Just-in-Time Inventory

Michael A. Hartmann

Just-in-Time Inventory

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Abstract

The Just-in-Time (JIT) manufacturing and inventory system is a philosophy that strives to eliminate wastes and be effective in lowering production costs. Inventory is supplied only when needed from start to finish. JIT requires the total cooperation of the entire company from the top executives to the common factory worker. Suppliers must also be included in the system to ensure that materials are shipped exactly when needed. Only when this is accomplished can a company successfully execute JIT inventory principles.

Just-In-Time Inventory

Introduction

Just-in-Time (JIT) is a widely used inventory system that is used throughout the world. The system is put into operation to enrich the Return on Investment (ROI) of a company by diminishing in-process inventory and its related overheads. In basic terms, JIT is a manufacturing structure which is designed to produce only the needed units, in the required amount at the obligatory time that upholds desired level of quality standards. It is a movement that is intended to attain excellence while diminishing or eliminating waste (Agility Centre, 2000).

The system requires the involvement of all employees from executive management to the factory worker. JIT is a long-term commitment that may take time and practice to achieve optimal results. All employees must be trained on the attributes of JIT for the system to reach its potential. The fundamental attributes if Just-In-Time manufacturing state the following (Agility Centre, 2000):

  • Customers can receive what they desire when they need it with no added consequences or hassles.
  • Continuous improvement is necessary to remain competitive to offer customers the best possible solution.
  • Customers are the motivation for the company being in existence, and they deserve to receive a faultless product or service.
  • All process bottlenecks and buffers are inefficient and need to be purged from the system.
  • Employment within a JIT company consists of resolving increasingly challenging issues in a multi-skilled, cross-functional team atmosphere.

To absorb a company into the JIT philosophy, the company must first be prepared to develop basic strategies. Companies must be aware that Just-in-Time has total authority in ordering, scheduling, and producing aspects of a manufacturer. The success of this system in a manufacturing company is dependent on employees, suppliers, and customers. The system solely relies on a partnership between all elements of the manufacturing chain. A break in the chain can result in a total collapse in the JIT system if it is not remedied. Some of the elements of a strategy can be as follows (Agility Centre, 2000):

  • Know the customer and their desires, recognize value-added activities and functions.
  • Focus all the company’s processes around the value flow of activities.
  • Bring into line the company to the requirements of all customers.
  • Actions that are excessively timely, assets and excess space that do not to the customer’s requisite are non-value added and must be condensed or eradicated.
  • Institute performance measurements in all facets of the value stream.

The most important aspect in JIT is implementing the empowerment of the workers. A company that empowers its employees provides them with the authority to resolve issues on their own. When this is available, workers will be properly trained and have the power to halt production to work out problems, as an alternative to depending on the direction of supervisors. The purpose of worker empowerment is obtaining employees that are engaged in problem-solving at the shop floor level (Agility Centre, 2000).

History

Fredrick Taylor is attributed with developing the fundamentals of JIT by presenting his scientific management ideology to the manufacturing community. His methodology for operational blueprint effectiveness encouraged manufacturers to look at means to improve systems to boost production at reduced costs. Furthermore, Taylor acknowledged the erroneous technique of extending tool life as a substitute for slashing production rate. Consistency and superlative procedure operations are also essential ideologies of scientific management. Taylor also thought that best practice operation effect enhancements to all related operations in the business (Strategos, 2005).

Henry Ford and Charles E. Sorensen shaped the first comprehensive manufacturing policy in 1910. They assembled all the rudiments of a manufacturing scheme comprising of employees, equipment, tooling, and products and structured them in a continuous technique for fabricating the Model T automobile. Ford was so remarkably triumphant using this scheme that he rapidly developed into one of the world’s richest men and massed produced vehicles to the world. Ford is regarded as by countless industrialists to be the earliest creator of Just in Time Manufacturing (Strategos, 2005).

