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Just-in Time Systems, Essay Example

Pages: 17

Words: 4602

Essay

Introduction

In modern-day competitive markets, Just-in-Time (JIT) systems represent one of the main approaches to manufacturing a production model where products are developed and manufactured specifically to meet urgent demand. The distinct difference between JIT and traditional logistics is that the products are not created in surplus. The entire point of JIT production is to avoid waste affiliated with the surplus production, excess inventory, and delayed launch times. These are three of the seven primary waste categories recognized by Toyota Production System and now identified in North America as “lean production”(Tersine, 2004).Companies are motivated to implement JIT due the fact that it helps then establish and sustain a competitive advantage over firms using traditional logistics and manufacturing methods. The primary philosophy promoted within just-in-time (JIT) philosophy is to eliminate waste by cutting unnecessary inventory which ultimately reduced delays in operations and provides more time and funding for improving quality(Tersine, 2004).. The objective of using JIT becomes the production of quality goods and services than can satisfy high demand or an immediate need while the company simultaneously implements a more aggressive standard of continuous improvement. In this way, JIT improves the value-added benefits of operations. A JIT system represents the organization and function of resources, decision rules, and information flows, that can best assist organizations to realize the benefits of the JIT philosophy. An example of the type of challenge JIT systems are best used for is when a company faces the possibility of going out if business or shutting down so they need to restructure their business model. JIT provides a way for companies to reevaluate how they do business and free up capital to operate on a less wasteful scale. Management can be galvanized along with labor to keep the business afloat. JIT also works to help companies identify and adopt new operating practicesthat could assist in providing more value to their consumers. The process of converting from traditional manufacturing to a just-in-time system JIT,reveals many issues in a company that might have gone unnoticed otherwise, and forces stakeholders to address inventory control, process management and scheduling issues. The following research breaks down key characteristics of JIT systems, discusses how they can be utilized for continuous improvement of operations, and it shows how manufacturers and service operators can utilize such a system to reduce costs and improve business. The strategic implications of JIT systems are also addressed, specifically in respect to the implication issues that a company might encounter during the transition from traditional to a JIT system.

Synopsis of Just-in Time systems

The way JIT improves production processes, is through increased efficiency, and decreases production costs. Companies that establish sound JIT systems have the added advantage of being able to manufacture and distribute at a more frequent pace. The successful implementation of the Just in Time system requires corporation from all stakeholders involved, due primarily to the fact that the system forces all aspects of business operations to function at optimum and most efficient level in order to sustain a competitive advantage. For starters, the main objective of the Just in Time system is to reduce manufacturing operation times, or to increase transactions and reduce inventory time by increasing the rate of exchange. In most corporate environments this is done by focusing on the urgency of need. Especially in relation to supplying demand at the highest of seasonal points, the coordination between suppliers and retailers becomes most critical as JIT requires high quality, small quantities within a short notice to ensure that the correct product at the correct place at the correct time.

Essential principles

The primary focus of Just-in-time systems is to reduce inefficiency and unproductive time in the production process to improve operations continuously as well as to make improvements to the company as a whole. Employee involvement and the reduction of inventory play essential roles in the effectiveness of proper JIT implementation. Inventory reduction is essential to JIT operations because it allows for the company to free up capital to allocate to other aspects of the business, specifically in respect to quality improvement. Just-in-time systems go by many different titles, such as, synchronous manufacturing, stockless production, zero inventory, or the most common alternative title lean production, which is used by (Hewlett-Packard), Harley-Davidson uses the term material as needed, and IBM uses the phrase continuous flow manufacturing (Singh & Singh, 2015). Despite the different titles, these are essentially just-in-time JIT because they share the common essential principles of a pull method of material mow, small lot sizes, consistent high quality, standardized work methods and components, uniform workstation loads, standardized components and work methods, and close relationships with suppliers. They also share other essential principle characteristics such as having a line flow manufacturing strategy, flexible work force, preventive maintenance, and automated production.

