Just-in-time (JIT)

Just in time (JIT) is a production strategy that strives to improve a business’ return on investment by reducing in-process inventory and associated carrying costs. To meet JIT objectives, the process relies on signals or Kanban between different points, which are involved in the process, which tell production when to make the next part. Kanban are usually ‘tickets’ but can be simple visual signals, such as the presence or absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organization’s return on investment, quality, and efficiency. To achieve continuous improvement key areas of focus could be flow, employee involvement and quality.

JIT relies on other elements in the inventory chain as well. For instance, its effective application cannot be independent of other key components of a lean manufacturing system or it can “end up with the opposite of the desired result.” In recent years manufacturers have continued to try to hone forecasting methods such as applying a trailing 13-week average as a better predictor for JIT planning; however, some research demonstrates that basing JIT on the presumption of stability is inherently flawed. The philosophy of JIT is simple: the storage of unused inventory is a waste of resources. JIT inventory systems expose hidden cost of keeping inventory, and are therefore not a simple solution for a company to adopt it. The company must follow an array of new methods to manage the consequences of the change. The ideas in this way of working come from many different disciplines including statistics, industrial engineering, production management, and behavioral science. The JIT inventory philosophy defines how inventory is viewed and how it relates to management. Inventory is seen as incurring costs, or waste, instead of adding and storing value, contrary to traditional accounting. This does not mean to say JIT is implemented without awareness that removing inventory exposes pre-existing manufacturing issues. This way of working encourages businesses to eliminate inventory that does not compensate for manufacturing process issues, and to constantly improve those processes to require less inventory. Secondly, allowing any stock habituates management to stock keeping. Management may be tempted to keep stock to hide production problems. These problems include backups at work centers, machine reliability, process variability, lack of flexibility of employees and equipment, and inadequate capacity. In short, the Just-in-Time inventory system focus is having ―the right material, at the right time, at the right place, and in the exact amount”, without the safety net of inventory. The JIT system has broad implications for implementers.

JIT works in the three types of inventories, as

• Raw materials – inventories provide insurance in case suppliers are late with deliveries.
• Work in process – inventories are maintained in case a work station is unable to operate due to a breakdown or other reason.
• Finished goods – inventories are maintained to accommodate unanticipated fluctuations in demand.

Aims of JIT

The purpose of JIT is to produce and deliver finished goods just in time to be sold, sub-assemblies just in time to be assembled into finished goods, fabricated parts just in time to go into final assemblies, and purchased materials just in time to be transformed into fabricated parts.

The fundamental aims of JIT are to produce or operate to meet the requirements of the customer exactly, without waste, immediately on demand. In some manufacturing companies JIT has been introduced as ‘continuous flow production’, which describes very well the objective of achieving conversion of purchased material or service receipt to delivery, i.e. from supplier to customer. If this extends into the supplier and customer chains, all operating with JIT a perfectly continuous flow of material, information or service will be achieved. JIT may be used in non-manufacturing, in administration areas, for example, by using external standards as reference points. The JIT concepts identify operational problems by tracking the following:

• Material movements – when material stops, diverts or turns backwards, these always correlate with an aberration in the ‘process’.
• Material accumulations – these are there as a buffer for problems, excessive variability, etc., likes water covering up ‘rocks’.
• Process flexibility – an absolute necessity for flexible operation and design.
• Value-added efforts – where much of what is done does not add value, the customer will not pay for it.

The Operation of JIT

The tools to carry out the monitoring required are familiar quality and operations management methods, such as:

• Flowcharting.
• Process study and analysis.
• Preventive maintenance.
• Plant layout methods.
• Standardized design.
• Statistical process control.
• Value analysis and value engineering.

But some techniques are more directly associated with the operation of JIT systems:

• Batch or lot size reduction.
• Flexible workforce.
• Kanban or cards with material visibility.
• Mistake-proofing.
• Pull-scheduling.
• Set-up time reduction.
• Standardized containers.

The main benefits of JIT are

• Funds that were tied up in inventories can be used elsewhere.
• Areas previously used to store inventories can be used for other more productive uses.
• Throughput time is reduced, resulting in greater potential output and quicker response to customers.
• Defect rates are reduced, resulting in less waste and greater customer satisfaction.

These programs are always characterized by a real commitment to continuous improvement. Organizations have been rewarded, however, by the low cost, low risk aspects of implementation provided a sensible attitude prevails. The golden rule is to never remove resources – such as stock – before the organization is ready and able to correct the problems that will be exposed by doing so. Reduction of the water level to reveal the rocks, so that they may be demolished, is fine, provided that we can quickly get our hands back on the stock while the problem is being corrected.

