How the benefits of "Just-in-Time" are achieved?

'Japanese companies that have used just-in-time (JIT) for five or more years are reporting close to a 30% increase in labour productivity, a 60% reduction in inventories, a 90% reduction in quality rejection rates, and a 15% reduction in necessary plant space. However, implementing a just-in-time system does not occur overnight. It took Toyota over twenty years to develop its system and realise significant benefits from it.' --- Sumer C Aggrawal, Harvard Business Review

Explain how the benefits claimed for JIT in the above quotation are achieved and why it takes so long to achieve those benefits.

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Just-in-time (JIT) has emerged from criticisms of traditional responses to the problems of improving manufacturing capacity and reducing unit costs of production.

The JIT approach involves a continuous commitment to the pursuit of excellence in all phases of manufacturing systems and design. The aims of JIT are to produce the required items, at the required quality and in the required quantities, at the precise time they are required. In particular, JIT aims to achieve the following:

 The elimination of non-value-added activities
 Zero inventory
 Zero defects
 Batch sizes of one
 Zero breakdowns
 A 100% on-time delivery service


There are two aspects to JIT systems, JIT purchasing and JIT production, both of which assist in the benefits highlighted by Aggrawal.

(i) Reduction in inventories
JIT purchasing seeks to match the usage of materials with the delivery of materials from external suppliers. This means that material inventories can be kept at near-zero levels. For JIT purchasing to be successful this requires the organisation to have confidence that the supplier will deliver on time and that the supplier will deliver materials of 100% quality, that there will be no rejects, returns and hence no consequent production delays. The reliability of suppliers is of utmost importance and hence the company must build up close relationships with their suppliers. This can be achieved by doing more business with fewer suppliers and placing long-term orders so that the supplier is assured of sales and can produce to meet the required demand. Such factors will enable inventory levels to be kept as near
to zero as possible and help to produce Aggrawal's claimed benefit.


(ii) Increase in labour productivity
In a JIT production environment, production processes must be shortened and simplified. Each product family is made in a work cell based on flowline principles. The variety and complexity of work carried out in these work cells is increased (compared with more traditional processes), necessitating a group of dissimilar machines working within each work cell. Workers must therefore be more flexible and adaptable, the cellular approach enabling each operative to operate several machines. Operatives are trained to operate all machines on the line and undertake routine preventative maintenance. It is factors such as these that result in an increase in labour productivity in a JIT environment.


(iii) Reduction of necessary plant space
With JIT production, factory layouts must change to reduce movement of workers and products. Traditionally machines were grouped by function. All the drilling machines were together, all the grinding machines were together and so on. A part therefore had to travel long distances, moving from one part of the factory to the other, often stopping along the way in a storage area. All these are non-value-added activities which have to be reduced or eliminated. Material movements between operations are therefore minimised by eliminating space between work stations and grouping dissimilar machines into manufacturing cells on the basis of product groups. Storage space is reduced due to the reasons set out in (i) above. Plant space is therefore kept to a minimum.


(iv) Reduction in quality rejection rate
Production management within a JIT environment seeks to both eliminate scrap and defective units during production and avoid the need for reworking of units. Defects stop the production line, thus creating rework and possibly resulting in a failure to meet delivery dates. Quality, on the other hand, reduces costs. This level of quality is assured by designing products and processes, introducing quality awareness programmes and statistical checks on output quality, providing continual worker training and implementing vendor quality assurance programmes to ensure that the correct product is made to the appropriate quality level on the first pass through production.


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Explanation of time needed

Some of the changes necessary to produce such benefits are quite radical and cannot be implemented overnight. The co-operation of workers is vital and they must be trained and will need many hours of practice. Close relationships with suppliers cannot be established straight away. They must be built up over time as trust between the two parties develops. It is therefore obvious that the benefits cannot be expected to appear within 24 hours but must be developed gradually to allow the full benefits of JIT to materialise.