Advantages and Disadvantages

The main advantage of Just in Time systems is that it cuts costs through the reduction of the obligation to sustain surplus tools, inventory, and other resources mostly related to human capital and operations(Singh & Singh, 2015). Another advantage is that JIT more efficiently satisfies customer needs. Through being lean, JIT run companies have more mobility in regards to market climate, being able to adjust their business strategies to satisfy the buying trends of consumers or shifts in technology. Also through being lean, the company can easily increase their inventory levels based on a specified category of product.

The disadvantages of JIT come into play when the challenges with coordinating the system are taken into account. Coordination is especially significant in respect to retailers and suppliers and their interaction. When a company endeavors to implement a JIT system they place a significant amount of their companies success or failure on the dependability of local suppliers, which requires trust(Singh & Singh, 2015). The primary tenant within the philosophy of JIT is reduction, as time is a valued resource that the system seeks to reduce, the ability for companies to sink their computer systems with their suppliers is paramount. The disadvantage this creates initially is with trusting a third party with critical data vital to the efficient operations of the company, but there are other aspects involved in this exchange as well. While a supplier may be dependable and have good intentions their security system may be more vulnerable to cyberattacks, which puts both parties as risk. Another disadvantage can be seen with the primary risk of not properly executing JIT to satisfy its main objective. For example, as companies operating through a JIT system tread a fine line between being overstocked and understocked, it is highly likely mismanagement of the system can result in either happening. If there is some form of disruption with the system in regards to logistics, buyer might counter this by over compensating to satisfy consumers which might overstock inventory and cause waste. On the other hand, at all times, through staying lean, the company runs the risk of running out of inventory for particular products.  Managing these challenges requires an in depth understanding of company operations and monitoring inventory.

Assumptions

The most common assumption associated with JIT implementation is the misconception that establishing the system is an easy task. Large companies use to mass manufacturing products on a large scale may assume it’s easy to reduce resource usage, while maintaining similar if not higher levels of production overall. Due to the reliance JIT has on efficient and effective coordination, as well as many of the new risks this introduces to operations, it becomes incredibly difficult to make this type of adjustment downsizing. The challenge stems from the need to setup relationships with dependable suppliers who can meet tight deadlines, but produce higher quality products.

Material cost is a fixed rate

Mazanai(2012), in his study on the impact of the just-in-time (JIT) inventory system on efficiency, flexibility and quality among small enterprises, notes that, “JIT has the effect of releasing the much needed capital and lessen the burden of SMEs of the need to keep excessive inventories” (Mazanai 2012). He argues that setting up a sound and effective JIT system can provide a firm with enhanced negotiating power and the ability to ensure timely deliveries of their products and the reduction of inventory in stock. The author further points out that there is an underlying philosophy of management within JIT that enables businesses to better allocate capital and function more productively beyond basic operations but in a strategic manner that extends into expansion and fiscal liquidity, when he states that, “the management philosophy underlying JIT is to continuously search for ways to make processes more efficient with the ultimate goal of producing goods or services without incurring any waste. Approaches to cut operating costs are of great importance as way of solving the problem of financial constraints faced by many SMEs” (Mazanai, 2012). This could largely be attributed to the fact that material costs are a fixed rate and JIT gives companies more control over material cost manipulation. This is especially true of small and medium enterprises which benefit from the ability to maintain small operations that can manufacture and distribute in large volume. They find ways to reduce cost by also increase the value of their products in the eyes of the consumer, JIT, essentially provides this benefit. A Mazanai notes, “SMEs must seek approaches to drive up customer value and at the same time reducing costs. This can be achieved through approaches aimed at reducing costs, improving product and service quality, increasing operational efficiency and being flexible and have the ability to meet the everchanging customer demands. Just in Time inventory management is such an approach” (Mazanai, 2012).Continuous improvement initiatives have in many ways become a byproduct of JIT, as they better enable companies to work towards improving operations from a lean position.

