Rethinking Just in Time (JIT) Manufacturing Principles
In manufacturing, costs of production and speeds of finished goods to the market can make or break a company. Traditionally, an inventory of raw materials and of finished products was considered assets. Today, such inventories are considered dead investments or waste, which incur additional capital costs. To eliminate dead investment and optimize their productivity, many manufacturing industries are adopting the Just-In-Time (JIT) philosophy.
Originally, JIT manufacturing referred to the production of goods in an effort to meet the exact customer demands with regards to quantity, quality, and delivery time; whether the customer required the final product or a part of it. But with time the meaning of JIT manufacturing has changed to the production of goods with minimum waste. In this case, “waste” is defined in terms of time, raw materials, and resources. Simply, Just-In-Time (JIT) production is a workflow methodology that focuses on reducing flow times for raw materials and products within productions lines, as well as the response times within the supply chain.
The desired manufacturing outcome is a streamlined production system in which a minimal amount of raw materials is maintained on-site, wait times in the production lines are significantly reduced, and small batch sizes of finished goods are produced. Implementing such a management philosophy can enable you to achieve high-volume production of low-cost and high-quality products while meeting precise customer requirements. There are many aspects of JIT manufacturing that combined can provide a considerable performance advantage. Note, JIT manufacturing is a management philosophy, not a production technique. This article looks into the principles of Just-In-Time Manufacturing in detail.
Background and History
The origin of Just-in-time (JIT) manufacturing is attributed to Toyota Motor Corporation- a Japanese automaker. In the 1970s, executives at Toyota- Taiichi Ohno and Shigeo Shingo, reasoned that the company could perform better and adapt more efficiently to demands for model changes or changes in automobile trends if it eliminated the in-store inventory of raw materials and finished cars than was immediately needed. It was then that Taiichi Ohno developed the Toyota Production System (TPS), to meet consumer demands with minimum delays. For this reason, Taiichi Ohno, a Japanese businessman, and industrial engineer is often referred to as the father of TPS.
Toyota Production System (TPS), is a manufacturing management process that was first applied and perfected within Toyota manufacturing plants. This detailed manufacturing methodology was primarily designed to increase production efficiency, reduce capital costs and eliminate waste by receiving raw materials and delivering finished cars only as they are needed, hence the name just-in-time manufacturing.
However, Toyota realized that implementation of JIT manufacturing would only be successful if all individuals within the company were fully committed and involved in it, and if the plant’s systems and processes were properly set up for maximum production efficiency and output, and if the production programs were scheduled to meet the exact quality and delivery times of the needed products. And through total commitment to JIT manufacturing, Toyota was able to meet the increasing challenges for survival through a management process that was entirely focused on customers, suppliers, workforce, plant’s processes, and systems. Since then, many other Japanese manufacturing organizations widely adopted the JIT management philosophy, especially in the early 1970s.
Although the JIT manufacturing approach originated from Toyota Motor Corporation, today, many other companies across the globe have been using similar manufacturing concepts although with different names. For example, Toyota’s Production System (TPS) inspired Lean Manufacturing in American multinational computer and IT technology companies like Dell and HP(Hewlett-Packard). Other companies such as Motorola use the concept of short-cycle manufacturing (SCM), while IBM implements the concepts of demand-flow manufacturing (DFM) and continuous-flow manufacturing (CFM), all of which are based on JIT management philosophy.
How does Just-In-Time Manufacturing Work?
Operations in a JIT manufacturing system begin when a customer places an order for a specific product with its manufacturer. On receiving the customer’s order, the manufacturer designs the product for manufacturing, projects the required materials, and places an order with their suppliers for these raw materials. When the suppliers receive the manufacturer’s order, they deliver the raw materials as needed in terms of the correct type, quality, quantity, and delivery time. The raw materials are then received at the manufacturing site, processed, and assembled as a finished product per the customer specifications. The image below illustrates how a Just-In-Time (JIT) Manufacturing model works.
