the industry today. Lack of resources brought in the need for designing and implementation of this technique.
What is that technique? “Just in time”
A technique which focuses on lean management and utilization of resources in an efficient manner.
“Great things are done by a series of small things brought together” – Vincent Van Gogh
“Our biggest cost is not power, or service, or people. It’s lack of utilization. It dominates all other costs.” – Jeff Bezos
STATISTICS – What Numbers have to Say?
- The lead time was reduced by 40%, the introduction of the new model was increased and are 30% faster and productivity increased by 20% when Nike implemented a just-in-time delivery system to improve their disconnected production facilities across Southeast Asia.
- Grayton implemented JIT delivery system and it works as a competitive advantage for them in the industry. Their cash flow increased by 70% after using a JIT delivery system.
- Apple has also used JIT principles to make it’s manufacturing process a success. They outsourced their production which resulted in cutting costs and decreasing overstock issues. Only one central warehouse is built in the USA and over 150 key suppliers worldwide, this helped them to build strong relationships with their vendors by implementing strategic plans.
DESCRIPTION – Let’s take a Deep Dive
Inventory management is one of the crucial parts of any manufacturing unit. Companies always try to optimize their inventory management to gain an advantage from their capital in hand to improve other functions of their business. One of the many inventory management methods is – Just in Time (JIT) manufacturing.
Aligning supply’s directly with production schedule is a management strategy called Just in Time inventory management. i.e. a supply chain management strategy that synchronizes supplier orders with production or delivery schedules. Implementation of Just in time inventory is also known as “Pull System” because each subprocess in JIT pulls from the previous subprocess when it is required.
Objectives of Just in Time
- Increase efficiency
- Decrease waste
- Reduced cost of inventory
It is centred at increasing efficiency if demand forecasting is done accurately.
Evolution of JIT
Just is time was introduced in the manufacturing industry and also known as just in time production or the Toyota Production System(TPS). Its roots were laid Japan in the 1960s and 1970s, it started to solve the lack of standardization and the post effect of World War II in Japan. The reason’s like:
- Lack of finance (cash) which didn’t permit maintaining a large inventory.
- Lack of land and space to build huge factories.
- Lack of natural resources in Japan due to the destruction caused in World War II.
- Unemployed people in Japan.
Who invented Just in Time?
Japan then decided to manage and cater to their issues in a lean manner. Toyota started using JIT in the 1970s and it took them 15 years to master the process. Taiichi Ohno, a Japanese industrial engineer and businessman who joined Toyota in 1943 started working as a shop-floor supervisor in engine manufacturing shop of the plant, grew to become an executive in the company. He is known as the “Father of JIT” or Toyota Production System.
What is Just in Time concept?
In the manufacturing environment Just in Time relies on signals between different modules or point in the manufacturing process, which notify the production in charge when to start the next batch. These signals are called “Kanban”, it is often used when lean manufacturing and JIT is discussed. It is used to improve the efficiency in manufacturing, it is a system which measures the lead time and cycle time throughout the production process and highlights problem areas. This helps to identify threshold limits for work-in-process inventory to avoid overcapacity.
There are companies which are using this system but with different names:
- Motorola – Short Cycle Manufacturing
- IBM – Continuous Flow Manufacturing & Demand Flow Manufacturing
- Toyota – Toyota Production System
Elements of Just in Time
- Workers and Management
- Plant and Equipment
JIT in the industry
The manufacturing industry has evolved over the past four decades. Due to this, there has been a radical shift in the management approach, techniques deployed in production and process, attitude of the supplier, expectations of the customer and the competition in the market. In this modern era, the world has become a global market and companies are experiencing increased pressure from customers and competitors.
However, to cope with this change there is a high need to deliver quality and a system which can bring efficiency.
Here, JIT plays a major role as procurement and supply chain is the primitive stage in any business and it can be applied to fields other than manufacturing. Some of the sectors are:
- Retail – Zara is the best example
- FMCG – HUL and ITC
- Fast Food – Burger King & Mc Donald’s
- Clothing and apparel – Nike
- Publishing & Print media – Popular among self-publishing and independent publishers
- IT & Technology – Dell & other IT companies which use Just in Time compilation in coding.
- Automotive – Toyota is the most appropriate example.
Advantages of Just in Time
- Reduction in storage and waiting time: In a JIT system, procurement of raw material or goods is done only when required. This reduces wastage and the storage space required to maintain inventory can be reduced. JIT system can be helpful to achieve a highly responsive supply chain system which can respond quickly and this can reduce the excess inventory of unsold products.
- Little capital tied up in stock: JIT keeps stock holdings to bare minimum cost which results in lower inventory stocks and very much lower warehouse and storage cost. So, capital can be used more productively into other business functions.
- Waste minimization: As a JIT system employs a well-managed and integrated supply system, minimal inventory levels can be maintained. Which means less is lost to accidents, degradation and obsolescence. High-quality controls are maintained because there are substitutes available for the material being used in the production process, which results in minimal wastage.
- A stronger relationship between supplier and producer: Due to the transparency between supplier and producer with respect to communication and information flow there is an open relationship which is developed which helps to support strong supply coordination. These relationships are enhanced by long-term contracts.
- Maximising Work-flow: A robust lean manufacturing setup results in reduced throughput times, flow and cycle. Which enhances productivity and leads in speeding up delivery of products to market, resulting in minimal costs and improved customer satisfaction. High responsiveness can be achieved by using an efficient JIT system.
Disadvantages of Just in Time
- Sudden rise in the demand from customers cannot be catered because the inventory maintained is minimal and planned to produce the projected output.
- Any error in the system can cost a huge loss for the company, as it will directly have an impact on the production and the risk is boiled down to the demand and supply of the company. However, there is no room for any kind of error.
- There is a need for information technology structure to establish a link/communication between the producer and its suppliers. This calls for high investments and if there is any outage the whole supply chain and production can go for a toss.
- When all the entities involved in the whole supply chain work in great tandem and coordination, only then the system will be a success. It may fail if any of the linkages in the supply chain fail to fulfil their obligations and respond to the requirements in a timely manner.
Just In Time Vs Just In Case
Just-in-Time and Just-in-Case are the two types of inventory management process. Both are opposite to each other as JIT focuses on keeping as little inventory as possible and JIC rely on having surplus or plenty inventory. Using any one method is a very rare condition, companies usually try to be in the middle of the two extremes.
JIT process aims to achieve the maximum with minimum inputs. This is possible only if all the parties integrated into the whole ecosystem of the supply chain is committed to achieve the same and work with a great amount of coordination. A well planned and timely coordinated IT system is needed to ensure efficient working in JIT system, high level of commitment is demanded from the stakeholders.
Contingency plans need to be in place to tackle disruptions and close monitoring is necessary on the suppliers which are done by businesses using Just in Time. Just-in-time manufacturing has been successfully implemented in many manufacturing organizations and now is finding its way in sectors other than manufacturing. They are reaping the benefits of this process and creating a competitive advantage for themselves which help the companies to take over their competitors or be in the competition. However, there are a few disadvantages which are discussed earlier and can be overcome with a little forethought and a lot of commitment at all levels of the organization.
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Author – Snehal Namade