Continuous improvement has also developed into a common organizational phenomena in the past decade. Intense competition, abetted by free markets, globalization, trade liberalization, and technology enhancements, has relegated comparative advantage to a temporary status. The prevalent view is that the status quo is a terminal malady with potentially dire consequences, so the performance envelope must be in an expansionary mode to add more value to targeted customers. This article discusses generic continuous improvement thrusts that are predicated on waste identification/reduction and devised to target the improvement journey. It outlines reductions in valueless time, valueless activity, and valueless variance as the primary drivers for continuous improvement. By focusing on the reduction of the triad of waste, JIT  highlights areas of process improvements that are often overlooked within corporations but that significantly improve operations through strengthening competitiveness without requiring significant capital investment.Time waste differs from material waste in that there can be no salvage.

The final price of products are also not influenced by inventory. There is no need to cut prices to reduce inventory as the cost of production has already been substantially reduced, inventory has already been substantially reduced, and it in no way is impacting future or current operations. One key advantage of lean production of JIT, is that raw material can be purchased locally if main suppliersfails to provide it due to the fact that resources have been reduced substantially to the effect that satisfying small orders are the main concern. Another advantage is that employee pay and benefits are unchanging from lot to lot. This mainly means that employee pay and benefits are not influenced in anyway by the implementation of JIT.

Supplier

Due to the fact that JIT systems function on reduced inventory, it is vital that companies using these systems maintain close relationships with their suppliers(Sakakibara, et al., 1997). While companies using JIT systems are not required to overstock their inventory, they are required to frequently stock for urgent shipments, of high quality products, to meet scheduled arrival times. This creates a relationship between companies and suppliers where the suppliers have to provide shipments on a more frequent basis. This is why it’s common for manufacturers running JIT systems to use local suppliers. An example of this can be seen when GM setup the Saturn production in Tennessee and had a substantial number of suppliers relocate to the location, or when Harley Davidson reduced its suppliers and then paid extra preference to those suppliers near their operation plants (Kovacheva, 2010). In her study on the challenges associated with lean manufacturing implementation, Kovacheva (2010), notes that this relationship established between suppliers and JIT companies provides a significant advantage in regards to distribution of products to the end users stating that, “the main advantage is that the suppliers are willing to coordinate theiractivities with the actors within the same functional area which ensures the continuous flow from one operation to another” (Kovacheva, 2010).

Distribution network / Retailer

As production becomes lean from JIT, it’s natural to assume distribution networks and retailers would reduce as well, but the end result is quite the opposite. Lean production actually results in a higher frequency of manufacturing, production and distribution. Kocheva (2010) notes that, the network of company operations that run JIT systems as their main form of lean manufacturing, entail a network of“suppliers upstream and customers downstream” (Kocheva, 2010). The author goes on to note that this requires that strong long-term relationships be established with suppliers with the suppliers are put into lights not only because of reducing the lead times, but also building of strategically closer and technologically reliable connections. As cited in (Frazier et al., 1988) (Schonberger, 1982) were the first to draw attention to the notion that logistics is an extension of the lean production process and the emphasis should be on the market and customers as opposed to the company itself(Frazier et al., 1988). The most difficult task entails understanding the conflicting needs of individuals, functions and companies up and down the value stream(Frazier et al., 1988)(Lee, 2002).

Customer or end user

A significantly positive aspect of JIT is that it reduces product launch times as well as distribution and delivery times of products to the consumer or end user. This allows companies to more efficiently produce, distribute, and exchange their products for compensation, but it also satisfies a potent demand on a more frequent basis(Singh& Singh, 2015).

Problems / Issues

There still some problems that can arise from lean production, such as the inability to satisfy certain manufacturing demand obligations due to economic crisis or natural man-made disasters that can cause disruption in operations.