After World War II, Japanese companies embarked to examine American manufacturing procedures such as the structure employed at Ford Motor Company. Toyota Motor Company took scrupulous regard to Henry Ford’s system and Toyota’s Taichii Ohno and Shigeo Shingo commenced to integrate Ford’s policies. Nevertheless, they quickly recognized that the Ford system had countless imperfections that needed to be enhanced to operate efficiently in the industry that existed after World War II. The Ford System did not consider the sociological facets of the workplace and was thought to put insignificant importance on the contributions that could be generated by company workers. Toyota embarked to define a total system that would be able to be used at all levels and fabricate higher quality parts at reduced costs. They also acknowledged the vital function of inventory. This system was soon christened the Toyota Production System (Strategos, 2005).

As the western world observed the accomplishments of the Toyota Production System, an assortment of American corporations attempted to imitate Toyota’s system with varying results. In 1990 an American, James Womack distributed a manuscript called “The Machine That Changed the World”. Womack’s writing was a straightforward account of the history of automobile manufacturing mixed with a study of American, Japanese, and European automotive production facilities. The outcome of the book was the creation of the expression “Lean Manufacturing”. Lean Manufacturing caught the awareness of companies all over the world. Lean Manufacturing methods are now widespread throughout the world. The expertise and knowledge base are mounting quickly. “Just-in-Time” is another term for Lean Manufacturing (Wikipedia, 2005).

JIT Process

Just-in-Time system centers around activities in the factory. Events in the factory effect how the company is going to execute their inventory levels, costing, and pricing schemes. Therefore, JIT suggests that it is the factory that must be able to implement the bulk of the responsibility for the company to be successful. Moving products quicker with smaller lot sizes and minimal waste is the key to achieving consistent job flow. Consistent job flow enables the company to run smoothly. This is achieved by implementing a Kanban system and a pull system (Agility Centre, 2000).

Kanban is the Japanese term for “card”. Kanban is a clear-cut parts movement configuration that depends on cards and containers to transport parts from one workstation to another in a manufacturing setting. A Kanban card refers to a set quantity of production or dimensions of a container and denotes information that consists of a part number, nomenclature, the type of the container, unit load, preceding station, and the subsequent station. The foundation of the Kanban model is that a company should only dispense components to the production line as and when they are necessary so it does away with storage in the production region. In this manner, each unit can be tracked and Work in Process (WIP) can be tracked more efficiently. Items that are not required to process products should be completely moved from the area to avoid confusion or delays. It is important that the areas are continued to be clean to avoid any pitfalls (Agility Centre, 2000).

One common method to control factory space is to construct cellular layouts. This is made up of manufacturing cells or work-cells that consist of different machinery grouped together to manufacture a specified category of products in a specific stage. These Cells are situated in relation to each other so that material movement is as little as possible. This allows materials to be tracked as well as WIP and finished products (Najarian, 2002).

Conventional manufacturing processes are structured by functional areas into plant divisions. This system dictates in the case of a PCB manufacturing company that all wave soldiers are in one department, all component placement machines in another, PCB wash machines in another and onwards. Typically, employees are situated down straight lined fashioned production lines and produce products in hefty batches or lots. Batch production describes a process that carries out all the order and then shifts it to the subsequent process for more processing (Najarian, 2002).

JIT cellular organization provides the opposite process. Production is controlled by product in contrast than by function with equipment committed or somewhat committed to a family of products. Production in cells is accomplished consecutively in the sequence in which a process should be executed to manufacture the end item. Employees in this kind of system are near one another and are completing processes on lots of one (Najarian, 2002).