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JIT Backflusing Example

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JIT - Types of Time (Waste)

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JIT Backflusing

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JIT Philosophy

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Essential Elements of JIT

(1) JIT Purchasing

• Parts and raw materials should be purchased as near as possible to the time they are needed, using small frequent deliveries against bulk contracts.

• Inventory levels are therefore minimized.


(2) Close Relationship with Suppliers

• In a JIT environment, the responsibility for the quality of goods lies with the supplier.

• A long-term commitment between supplier and customer should therefore be established.

• If an organization has confidence that suppliers will deliver material of 100% quality, on time, so that there will be no rejects, returns and hence no consequent production delays, usage of materials can be matched with delivery of materials and inventories can be kept at near zero levels.


(3) Uniform Loading

• All parts of the production process should be operated at a speed which matches the rate at which the final product is demanded by the customer.

• Production runs will therefore be shorter and there will be smaller inventories of finished goods because output is being matched more closely to demand (and so usage costs will be reduced).


(4) Set-up Time Reduction

• Machinery set-ups are non-value-added activities which should be reduced or even eliminated.


(5) Machine Cells

• Machines or workers should be grouped by product or component instead of by the type of work performed.

• Production can flow from machine to machine without having to wait for the next stage of processing or returning to the stores.

• Lead time and work in progress are thus reduced.


(6) Quality

• Production management should seek to eliminate scrap and defective units during production, and to avoid the need for reworking of units since this stops the flow of production and leads to late deliveries to customers.

• Product quality and production quality are important “drivers” in a JIT system.


(7) Pull system (Kanban)

• Products/components are only produced when needed by the next process.

• Nothing is produced in anticipation of need, to then remain in inventory, consuming resources.


(8) Preventive Maintenance

• Production systems must be reliable and prompt, without unforeseen delays and breakdowns.


(9) Employee Involvement

Workers within each machine cell should be trained to operate each machine within that cell and to be able to perform routine preventive maintenance on the cell machines (ie to be multi skilled and flexible).


(source: BPP Learning Media)



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Just-in-Time (JIT) Philosophy Explained

JIT is a system whose objective is to produce or to procure products or components as they are required by a customer or for use, rather than for inventory.

JIT is a ‘pull’ system, which responds to demand, in contrast to a ‘push’ system, in which inventories act as buffers between the different elements of the system, such as purchasing, production and sales.

JIT aims to achieve (a) zero inventory and (b) perfect quality.

JIT operates by demand-pull.

JIT consists of JIT Purchasing and JIT Production:

• JIT Purchasing is a System in which material purchases are contracted so that the receipt and usage of material, to the maximum extent possible, coincide.

• JIT Production is a System which is driven by demand for finished products whereby each component on a production line is produced only when needed for the next stage.

JIT results in lower investment requirements, space savings, greater customer satisfaction and increased flexibility.

JIT is often described as a technique, but it is more of a philosophy or approach to management since it encompasses a commitment to continuous improvement and the search for excellence in the design and operation of the production management system.


Problems associated with JIT

(a) It is not always easy to predict patterns of demand.
(b) JIT makes the organization far more vulnerable to disruptions in the supply chain.
(c) JIT, originated by Toyota, was designed at a time when all of Toyota’s manufacturing was done within a 50km radius of its headquarters. Wide geographical spread, however, make this difficult.


Costing implications of JIT

(a) Just-in-Time manufacturing enables purchasing, production, and sales to occur in quick succession with inventory being maintained at minimum levels.
(b) The absence of inventory renders decisions regarding cost-flow assumptions (such as weighted average or first-in, first-out) or inventory costing methods (such as absorption or marginal costing) unimportant. This is because all of the manufacturing cost attributable to a period flow directly into cost of goods sold.
(c) Job costing is simplified by the rapid conversion of direct materials into finished goods that are then sold immediately.


(source: BPP Learning Media)



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