Economic crises

JIT is one of the most effective methods for a company to endure economic crisis specifically in respect to the way it cuts costs and reduces the use of vital resources for a company to continue operations(Huson and Nanda, 1995). When talking about the success of Toyota during economic crisis, it is noted how the company utilized JIT to survive the economic crisis. The authors note that, “great lean leaps are made during tough economic times. Taiichi Ohno pushed the Toyota production System through the entire Toyota Motor Company in 1950 during the greatcrisis that left Toyota on the brink of bankruptcy” (Amasaka, 2007). It is argued that this is prime support for how JIT is   advancing the lean transformation processes in the form of freeing up cash flow, through the elimination of excess inventory to better enable companies to function during pivotal economic times(Amasaka, 2007).

Natural and man-made disasters

One major benefit of JIT, is that it’s less susceptible to natural and man-made disasters, such as hurricanes, earthquakes, or cyber terrorist attacks. For example, when instances occur that could impact production or manufacturing there is never a substantial amount of inventory or operation resources that can be effected at any given time(Frazier et al., 1988).

Results and Benefits

Reduction of resources utilized overall is the main result of JIT, and the benefit this provides companies is the ability to view their operations more objectively independent of certain stresses, distractions or time obligations. This leads to a culture of continuous improvement(Singh & Singh, 2015). Continuous improvement initiatives have in many ways become a byproduct of JIT, as they better enable companies to work towards improving operations from a lean position. Continuous improvement has also developed into common organizational phenomena in the past decade(Singh & Singh, 2015).

Organizations with successful Implantation:

Toyota Motor Company – credited with the concept

It is common within most JIT epistemology to credit Japan, specifically, Toyota, as the region to introduce lean manufacturing to the western world. Kocheva makes this distinction noting that “the increasing competitive advantage of Toyota increases the challenge for the Western companies. The firms try to implement the approach in their context. A connection between organization size and the level of implementation was identified throughout the different areas of the organization” (Kocheva, 2010). The author goes on to point out that most studies on the topic found that once Germany and US companies implemented JIT based resource management techniques they saw substantial improvements in their operations.

Toyota Motor Company was founded back in 1918, based on a spinning and weaving business formed from the success of Sakichi Toyoda’s automatic loom.When Toyoda sold the business to the Platts Brothers for £100,000, in 1929, his son Kiichiro, would later use these funds to start an automobile company (Holweg, 2007). While there are some discrepancies within the story of how Toyota was originated, it is said that on Sakichi’s deathbed, he told his son that her served Japan with the loom, and he wanted his son to serve Japan with the automobile(Holweg  2007). During this time, For and General Motors (GM) had flowed the Japanese market with their local subsidiaries. The start of Toyoda was faced with substantial challenges like financial troubles and ownership disputes.Through the use of Ford and GM components, Kiichiro was able to overcome the initial challenges and launch his Model AA (Holweg  2007). He thenrelabeled the company ‘Toyota’ “to simplify the pronunciation and give it an auspicious meaning in Japanese. Truck and car production started in 1935 and 1936, respectively, and in 1937 the Toyota Motor Company was formally formed” (Holweg, 2007). World War II created a disruption for production, and brought on post-war economic hardships that resulted in overstocked inventory and financial problems for Toyota.This also brough on a wide range of labor disputes for the company. In 1950, the challenges mounted; Kiichiro resigned and Toyota Motor manufacturing and Toyota Motors Sales had a split.Resultant severe labour disputes in 1950 forced a split of the Toyota Motor Manufacturing and Toyota Motor Sales divisions, as well as the resignation of Kiichiro from the company (Holweg, 2007).

In his study on the observations of justin time implementation as the U.S. attempted to catch up with Japanese automotive production by implementing JIT, Schonberger, (1982), noted that, “the U.S. industry has been bombarded with prescriptions for catching up with the Japanese. Surprisingly absent from many lists of these prescriptions is the Japanese just-in-time (JIT) production system” (1982). The study which was produced in 1982 pointed out that at the time the JIT system required minimal use of computers, and further emphasized the fact that the U.S. at the time was relying substantially on computer based inventory control systems which enabled far less control over inventory size than JIT. Furthermore the author assessed the relationship between JIT and MRP, otherwise known as materials requirements planning, another method company used by manufacturers to reduces inventory (Amasaka, 2007).  The authors note that in addition to having an advantage over U.S. automotive production at the time, more importantly, Japanese JIT tends to promote major improvements in quality and productivity, as well as increased worker responsibility and commitment(Huson, and Nanda, 1995). JIT applications and benefits apply not only to the manufacture and development floor but also to the distribution of products and on the purchasing end.

