Just-in-Time

From Supply Chain Management Encyclopedia

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'''Russian: [http://ru.scm.gsom.spbu.ru/Точно-в-срок Точно-в-срок]'''
'''Russian: [http://ru.scm.gsom.spbu.ru/Точно-в-срок Точно-в-срок]'''
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By far the best known and most detailed performance metrics are encompassed in the Supply Chain Operations reference – SCOR model, which was created in 1995 and has been continuously refined ever since. The SCOR model provides an industry-standard approach to analyze, design, and implement changes to improve performance throughout five integrated supply chain processes: plan, source, make, deliver, and return – spanning the full gamut from a supplier’ supplier to a customer’s customer and every point in between. The SCOR model is aligned with a company’s operational strategy, material, work flows, and information flows.<ref>David Blanchard, Supply Chain Management, Best Practices, New Jersey,  John Wiley & Sons, 2007, 44</ref>
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"Just-in-Time" or JIT means making "only what is needed, when it is needed, and in the amount needed."  JIT is also known as lean production or stockless production, which reduces inventory in a firm. But still there is a difference between the concepts of JIT which is a philosophy and the Quality control Management which is a practice. Just-In-time is a management philosophy aimed at eliminating manufacturing wastes by producing only the right amount and combination of parts at the right place at the right time . Eliminating wastes statement is based on the fact that wastes result from any activity that adds cost without adding value to the product, such as transferring of inventories from one place to another or even the mere act of storing them .  
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JIT dates back to the early 1970’s when it first appeared in Japan, after being developed and perfected by Taiichi Ohno of Toyota Company. Taiichi Ohno developed this philosophy as a means of meeting customer demands while minimizing delays. Thus, in the early days, JIT was used not to reduce manufacturing wastage, but primarily to produce goods so that customer orders were met exactly when they needed the products .
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As explained by Peter Bolstorff and Robert Rosenbaum in Supply Chain Excellence, a handbook on using the SCOR model, the five SCOR processes encompass the following measurable activities<ref>Peter Bolstorff and Joseph Rosenbaum, Supply Chain Excellence: A Handbook for Dramatic Improvement Using the SCOR Model, New York: Amacom, 2003, 2-3</ref>:
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==Objectives of JIT==
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* '''Plan''': Assess supply resources; aggregate and prioritize demand requirements; plan inventory for distribution, production, and material requirements; and plan rough-cut capacity for all products and all channels.
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There are three main objectives of JIT system, could be emphasized among the others :
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* '''Source''': Obtain, receive, inspect, hold, issue, and authorize payment for raw materials and purchased finished goods.
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* Increasing the organization’s ability to compete with others emphasizing the long run period. JIT manufacturing process is a more optimal process for the firm, what helps to increase the competitiveness.
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* '''Make''': Request and receive material; manufacture and test product; package, hold, and/or release product.
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* Increasing efficiency within the production process. Efficiency is obtained through the increase of productivity and decrease of cost.  
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* '''Deliver''': Execute order management processes; generate quotations; configure product; create and maintain a customer database; maintain a product/price database; manage accounts receivable, credits, collections, and invoicing; execute warehouse processes, including pick, pack, and configure; create customer-specific packaging/labeling; consolidate orders; ship products; manage transportation processes and import/export; and verify performance.
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* Reducing wasted materials, time and effort, which lead to the costs reduction.
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* '''Return''': defective, warranty, and excess return processing, including authorization, scheduling, inspection, transfer, warranty administration, receiving and verifying defective products, disposition, and replacement.
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SCOR model is used like a language to communicate among supply-chain partners. It decomposes processes in the company to process elements, then to tasks, and then to activities. SCOR model includes three levels of details <ref>Faisal M.N., Banwet D.K., Shankar R. Management of Risk in Supply Chains: SCOR approach and Analytic Network Process. 2007. An international journal, Vol. 8, #2.</ref>:  
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==Elements of JIT==
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* Top-level (to define scope of supply-chain operations);
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According to R. Dan Reid & Nada R. Sanders  the are the following elements of JIT system:
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* Configuration level (on the basis of specific configuration, supply chain operations are based);
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* Value-added manufacturing, achieved by
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* Process element level (companies “fine tune” their operations strategy)
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* Inventory reduction - exposes problems
 +
* Kanbans & pull production systems
 +
* Small lots & quick setups
 +
* Uniform plant loading
 +
* Flexible resources
 +
* Efficient facility layouts
 +
* Total Quality Management  which is an integrated effort designed to improve quality performance at every level
 +
* Human resources as respect for people rests on the philosophy of JIT
 +
 