In operations based on JIT, daily activities are taken place in accordance with continuous appeal of inventory of the final product which has been demanded by the customers. These aims lead the production program to applying production investments, workers, and even to raw materials re-ordering from suppliers or from stocking and distribution operations. In fact, JIT needs a production which relies directly on the patterns of customer’s short-term demands.

The Kanban system

Kanban is a Japanese term referring to sign board or visual signals that authorize the production or movement of items in manufacturing environment. A Kanban system is a self-regulating pull system that leads to shorter lead times and reduced inventory. Kanban systems are typically applied to items that have relatively constant demand and medium-to-high production volume.

It works on the basis that each process on a production line pulls just the number and type of components the process requires, at just the right time. Kanban systems focus on stopping overproduction thus, preventing creation of large inventories and reducing waste. Kanban enables a pull-based replenishment in manufacturing setups.

A kanban is a card with an inventory number which is attached to a part and before installation, the kanban card is detached and sent up the supply chain as a request for another part. A part is only manufactured (or ordered) if there is a kanban card for it. Few generally accepted rules are

• Downstream processes may withdraw items in the amounts specified on the kanban card.
• Upstream processes may send items downstream as per quantity and sequence as per kanban.
• No items are made or moved without a kanban.
• A kanban must accompany each item at all times.
• Defects and incorrect amounts are never sent to the next downstream process.
• The number of kanbans should be monitored carefully to reveal problems and opportunities for improvement.

Kanban employs Kanban card wherein, Kan means color and Ban means card used for inventory. Kanban starts with the customer’s order and follows production downstream. Because all requests for parts are pulled from the order, kanban is sometimes referred to as a “pull” system. Kanbans represent replenishment signals that are usually manual and highly visible such as a color-coded card that moves with the material, a light that goes on when replenishment is required, or an empty bin that is moved to the supply location to trigger replenishment.

The system provides support for external devices such as bar code readers to read kanban cards and trigger a replenishment signal. Kanbans can be sourced from an external supplier or an internal organization. A “Supplier” kanban triggers a purchase request to the supplier, while an “inter-org” kanban results in an inter-organization transfer.

Kanbans are generally replenishable and cycle through the system from full to empty, remaining active until they are withdrawn. One-time signals called non-replenishable kanbans are used primarily to manage sudden spikes in demand.

Just-in-time in partnerships and the supply chain

Effective control of materials and components flow in producing and assembling lines is a key for effective production. In an optimal supply chain, all materials and components are received in time to lead to a precise production. Precise production means producing a safe efficient product in a proper place and time with the least costs. In recent years, several achievements have been got to increase production operation outcome and to get an optimal supply chain, among which “Just In Time Production” system has been the kernel. Of the newest phenomena in industry management and engineering, “just in time production” system has got much more attentions in last decade in the world industrial societies while it is still considered a new idea in this field.

The development of long-term partnerships with a few suppliers, rather than short-term ones with many, leads to the concept of co-producers in networks of trust providing dependable quality and delivery of goods and services. Each organization in the chain of supply is often encouraged to extend JIT methods to its suppliers. The requirements of JIT mean that suppliers are usually located near the purchaser’s premises, delivering small quantities, often several times per day, to match the usage rate. Administration is kept to a minimum and standard quantities in standard containers are usual. The requirement for suppliers to be located near the buying organization, which places those at some distance at a competitive disadvantage, causes lead times to be shorter and deliveries to be more reliable.

It can be argued that JIT purchasing and delivery are suitable mainly for assembly line operations, and less so for certain process and service industries, but the reduction in the inventory and transport costs that it brings should encourage innovations to lead to its widespread adoption. The main point is that there must be recognition of the need to develop closer relationships and to begin the dialog – the sharing of information and problems – that leads to the product or service of the right quality, being delivered in the right quantity, at the right time.

By minimizing inventory, JIT frees up resources to employ elsewhere in the company. A retail store using JIT can remodel the warehouse space into more retail sales floor space without expanding the physical store. A manufacturer gets more space to produce goods. Both companies free the workforce to focus on primary tasks, from making goods to interacting with customers rather than stocking merchandise. Manufacturers can train employees to work at different stages of the assembly line or at different workstations, to meet shifts in demand. A better-trained, more flexible workforce focusing on quality production can mean faster set-up or customization of workstations and lower defect rates, which lower costs and increase customer satisfaction.