JIT Purchasing

JIT Purchasing is referred to the procedure of buying, involving determining the material requirement, selecting the suppliers, agreement on price, delivery, and other terms and conditions. JIT purchasing is carried out in small lots and recurrent deliveries in small-sized containers of equivalent quantity and specifications from local suppliers with long term contracts.

JIT is broadly defined as an integrated set of activities designed to achieve high volume production using minimal inventories or raw materials, work-in-process, and finished goods. Parts arrive at the next workstation “just in time” and are completed and move through the operation quickly. Just-in-time is also based on the logic that nothing will be produced until it is needed. Need is created by actual demand for the product. When an item is sold, in theory, the market pulls a replacement from the last position in the system – final assembly in this case. This triggers an order to the factory production line, where a worker then pulls another unit from an upstream station in the flow to replace the unit taken. This upstream station then pulls from the next station further upstream and so on back to the release of raw materials. To enable this pull process to work smoothly, JIT demands high levels of quality at each stage of the process, strong supplier relations, and a fairly predictable demand for the end product.

There are some basic principles / elements / prerequisites of JIT purchasing being implemented by many industries across the world, such as the US, the UK, Germany, Italy and Korea, etc. in their purchasing, production and marketing departments.

Elimination of Waste

The Japanese truly believe in elimination of waste. Waste in Japan, as defined by Toyota’s Fujio Cho, is “anything other than the minimum amount of equipment, materials, parts and workers which are absolutely essential to production. There are 7 prominent types of waste to be eliminated: (1) waste from overproduction, (2) waste of waiting time, (3) transportation waste, (4) inventory waste, (5) processing waste, (6) waste of motion, and (7) waste from product defects.”

The 7 elements that address elimination of waste are:

• Focused factory networks
• Group technology
• Quality at the source
• JIT production
• Uniform plant loading
• Kanban production control system
• Minimized setup times

Focused Factory Networks – The Japanese build small specialized plants rather than large vertically integrated manufacturing facilities. They find large operations and their bureaucracies difficult to manage and not in line with their management styles. Plants designed for one purpose can be constructed and operated more economically. The bulk of Japanese plants, some 60,000, have between 30 and 1,000 workers.

Group Technology – Although invented in the US, group technology was most successfully employed in Japan. This is a philosophy in which similar parts are grouped into families, and the processes required to make the parts are arranged in a specialized work cell. Instead of transferring jobs from one department to another to specialized workers, the Japanese consider all operations required to make a part and group those machines together. The group technology cells eliminate movement and queue (waiting) time between operations, reduce inventory, and reduce the number of employees required. Workers, however, must be flexible to run several machines and processes. Due to their advanced skill level, these workers have increased job security.

Quality at the Source – It means do it right the first time and, when something goes wrong, stop the process or assembly line immediately. Factory workers become their own inspectors, personally responsible for the quality of their output. Workers concentrate on one part of the job at a time so quality problems are uncovered. If the pace is too fast, if the worker finds a quality problem, or if a safety issue is discovered, the worker is obligated to push a button to stop the line and turn on a visual signal. People from other areas respond to the alarm and the problem. Workers are empowered to do their own maintenance and housekeeping until the problem is fixed.

JIT Production – JIT means producing what is needed, when needed and no more. Anything over the minimum amount necessary is viewed as waste, because effort and material expended for something not needed now cannot be utilized now. This is in contrast to relying on extra material just in case something goes wrong.

JIT is typically applied to repetitive manufacturing, which is when the same or similar items are made one after another. JIT does not require large volumes and can be applied to any repetitive segments of a business regardless of where they appear. Under JIT, the ideal lot size is one. Although workstations may be geographically dispersed, the Japanese minimize transit time and keep transfer quantities small – typically one-tenth of a day’s production. Vendors can ship several times a day to their customers to keep lot sizes small and inventory low. The goal is to drive all inventory queues to zero, thus minimizing inventory investment and shortening lead times.

Uniform Plant Loading – Smoothing the production flow to dampen the reaction waves that normally occur in response to schedule variations is called uniform plant loading. When a change is made in a final assembly, the changes are magnified throughout the line and the supply chain. The only way to eliminate the problem is to make adjustments as small as possible by setting a firm monthly production plan for which the output rate is frozen. The Japanese found they could do this by building the same mix of products every day in small quantities. Thus they always have a total mix available to respond to variations in demand.