 +
==Benefits of JIT==
 +
Advantages of working in JIT system could be grouped the following way:
 +
* Product costs are greatly reduced of manufacturing cycle time, reduction of scraps, inventories, space requirements, material handling and eliminations of non-value adding operations
 +
* Quality is substantially improved due to fast detection and correction of defects, use of automatic stop devices, higher quality of purchased parts, worker centered quality control and statistical process control. Total preventive maintenance and lower inventory levels also help in quality improvements.
 +
* Design. Due to the reduction of set-up times (changeovers), alternative designs can be quickly brought on the shop floor.
 +
* Productivity. Order level productivity improvements are obtained due to the use of flexible workforce, reduced rework, reduced inspection, reduced part delay and  reduced throughout time and manufacturing lead time. Workers acquire multiple skills and become highly productive, they participate in problem-solving.
 +
Expressed in numbers an empiric analysis in JIT production and delivery in 172 European companies has shown that by the introduction of JIT production a reduction of the door to door time by 60-90%, a decrease of stock by 50%, a reduction of storage and transport costs by up to 20%, as well as improvements in quality, in flexibility in quantity and productivity by more than 25 % were achieved, which equals a reduction in the total costs by about 8-12%.  
 +
 
 +
==Drawbacks of JIT==
 +
There are the following disadvantages of JIT:
 +
* High supply chain risks. Due to the fact that JIT systems are focused on the reduction of inventory any fail  from using JIT companies to adjust quickly to increased demand or suppliers’ distribution problems could lead to the stock outs and thus to the customer’s dissatisfaction.
 +
* Little room for mistakes. Low level of inventory may hamper the possibility of reworking faulty products.
 +
* Limitations of location choices. The external supplier is not free in his choice of location but is forced to settle down nearby his orderer to reduce the transport’s expense and the lead time, even though another location may be more suitable for competitive reasons.
 +
* Negative effect on the environment. JIT procuration has negative effects on the environment as well as  additional congestion is caused by frequent transports with little shipments.
 +
These pitfalls make the importance of a precise planning and controlling of all JIT production processes obvious.
 +
 
 +
==Applications of JIT==
 +
JIT success is different from industry to industry. Moreover some companies benefit more from JIT while others do not. For example, while there are semiconductor companies which successfully practice JIT, some of them don’t for the simple reason of high complexity of their operations for JIT implementation. On the other hand, that’s precisely the challenge of JIT-creation of a production set-up that is simple enough to allow JIT.
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SCOR is the first model which can be used to configure the supply-chain based on a business strategy. SCOR model is used to measure supply-chain processes in organizations. There are more than 150 key metrics organized hierarchically. By that model all departments can develop integrated supply chain and collaborate effectively. SCOR model is using as theoretical framework for different researches in the field of SCM (e.g. “Management of risks in Supply Chains: SCOR approach and Analytic Network Process” by Faisal, Banwet and Shankar, 2007). Also, many companies are using SCOR model for their business. There are list of them on the website of Supply Chain council.  SCOR was used as reference model to document HP and Compaq Supply Chains and helped during the process of their merger. Siemens Medical using SCOR model decreased delivery time from 22 to 2 weeks and inventory by 60%.  U.S. Marine Corps reduced 200 logistics systems to handful Internet-enabled systems.  Volvo by using SCOR received such benefits: standard language and nomenclature, incorporated best practices and metrics, accelerated process understanding and definition and depicted relationships between supply chain partners. SCOR model is useful both for simple and complex supply chains because it represents integrated and unified approach. SCOR model is the basis for improvements in supply chain in global scale. SCOR model is developing and the number of organizations using it is rising because it provides unambiguous standard descriptions for the thousand of activities.
 