Principles of Just-In-Time Manufacturing
JIT is a ‘demand-pull’ system of manufacturing, in which the actual customer order signals when a given product will be manufactured. A demand-pull system enables a plant to produce only what is required, at the correct time and in the correct quantity. Hence, stock levels of raw materials, spare parts, work in progress, and finished products can be kept at minimum levels. This is achieved by carefully planning resource flow and production schedules throughout the manufacturing process.
Supplies deliver raw materials right to the production line, only when the manufacturer requests them. For instance, a car manufacturing plant may request a given number and type of tires for a single day’s production, and the supplier would then be expected to deliver those tires to the correct loading bay on the production line, within a very short period of time.
Modern manufacturing plants use sophisticated and advanced software to schedule timely production programs, which also include ordering the correct stock of raw materials. Also, comprehensive communication networks such as Electronic Data Interchange (EDI) are used in JIT manufacturing, through which personnel in manufacturing plants exchange information with customers and suppliers, to ensure that every product detail is correct.
The discussed principles of JIT manufacturing can be summarized as follows:
A) Continuous improvement: This principle entails:
- Addressing fundamental production problems at source and eliminating anything that will not add value to the product.
- Devising troubleshooting and diagnostic systems that assist in the identification of production and related problems.
- Striving for simplicity, as simpler systems are easier to understand and manage. They are also less likely to go wrong.
- A product-oriented plant layout to assist in reducing the time spent moving raw materials and parts from one production section to the other.
- Quality control at source- this ensures that every individual in the production and supply chain is solely responsible for the quality of the produced output.
- Poka-yoke – this is a Japanese term that means “inadvertent error prevention” or “mistake-proofing”. In JIT manufacturing, the Poka-yoke mechanism is used to assist equipment operators to avoid production mistakes and product defects through prevention, correction, or pointing out human errors as they occur.
- Preventative maintenance- JIT manufacturing systems utilize Total Productive Maintenance (TPM), in which everyone in the plant facility is required to participate in maintenance routines, rather than just the maintenance team. This ensures that the machinery/equipment is available and can function perfectly whenever they are required, with continuous improvement on their performance.
B) Waste Elimination: In JIT manufacturing, waste is classified into eight different forms which include: (i) Inventory waste; (ii) Waste of production time; (iii) Waiting waste; (iv) Waste from product defects; (v) Processing waste; (vi) Waste from overproduction; (vii) Transportation waste; (viii) Unutilized talent. Waste minimization or elimination is one of the primary objectives of JIT production systems. This requires effective inventory management and control throughout the entire supply chain.
C) Inventory Management: At the initial stages of implementing JIT philosophy, manufacturing entities seek to reduce inventory and improve production operations within their organizations. To reduce/eliminate waste attributed to ineffective inventory management, Schniededans stated six inventory management principles in relation to JIT manufacturing. These principles are: (i) Reduce buffer inventory; (ii)Try for zero inventory; (iii) Search for reliable suppliers for raw materials; (iv)Reduce batch size by increasing the frequency of purchase orders; (v)Reduce purchasing costs; (vi) Improve material handling.
D) Good Housekeeping: For successful implementation of JIT manufacturing approach, overall cleanliness within the manufacturing plant is mandatory.
E) Setup-Time Reduction: This increases the firm’s flexibility, by allowing the production of smaller batches. In a JIT manufacturing system, the ideal batch size of finished products is 1 item.
F) Mixed/Levelled Production: This allows the smooth flow of components and products through different production sections within the factory.
G) Multi-process handling: A multi-skilled workforce in a manufacturing plant ensures higher flexibility, greater productivity, and job satisfaction.
H) Kanban: This is a scheduling system for JIT manufacturing, developed by Taiichi Ohno, aimed at improving manufacturing efficiency at Toyota Motors Corporation. In this system, simple tools are used to ‘pull’ components and products through the production process.
I) Autonomation: This may be described as “automation with a human touch” or “intelligent automation”. It is also referred to as “jidoka,” a design feature that provides machines with the autonomous capability of making decisions, allowing operators to do other useful work instead of just standing and watching the machines work.