Ford Motor Company – did not file federal assistance during fall out

In his study on the implementation of the just in time system in the Unites States, Im and Lee (1989) note that following the success of the system’s implementation in Japan, U.S. firms started to adopt the system. The authors state that, “impressed by the remarkable improvement in productivity by Japanese manufacturing companies, many leading American counterparts are implementing their Just‐in‐time (JIT) systems. There are still several key issues to be answered for successful implementation. The results of a field survey on the implementation of JIT systems in US firms are described and some major findings are discussed (Im and Lee, 1989). The success of this adoption and its popularity can be seen with companies like Ford Motor company, General Motors and Harley Davidson.  In a study assessing the manufacturing leanness of Ford Motor Company compared to general motors when Ford Motor company first implemented  JIT between 2001-2003, it was found that Ford Motor company’s manufacturing increased in efficiency through improved leanness. The authors specifically note that their study found, “applying the measure to compare the production leanness of Ford Motor Company and General Motors, the paper selects Honda Motor Company as the benchmarking firm. Selecting just-in-time (JIT), Kaizen, and quality controls as lean attributes, the paper uses surrogates for these attributes extracted from audited financial statements over the years 2001–2003” (Bayou and De Korvin, 2008). The results of the study specifically revealed that Ford Motor company outperformed General Motors based on a leanness metric by 17%  in respect to the  benchmarked system set by the company.

Dell Computer Corporation

Benefits

One of the key financial benefits of JIT, is that funds used to purchase and store large quantities of raw materials can be utilized elsewhere, because there is no need to sustain large inventory. As Lee (2002), Dell Computers and other computer and technology companies have largely benefited from utilizing JIT systems due to the fact that they can produce and distribute their products in a timely efficient manner. The author notes that, “Dell Computer is a champion in this game. As long as PC manufacturers can design their products with highly modular structures—so that the final assembly and test stepd can be simply and reliably performed and suppliers of key components can provided stable suppliers—then companies such as Dell, Gateway, and others can engage in build-to-order processes” (Lee, 2002). The ability to do build to order can also be seen with companies like Amazon, who often use print publishing systems, where they print books on demand as customers purchase these items. This substantially reduces the cost of storing inventory, freeing up capital for other business costs, but also making manufacturing much leaner.

In Bruunaand  Meffordb  (2004) study on the relationship between the internet and lean production, the authors note that the term lean production evolved into the fully realized concept of JIT but now with advancements offered by the internet, technology companies, and small enterprises as alike are expanding the use of JIT into other aspects of business beyond just lean production. The authors note that lean production “was used by the authors of theInternational Motor Vehicle Project carried outby MIT in the 1980s to describe the approachoriginally developed in the Japanese auto manufacturingindustry which is contrasted with themass production approach common in the UnitedStates and Europe at the time” (Bruuna and Meffordb, 2004). They further point out that it has become an industry standard practice to refer to this method as JIT, but now many aspects of business worldwide have taken JIT to expanisve new levels beyond the simple JIT which was used to“more accurately describes the production systemsused in the Japanese auto industry at the time (andnow in much of the world)” (Bruuna and Meffordb, 2004). They breakdown the definition of lean production, the core origin of JIT, to mean the use of less production based resources as well a the reduction of inventory, further noting that this results in a reduction of human capital needs, reduction in manufacturing space as well as reduction in engineering, capital investment for tools, and reduction in the time leading to product launch. They further note that, “also,it requires keeping far less than halfthe needed inventory on site,results in many fewerdefects,and produces a greater and ever growingvariety of products’’(Bruuna and Meffordb, 2004). The core aspect of this definition reveals a significant emphasis on the reduction of all resources, and the authors find that the internet further supplements this concept through enhanced business to business relationships and increased efficiency, specifically in regards to business intelligence.