Cellular production consists of the following characteristics (Najarian, 2002):

  • Product family focus. Product family grouping and layout are what comprise a work cell driven plant. Equipment is devoted to the product line.
  • One at a time production. A lot size of one is what results in overlapping operations. In this setting, the subsequent process is established right after the part comes out from the previous process. In this manner, the company produces a batch of one piece.
  • Flexible output levels. To appreciate the benefits of JIT, work cells loosen the output level to the final level of demand by the customer regardless if the customer is the ending user or a subsequent work cell. All work cells must maintain their output levels harmony to keep away from batch production.
  • Operator multi-tasking. Work cell operators characteristically control more than one machine at the same time. In this situation, the operator is frequently administering alike machines making dissimilar parts.
  • JIT defines certain goals during the production of products from start to finish. These goals ensure that the process flow is running evenly and consistent as possible. These defined goals are as follows (Hendrickson, 2005):
  • Zero Defects. If quality is not 100%, production is in discontent. In legacy manufacturing systems, companies believed that zero defects production was not likely and not essential. Previously it was the attitude of companies to be content with meeting the expectations of their customers. JIT strives to eliminate the potential for defects and exceed customer expectations.
  • Zero Set-up Time. Reducing the set up-times results in an increasingly even production level. Zero set-up time also generates shorter production time and production cycles, and fewer required inventories. Under JIT set up times should be insignificant. This necessitates either exceptionally rapid changeover to minimize the effect on production or the accessibility of additional machines previously set up. Fast changeover allows small lot sizes to be sensible and permits an extensive selection of parts to be made regularly.
  • Zero Inventories. Inventories, as well as WIP, finished goods, and sub-assemblies, must be exhausted. This is a polar standpoint from traditional manufacturing, where inventories are perceived as a buffer against a variable demand, or as a buffer to augment unreliable vendors. Simply inventory is considered a liability. Every effort must be used to eliminate it.
  • Zero Handling. This means purging all non-value adding actions. Design is the first phase in manufacturing and is consequently the single most significant factor in both manufacturing costs and labor requirements.
  • A Lot Size of One. A lot size of one enables a company to be dynamic when demand is varying. Lots should be used for immediate needs only. A minimum replacement quantity is preferred for both manufactured and acquisition parts.
  • Zero Queues. Manufacturing queues need to be eliminated under JIT principles. When problems arise, workers can recognize the reasons and correct them. The correction procedure is assisted when queues are small. If the queues are small, it reveals problems before they can affect additional products.

The JIT system promotes the pull production system. The pull system is modeled after the retail system. In retail, products are supplied based on relies on customer demand to pull products all through the inventory system. Shelves are stocked according to the current demand of customers. In the same fashion, the JIT pull system states that workers will only take those parts or materials are required and can be handled without interruption. This is dissimilar to the conventional push system which develops demand forecasts to begin assembly and inventory designs. Pull systems have fewer bottlenecks and are inherently less problematic to manage than usual push systems (Najarian, 2002).

JIT Planning and Control

For a company to begin to produce a strategy for producing a product under JIT, they must establish a production schedule. The Master Production Schedule (MPS) provides the governing schedule that all products will be manufactured under. The MPS regulates the amount of each product to be completed each week of the short-term planning scope. The MPS is also a plan for the outlook of the expected manufacture of end products. The MPS regulates its production timetables centered on a forecast, orders, and lot size (Hendrickson, 2005).

Following the creation of the Master Production Schedule, a company should determine how they will plan and control the inventory needed to assemble the product. This includes ordering the right amount of material needed to assemble the product and the costs associated with them. The company must be sure that all required machines are purchased and in place in their respective work cell configurations. Manufacturing floor schedules like machine changeovers and workforce schedules should be determined to compute the amount of labor and associated overhead that will be directly linked to the product. Indirect overhead should be included to give an accurate cost that will be charged to the costs for production (Hendrickson, 2005).

Ordering materials under a JIT system involve having the knowledge of what to order and when to order. It also controls supplier selection which determines the elimination of suppliers. There are some concerns with companies with relying on one primary vendor to supply materials for a project; however, it is becoming increasingly common in JIT to use the single vendor all the times. Using the same vendor is essential to building up a relationship with vendors, to guarantee long-standing relations. This long-standing relationship is crucial since, in a pull system like JIT, the materials are obtained or delivered for by customers as required. If the buyer has any predicaments, then the supplier must react to that. In the case that a supplier has issues, then the buyer is affected and production ceases. There are three vital ingredients in the capability to forge a relationship with suppliers. These ingredients are trust, communications and time and visibility (Hendrickson, 2005).