J) Andon (Warning Lights): Andon systems are often used on equipment in process control and industrial manufacturing systems to provide audible and visual indicators of a machine’s status to the factory personnel (technicians, machine operators) and production managers. The Andon system is designed to halt production whenever a defect occurs within the production line, and the process is stopped until the issue is fixed.
Advantages of JIT Manufacturing
- More cost-efficient production systems: JIT manufacturing approach aims at minimizing the number of goods held at any one time or maintaining low stock levels without compromising the production volumes. Low stock levels mean a faster turnaround of stock, with less warehouse or storage space for raw materials and finished goods. Also, keeping the stock holding at minimum levels means a reduction in storage space; which leads to much lower inventory and warehouse costs, while saving on rent and insurance premiums for the stored goods. Overall, low stock holding requires less working capital, and Returns on Investment (ROI) are generally high.
- Waste Elimination: JIT production systems are based on a demand-pull approach, in which raw materials are supplied as needed, all produced goods are sold and changes in demand are easily handled. Therefore, with less stock in all stages of the production chain, there is also less likelihood of raw materials perishing or finished products expiring or becoming obsolete. This translates to lesser wastage.
- Improved relationships: Under JIT manufacturing better working relationships are fostered along the supply chain. This is because successful implementation of JIT production requires very close and precise communication between all the parties involved in the entire supply chain (customer, manufacturer, and supplier). Such a communication technique within a production supply chain is often referred to as “Kanban” system.
- Enhanced capacity utilization: Keeping lower stock holdings would mean a reduction in storage space, the freed-up production space results in better capacity utilization. As the areas that were previously used to store raw materials and goods can now be used for a more productive purpose or other uses.
- Reduced Throughput Time: This results in reduced manufacturing time, as the just-in-time production philosophy is embraced. Therefore, customer orders can be delivered with limited advance notice. Therefore, businesses with a JIT manufacturing system have a competitive edge over other similar businesses, as their customer response time is much faster.
- Defect-free output: JIT manufacturing approach emphasizes the “right-first-time” concept, whereby the focus is on getting the product right the first time it is produced. Hence, less time is spent on quality checking and re-working the product; so that inspection and rework costs are minimized.
- Increased Quality of Products: In JIT manufacturing, the immense focus is on the quality of the final product, and manufacturing personnel works to achieve “first time right” for all products. Also, the plant layout and production processes in a JIT manufacturing system make it easier for operators to swiftly identify and correct production problems, as the plant operates without huge work-in-progress. With reduced defect rates the quality of the products is significantly improved, resulting in greater customer satisfaction and minimal waste in terms of faulty products.
Disadvantages of Adopting JIT Manufacturing
- Re-working a faulty product would be very difficult in a JIT manufacturing system. This is because due to the system’s ZERO tolerance for production mistakes, the inventories are kept at minimal levels; hence, there wouldn’t be any raw materials available to reproduce an already finished product.
- JIT production systems are highly reliant on suppliers. But the manufacturer cannot directly influence their performance. Therefore, if any of the suppliers fail to honor their commitment and respond to the manufacturer’s requirements in a timely manner, the JIT production system may fail. For example, if one of the suppliers does not deliver the required quality of raw materials and on time, then the whole production schedule will be delayed; resulting in dissatisfied customers and profit losses for the manufacturer.
- For any reason, if any kind of failure or delay happens within the supply chain, production line idling and downtime are likely to occur; as in JIT manufacturing, there are little or no buffer stocks. This would negatively affect the production process with increased costs of production leading to huge losses for the company.
- JIT manufacturing systems require frequent deliveries which leads to more fossil fuel consumption and higher emissions; this negatively affects the environment. In addition to increased transportation costs, the transaction costs would also be comparatively high depending on the frequency of the deliveries.