Kanban Production Control Systems – A kanban control system uses a signalling device to regulate JIT flows. Kanban means “sign” or “instruction card” in Japanese. In a paperless control system, containers can be used instead of cards. The cards or containers make up the kanban pull system. The authority to produce or supply additional parts comes from downstream operations. Sometimes the container itself can be used as a signal device and the amount of inventory is adjusted by simply adding or removing containers. Some companies use marked spaces on the floor or on a table to identify where material should be stored. When the square is empty, like the one on the left, the supplying operations are authorized to produce; when the square is full, no parts are needed. The kanban pull approach can be used not only within a manufacturing facility but also between manufacturing facilities and between manufacturers and external suppliers.

Minimized Setup Times – Because small lot sizes are the norm, machines must be quickly set up to produce the mixed models on the line. To achieve setup time reduction, set ups are divided into external and internal activities. Internal setups must be done while a machine is stopped. External setups can be done while the machine is running. Other time-saving devices such as duplicate tool holders are also used to speed setups.

Respect for People

Respect for people is a key to the Japanese improvements. They have traditionally stressed lifetime employment for permanent positions within major firms. Companies try to maintain level payrolls even when business conditions deteriorate. Permanent workers (about the one-third of the total workforce) have job security and tend to be more flexible, remain with a company, and do all they can to help a firm achieve its goals.

Company unions in Japan exist to foster a cooperative relationship with management. All employees receive two bonuses a year in good times. Employees know that if the company performs well, they will get a bonus. This encourages workers to improve productivity. Management views workers as assets, not as human machines. Automation and robotics are used extensively to perform dull or routine jobs so employees are free to focus on important improvement tasks.

They also use a ‘bottom-round management’ style made up of consensus management by committees or teams. This decision process is slow but attempts to reach a consensus by involving all parties, seeking information, and making a decision at the lowest level possible. Quality circles of employees meet weekly to discuss their jobs and problems. These small group improvement activities (SGIA) attempt to devise solutions to problems and share the solutions with management. They are led by a supervisor or production worker and typically include employees from a given production area. Others are multidiscipline teams led by a trained group leader or facilitator. The fundamental ideas of elimination of waste and respect for workers should be prioritized.

Total Quality Control (TQC)

JIT and TQC have merged in theory and practice. TQC is the practice of building quality into the process and not identifying quality by inspection. It also refers to the theory of employees assuming responsibility for the quality of their own work. When employees are responsible for quality, JIT works at its best because only good quality products are pulled through the system. When all products are good, no ‘just-in-case’ extra inventory is needed. Thus, organizations can achieve high quality and high productivity. By using statistical quality control methods and training workers to maintain quality, inspections can be reduced to the first and last units produced. If they are perfect, we can assume the other units between these points are perfect as well.

A foundation of quality is improved product design. Standard product configurations, fewer parts and standardized parts are important elements in JIT. These design modifications reduce variability in the end term or in the materials that go into the product. Besides improving the productivity of a product, product design activities can facilitate the processing of engineering changes.

A Stable Schedule

JIT firms require a stable schedule over a lengthy time horizon. This is accomplished by level scheduling, freeze windows, and underutilization of capacity. A level schedule is one that requires material to be pulled into final assembly in a pattern uniform enough to allow the various elements of production to respond to pull signals. It does not necessarily mean that the usage of every part on an assembly line is identified hour by hour for days on end; it does mean that a given production system equipped with flexible setups and a fixed amount of material in the pipelines can respond.

The term freeze window refers to that period of time during which the schedule is fixed and no further changes are possible. An added benefit of the stable schedule is seen in how parts and components are accounted for in a pull system. Here, the concept of backflush measurement is used to periodically explode an end item’s bill of materials to calculate how many of each part went into the final product (s). This eliminates much of the shop-floor data collection activity, which is required if each part must be tracked and accounted for during production.

Work with Suppliers

Just as customers and employees are key components of the JIT system, vendors are also important to the process. If a firm shares its projected usage requirements with its vendors, they have a long run picture of the demands that will be placed on their production and distribution systems. Some vendors are linked online with a customer to share production scheduling and input needs data. This permits them to develop level production systems. Confidence in the supplier or vendor’s delivery commitment allows reductions of buffer inventories. Maintaining stock at a JIT level requires frequent deliveries during the day. Some suppliers even deliver at a location on the production line and not at a receiving dock. When vendors adopt quality practices, incoming receiving inspections of their products can be bypassed.