==References==
==References==

Revision as of 15:01, 20 September 2012

Russian: Точно-в-срок

"Just-in-Time" or JIT means making "only what is needed, when it is needed, and in the amount needed." JIT is also known as lean production or stockless production, which reduces inventory in a firm. But still there is a difference between the concepts of JIT which is a philosophy and the Quality control Management which is a practice. Just-In-time is a management philosophy aimed at eliminating manufacturing wastes by producing only the right amount and combination of parts at the right place at the right time . Eliminating wastes statement is based on the fact that wastes result from any activity that adds cost without adding value to the product, such as transferring of inventories from one place to another or even the mere act of storing them . JIT dates back to the early 1970’s when it first appeared in Japan, after being developed and perfected by Taiichi Ohno of Toyota Company. Taiichi Ohno developed this philosophy as a means of meeting customer demands while minimizing delays. Thus, in the early days, JIT was used not to reduce manufacturing wastage, but primarily to produce goods so that customer orders were met exactly when they needed the products .

Contents

Objectives of JIT

There are three main objectives of JIT system, could be emphasized among the others :

  • Increasing the organization’s ability to compete with others emphasizing the long run period. JIT manufacturing process is a more optimal process for the firm, what helps to increase the competitiveness.
  • Increasing efficiency within the production process. Efficiency is obtained through the increase of productivity and decrease of cost.
  • Reducing wasted materials, time and effort, which lead to the costs reduction.

Elements of JIT

According to R. Dan Reid & Nada R. Sanders the are the following elements of JIT system:

  • Value-added manufacturing, achieved by
  • Inventory reduction - exposes problems
  • Kanbans & pull production systems
  • Small lots & quick setups
  • Uniform plant loading
  • Flexible resources
  • Efficient facility layouts
  • Total Quality Management which is an integrated effort designed to improve quality performance at every level
  • Human resources as respect for people rests on the philosophy of JIT

Benefits of JIT

Advantages of working in JIT system could be grouped the following way:

  • Product costs are greatly reduced of manufacturing cycle time, reduction of scraps, inventories, space requirements, material handling and eliminations of non-value adding operations
  • Quality is substantially improved due to fast detection and correction of defects, use of automatic stop devices, higher quality of purchased parts, worker centered quality control and statistical process control. Total preventive maintenance and lower inventory levels also help in quality improvements.
  • Design. Due to the reduction of set-up times (changeovers), alternative designs can be quickly brought on the shop floor.
  • Productivity. Order level productivity improvements are obtained due to the use of flexible workforce, reduced rework, reduced inspection, reduced part delay and reduced throughout time and manufacturing lead time. Workers acquire multiple skills and become highly productive, they participate in problem-solving.

Expressed in numbers an empiric analysis in JIT production and delivery in 172 European companies has shown that by the introduction of JIT production a reduction of the door to door time by 60-90%, a decrease of stock by 50%, a reduction of storage and transport costs by up to 20%, as well as improvements in quality, in flexibility in quantity and productivity by more than 25 % were achieved, which equals a reduction in the total costs by about 8-12%.

Drawbacks of JIT

There are the following disadvantages of JIT:

  • High supply chain risks. Due to the fact that JIT systems are focused on the reduction of inventory any fail from using JIT companies to adjust quickly to increased demand or suppliers’ distribution problems could lead to the stock outs and thus to the customer’s dissatisfaction.
  • Little room for mistakes. Low level of inventory may hamper the possibility of reworking faulty products.
  • Limitations of location choices. The external supplier is not free in his choice of location but is forced to settle down nearby his orderer to reduce the transport’s expense and the lead time, even though another location may be more suitable for competitive reasons.
  • Negative effect on the environment. JIT procuration has negative effects on the environment as well as additional congestion is caused by frequent transports with little shipments.

These pitfalls make the importance of a precise planning and controlling of all JIT production processes obvious.

Applications of JIT

JIT success is different from industry to industry. Moreover some companies benefit more from JIT while others do not. For example, while there are semiconductor companies which successfully practice JIT, some of them don’t for the simple reason of high complexity of their operations for JIT implementation. On the other hand, that’s precisely the challenge of JIT-creation of a production set-up that is simple enough to allow JIT.


References

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