Trust is the essential element to need to supply constancy among a company and its supplier. Having a high level of trust will help mold the two companies together that will result in benefiting them both. When two companies are on the same page, any problems or special circumstance can be taken care of quickly (Najarian, 2002).

Communications between the two companies are also vital. Suppliers have two mechanisms to cope with communication. They are Supplier Contact and Supplier Programs. Supplier Contact is the point of contact that a company can get in touch with in any situation. The benefit of this is that it offers a formal communication conduit for the supplier and consequently diminishes any potential miscommunication. Supplier Programs keep the supplier up to date on matters of reciprocal concern or anything that may alter supplier’s production quality or level. These programs offer important knowledge of each company’s requirements and needs (Najarian, 2002).

Time and visibility allow the partnership to respond to variations in customer demand that can fluctuate. Changes occur that may call for additional equipment, training, or workers, modifying working shifts, purchasing materials, and so forth. With time visibility suppliers may possibly react more rapidly to required adjustments (Najarian, 2002).

Once partnership with suppliers has been established, it is the company’s responsibility to control their inventory and production schedules. There is always a chance that expected product flow will require a high level of control once implemented. Bottlenecks or delays in manufacturing at a certain point are always a threat to JIT (Hendrickson, 2005).

One way to eliminate that threat is to execute the Theory of Constraints (TOC) system. The TOC is a system to remove restrictions in a manufacturing setting. TOC manufacturing planning and control system, assisted by a computer software program named OPT. OPT analyzes the manufacturing process and works in the following way: The amount of work that must be done at a workstation is inputted into the system. The software discovers the bottlenecks of the process. If it is required that a product must be passed through multiple product workstations, TOC reveals which workstation is the bottleneck. This aspect is central because the capacity of the slowest workstation is the capacity of the production line. The slow workstation point is then focused on to improve capacity. As the production rate of a bottleneck improves, the output of the factory increases until it is no longer considered a bottleneck. Another term for this method is called synchronous manufacturing and is essential to establishing the workflow of a JIT system and controlling inventory (Hendrickson, 2005).

As the process flow is clear of any bottlenecks, the company can focus on maintaining an optimal inventory program. The impact of JIT’s inventory results from three interconnected events. The first deals with a spotlight on product and process quality. The implementation of analytic tools and the incorporation of direct labor into quality enhancement plans have a considerable impact on inventory levels. Analytic tools are employed to identify the cause of defects, regardless of these problems begin in defective assembly practices, materials, or materials design. These tools turn out to be even more potent when their use is coordinated by direct workers in production and logistics whose expertise and familiarity is exploited by quality teams. As causes of shortcomings are recognized and resolved, product quality enhances the number of quality control inspectors lessen, and the quantity of scrap and rework inventory is reduced (Droge, 1998).

Decreases in WIP inventories result in a diminished requirement for safety stock established upon anticipated defect levels in inventory. Safety stocks of finished goods may perhaps also deteriorate because the anticipated defect percentage is lower. Given that products are of a superior quality, the quantity of subsequent sales service repair work falls off. This leads to prospective decreases in the number of emergency parts stocked in inventory (Droge, 1998).

The second source of JIT’s inventory impact is situated in the redesigning of internal plant processes. Cellular work cells are used to enhance the process flow as previously designed. Direct workers at a specific cell should be required to control several different machines. Cellular layout condenses the amount of travel that inventory in the plant. Currently, JIT embraces pull support, reduced machine set-up times, and total preventive maintenance. Under pull support, inventory is made accessible only when the subsequent workstation requires more inventory in a specific quantity. Reduced machine set up time allows quick change over rates from one product to another. The objective of total preventive maintenance is having equipment constantly running when they are supposed to (Droge, 1998).