Conclusion

In sum, in modern-day competitive markets, Just-in-Time (JIT) systems represent one of the main approaches to manufacturing a production model where products are developed and manufactured specifically to meet urgent demand. The distinct difference between JIT and traditional logistics is that the products are not created in surplus. The entire point of JIT production is to avoid waste affiliated with the surplus production, excess inventory, and delayed launch times.The above research assessed key characteristics of JIT systems, discussed how they can be utilized for continuous improvement of operations, and it shows how manufacturers and service operators can utilize such a system to reduce costs and improve business. The strategic implications of JIT systems were also addressed, specifically in respect to the implication issues that a company might encounter during the transition from traditional to a JIT system, and they revealed that it is significantly difficult to implement a JIT system effectively without cooperation.The main finding of this research shows that JIT is evolving as a philosophy within a wide range of markets, due primarily with the introduction of the internet. JIT is difficult to implement without proper coordination between suppliers and retailers. JIT allows for continuous improvement initiatives through freeing up capital. The use of the internet to further supplement the concept of resource reduction as a whole enables businesses to now reduce funds they might invest on human capital, as well as the subsequent time and effort that might have invested in certain aspects of operation, to now outsource services or even automate those services with affordable software and applications. The use of JIT in the automotive industry has served as a stepping stone for it broad application across many industries, especially the technology sector.

References

Amasaka, K. (2007). Applying New JIT—Toyota’s global production strategy: Epoch-making innovation of the work environment. Robotics and computer-integrated manufacturing, 23(3), 285-293.

Bayou, M. E., & De Korvin, A. (2008). Measuring the leanness of manufacturing systems—a case study of Ford Motor Company and General Motors. Journal of Engineering and Technology Management, 25(4), 287-304.

Bruuna, P., &Meffordb, R. N. (2004). Lean production and the Internet. Int. J. Production Economics, 89, 247-260.

Davenport, T. H., & Glaser, J. (2002). Just-in-time delivery comes to knowledge management. Harvard business review, 80(7), 107-111.

Frazier, G. L., Spekman, R. E., &O’neal, C. R. (1988). Just-in-time exchange relationships in industrial markets. The Journal of Marketing, 52-67.

Holweg, M. (2007). The genealogy of lean production. Journal of operations management, 25(2), 420-437.

Huson, M., & Nanda, D. (1995). The impact of just-in-time manufacturing on firm performance in the US. Journal of Operations Management, 12(3), 297-310.

Im, J. H., & Lee, S. M. (1989). Implementation of just-in-time systems in US manufacturing firms. International Journal of Operations & Production Management, 9(1), 5-14.

Kovacheva, A.V. (2010). Challenges in lean implementation. AARHUS School of Business, 1-55.

Lee, H. L. (2002). Aligning supply chain strategies with product uncertainties. California management review, 44(3), 105-119.

Mazanai, M. (2012). Impact of just-in-time (JIT) inventory system on efficiency, quality and flexibility among manufacturing sector, small and medium enterprise (SMEs) in South Africa. African Journal of Business Management, 6(17), 5786-5791.

Monden, Y. (2011). Toyota production system: an integrated approach to just-in-time. CRC Press.

Sakakibara, S., Flynn, B. B., Schroeder, R. G., & Morris, W. T. (1997). The impact of just-in-time manufacturing and its infrastructure on manufacturing performance. Management Science, 43(9), 1246-1257.

Schonberger, R. J. (1982). Some observations on the advantages and implementation issues of just-in-time production systems. Journal of Operations Management, 3(1), 1-11.

Singh, J., & Singh, H. (2015). Continuous improvement philosophy-literature review and directions. Benchmarking: An International Journal, 22(1).

Tersine, R. J. (2004). The primary drivers for continuous improvement: the reduction of the triad of waste. Journal of managerial issues, 15-28.

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