- JIT production is able to adapt well to a sudden decrease in volume of demand, but this would not be the case if the product demand was to increase drastically. As the stock inventories are maintained at bare minimum levels to only meet actual orders and there are no available finished products to meet unexpected orders.
Potential Risks of Adopting JIT Manufacturing
Generally, companies and organizations that employ JIT manufacturing enjoy reduced operating costs, reduced production cycle times, and faster production times to market. However, adopting JIT production systems has some potential risks, particularly for smaller companies. To realize success with JIT production, you have to find suppliers who can supply raw materials within a very narrow time slot or who are close by. Also, at times minimum material order policies can the hinder progress of smaller manufacturers who might be forced to order only smaller quantities below their required amounts.
For example, today, Toyota Motor Corporation is famous for its highly successful JIT production system, in which automobile parts are only ordered when new car orders are received. But even though the company first implemented this workflow methodology in the 1970s, it took about 20 years to perfect it. Sadly, on February 1, 1997, Toyota’s Total Production System (TPS) nearly caused the entire manufacturing plant to come to a screeching halt; this was after a fire at Aisin Corporation, a Japanese-owned automotive parts supplier, decimated the corporation’s capacity to produce P-valves which are a crucial component in the brake system of Toyota vehicles.
In the wake of the Aisin fire, Toyota only had one day’s worth of P-valves in inventory, and with Aisin being their sole supplier of this part; the entire production operations at Toyota would grind to a halt for several days. This caused a negative ripple effect, where the other Toyota’s parts suppliers had to also temporarily shut down their facilities since the automaker did not need their parts at the time. The Aisin fire cost Toyota about 70, 000 vehicles and 160 billion yen in revenues, but the losses could have been more. Given that Aisin was to take months to get back into P-valve production, it seemed inevitable that Toyota’s manufacturing operations would grind to a halt for months. If that were to happen, the economic damage would have dire consequences for both the Toyota corporation and the Japanese economy. But Toyota was able to get help from its vast network of suppliers and other manufacturers.
The automaker requested its other suppliers to prioritize the production of P-valves, to meet the delivery of 32,500 P-valves per day. In a world where manufacturing processes are run down to the margin and given that these firms differed in areas of specialization, size, position in the supply chain, and in their financial linkages to Toyota, prioritizing P-valves production was a lot to ask. However, they came in clutch and delivered the required P-valves in just four days after the Aisin fire. This demonstrated a strong relationship among Toyota’s suppliers, their commitment to the success of Toyota’s Production System (TPS), and their ability to solve problems at the source; which are some of the key principles of JIT’s manufacturing philosophy.
Another potential risk of JIT manufacturing was made all too clear at the start of the Covid-19 pandemic, and its ripple effect on supply chains. At the onset of the 2020’s economic crisis, the production of things like surgical masks, ventilators, hand sanitizers, and toiletries experienced a major disruption. Due to the pandemic and lockdown measures, supplies from overseas warehouses and factories could not reach designated manufacturers in time to meet the surge in their demand.
In summary, JIT manufacturing is a management philosophy that aims at achieving maximum outputs with minimum inputs. When adequately applied, JIT manufacturing is an optimal system that is able to significantly improve a company’s competitiveness by reducing its inventory, minimizing waste, improving production efficiency and product quality whilst being increasingly responsive to customer demands. Many manufacturing organizations such as Toyota Motors Corporation, IBM, Dell, Motorola, and HP(Hewlett-Packard) have successfully implemented this approach in their production systems.
Due to the adverse potential risks associated with adopting JIT manufacturing, many companies may be rethinking implementing Just-in-Time Manufacturing principles. However, reading through this article will assist you to realize that all you need to successfully implement JIT production in your organization or company, is just careful planning, timely communication, and a lot of commitment among all the parties involved in the entire supply chain. As witnessed in the coordinated and collaborative response to the Aisin fire crisis which involved Toyota and its supplier network. For more information or to discuss which PLC Control and Instrumentation solution might be best for your application, please visit our website here, or contact us at email@example.com or 1-800-730-0292.
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