While combined, the outcome of cellular layout, total preventive maintenance, reduced machine setup times, and pull support on inventory quantities is substantial. While these essentials can be applied devoid of an overreaching JIT viewpoint, their synergy provides their definitive outcome on inventory levels. For example, materials travel shorter distances within the facility, produce a decrease in internal distribution cycle span and inconsistency. The effect is a reduction in inventory for unexpected internal distribution setbacks. Given that machines operate when they are supposed to, less inventory is necessary to support machine failures. Pull support ties the amount manufactured to the amount required, prompting production simply when following stations require inventory. Reduced machine set up time pushes lowered lot sizes that will outcome in a lowered average inventory on hand (Droge, 1998).

The third and final inventory associated component of JIT is exchange with suppliers. Nearby suppliers can cut down incoming supply lines, dropping equally the length and the inconsistency in delivery cycles. This eventually shrinks the amount of inventory required to account for overdue or partial distribution. Overdue delivery is additionally influenced by the buyer giving out production plans and schedules with suppliers. Collective buyer and seller product plans will enhance the number of people undertaking quality concerns and improve the prospect of design for manufacturability. The outcome trickles down throughout the buyer’s logistics chain, promoting lower inventory levels. Far-reaching supplier evaluation programs eliminate less dedicated suppliers to preserve only those competent enough to provide elevated quality materials on schedule. Single sourcing can lead to fewer distribution cycles that require management. When this is pooled with broadly based supplier appraisal, retention of nearby suppliers, and improved buyer-seller communication, inventory levels ought to decline (Droge, 1998).

Even in an established JIT system, inventory and assets can become excessive. JIT dictates that all unneeded material and assets be eliminated. Therefore, inventory liquidation ought to be a continuing practice that should be managed by a specific employee in the company. This person is commonly referred to the dead stock coordinator. After getting the list of discontinued products and assets with surplus inventory, this employee ought to establish the finest scheme of liquidation. This is going to be the process which provides the most value to the company. The process consists of that person going through the list, calculating each technique of liquidation in order of suitability, until they liquidate the material (Schreibfeder, 1998).

There are several methods of liquidation. Commonly the best method is to transfer the surplus to another company place where the inventory is desired. A product may be discontinued in one location, but still functioning in another location. This selection is predominantly appealing if the rate of moving the asset among locations is a small portion of the value of the item. Another common method is to trim down the price to move the surplus inventory. Companies find creative ways to reduce inventory but also may choose to sell the surplus to other companies, donate it to a nonprofit organization, sell excess finished products to a surplus retail store chain, or even throw it away. Whatever method a company chooses, JIT principles suggest that excess and waste must be removed to be successful (Schreibfeder, 1998).

Conclusion

To make a Just-in-Time inventory program to become the success that a company desires, all facets of the company must work together. JIT is a total commitment philosophy that affects everyone from the CEO to the common worker. With the changes properly made, JIT inventory will help reduce waste and in turn will lower costs, raise profits and quality, and improve relations with suppliers as well as customers. If a company does not totally embrace the JIT concept, the system is sure to fail.

References

Agility Centre (2000). Just-in-time Retrieved September 8, 2005, http://www.agilitycentre.com/best%20practice/JIT.PDF
Droge, C. (1998). Just-in-time inventory effect. Retrieved August 16, 2005, from http://www.findarticles.com/p/articles/mi_qa3705/is_199801/ai_n8781524/print
Hendrickson, W.F. (2005). Just in time production (JIT). Retrieved August 15, 2005, from http://members.aol.com/williamfla/jitprod.htm
Najarian, G. (2002). Manufacturing in the new millennium. Retrieved August 18, 2005, from http://www.remgrp.com/jitarticle.htm
Schreibfeder, J. (1998). Liquidating non-moving inventory. Retrieved August 15, 2005, from http://www.effectiveinventory.com/article14.html
Strategos. (2005). Just in time, toyota production system & lean manufacturing. Retrieved August 25, 2005, http://www.strategosinc.com/just_in_time.htm
Wikipedia. (2005). Just in time. Retrieved August 14, 2005, from http://en.wikipedia.org/wiki/Just_in_time

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©2018 Michael A. Hartmann

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