MANAGEMENT PROJECT ON JUST IN TIME
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In today's competitive world shorter product life cycles, customers rapid demands and quickly changing business environment is putting lot of pressures on manufacturers for quicker response and shorter cycle times. Now the manufacturers put pressures on their suppliers. One way to ensure quick turnaround is by holding inventory, but inventory costs can easily become prohibitive. A wiser approach is to make your production agile, able to adapt to changing customer demands. This can only be done by JUST IN TIME (JIT) philosophy. JIT is both a philosophy and collection of management methods and techniques used to eliminate waste (particularly inventory).
Waste results from any activity that adds cost without adding value, such as moving and storing. Just-in-time (JIT) is a management philosophy that strives to eliminate sources of such manufacturing waste by producing the right part in the right place at the right time.
JIT (also known as lean production or stockless production) should improve profits and return on investment by reducing inventory levels (increasing the inventory turnover rate), reducing variability, improving product quality, reducing production and delivery lead times, and reducing other costs (such as those associated with machine setup and equipment breakdown).
The basic elements of JIT manufacturing are people involvement, plants, and system. People involvement deal with maintaining a good support and agreement with the people involved in the production. This is not only to reduce the time and effort of implementation of JIT, but also to minimize the chance of creating implementation problems. The plant itself also has certain requirements that are needed to implement the JIT, and those are plant layout, demand pull production, Kanban, self-inspection, and continuous improvement. The plant layout mainly focuses on maximizing working flexibility. It requires the use of multi-function workers”. Demand pull production is where you produce when the order is received. This allows for better management of quantity and time more appropriately. Kanban is a Japanese term for card or tag. This is where special inventory and process information are written on the card. This helps in tying and linking the process more efficiently. Self-inspection is where the workers on the line inspect products as they move along, this helps in catching mistakes immediately. Lastly continuous improvement which is the most important concept of the JIT system. This simply asks the organization to improve its productivity, service, operation, and
customer service in an on-going basis.
In a JIT system, underutilized (excess) capacity is used instead of buffer inventories to hedge against problems that may arise. The target of JIT is to speed up customer response while minimizing inventories at the same time. Inventories help to response quickly to changing customer demands, but inevitably cost money and increase the needed working capital.
JIT requires precision, as the right parts must arrive "just-in-time" at the right position (work station at the assembly line). It is used primarily for high-vPolume repetitive flow manufacturing processes.
The technique was first used by the Ford Motor Company as described explicitly by Henry Ford's My Life and Work (1922):
"We have found in buying materials that it is not worth while to buy for other than immediate needs.”
They bought only enough to fit into the plan of production, taking into consideration the state of transportation at the time. If transportation were perfect and an even flow of materials could be assured, it would not be necessary to carry any stock whatsoever. The carloads of raw materials would arrive on schedule and in the planned order and amounts, and go from the railway cars into production. That would save a great deal of money, for it would give a very rapid turnover and thus decrease the amount of money tied up in materials. With bad transportation one has to carry larger stocks.
They followed the concept of "dock to factory floor" in which incoming materials are not even stored or warehoused before going into production. This paragraph also shows the need for an effective freight management system (FMS) and Ford's Today and Tomorrow (1926) describes one.
Japanese corporations could afford large amounts of land to warehouse finished products and parts. Before the 1950s, this was thought to be a disadvantage because it reduced the economic lot size. (An economic lot size is the number of identical products that should be produced, given the cost of changing the production process over to another product.) The undesirable result was poor return on investment for a factory. Also at that time, Japanese companies had a bad reputation as far as quality of manufacturing and car manufacturing in particular was concerned.
One motivated reason for developing JIT and some other better production techniques was that
after World War II, Japanese people had a very strong incentive to develop a good manufacturing technique which would help them rebuild their economy. They also had a strong working ethic which was concentrated on work rather than on leisure, and this kind of motivation was what drove Japanese economy to succeed. Therefore Japan’s wish to improve the quality of its production led to the worldwide launch of JIT method of inventory
The basic elements of JIT were developed by Toyota in the 1950's, and became known as the Toyota Production System (TPS).The chief engineer Taiichi Ohno, a former shop manager and eventually vice president of Toyota Motor Company at Toyota in the 1950s examined accounting assumptions and realized that another method was possible. The factory could be made more flexible, reducing the overhead costs of retooling and reducing the economic lot size to the available warehouse space.
Over a period of several years, Toyota engineers redesigned car models for commonality of tooling for such production processes as paint-spraying and welding. Toyota was one of the first to apply flexible robotic systems for these tasks. Some of the changes were as simple as standardizing the hole sizes used to hang parts on hooks. The number and types of fasteners were reduced in order to standardize assembly steps and tools. In some cases, identical subassemblies could be used in several models.
Toyota engineers then determined that the remaining critical bottleneck in the retooling process was the time required to change the stamping dies used for body parts. These were adjusted by hand, using crowbars and wrenches. It sometimes took as long as several days to install a large (multiton) die set and adjust it for acceptable quality. Further, these were usually installed one at a time by a team of experts, so that the line was down for several weeks.
Toyota implemented a program called Single Minute Exchange of Die (SMED). With very simple fixtures, measurements were substituted for adjustments. Almost immediately, die change times fell to about half an hour. At the same time, quality of the stampings became controlled by a written recipe, reducing the skill required for the change. Analysis showed that the remaining time was used to search for hand tools and move dies. Procedural changes (such as moving the new die in place with the line in operation) and dedicated tool-racks reduced the die-change times to as little as 40 seconds. Dies were changed in a ripple through the factory as a new product began flowing.
After SMED, economic lot sizes fell to as little as one vehicle in some Toyota plants. Carrying the process into parts-storage made it possible to store as little as one part in each assembly station. When a part disappeared, that was used as a signal to produce or order a replacement.
JIT was firmly in place in numerous Japanese plants by the early 1970's. JIT began to be adopted in the U.S. in the 1980's.
JIT applies primarily to repetitive manufacturing processes in which the same products and components are produced over and over again
For Example Cars, Fast Food Chains
The requirements for a proper just-in-time management are:
STANDARDIZATION: Where the supplies are standardized and the suppliers are trustable and close to the plant. As there is little buffer inventory between the workstations, so the quality must be high and efforts are made to prevent machine breakdowns. Those organizations that need to respond to customer demands regularly this system is also being able to respond to changes in customer demands.
SOFTWARE: For JIT to work efficiently Supply Chain Planning software, companies have in the mean time extended Just-in-time manufacturing externally, by demanding from their suppliers to deliver inventory to the factory only when it's needed for assembly, making JIT manufacturing, ordering and delivery processes even speedier, more flexible and more efficient.
MULTI-FUNCTIONALITY In JIT workers are multifunctional and are required to perform different tasks. Machines are also multifunction and are arranged in small U-shaped work cells that enable parts to processed in a continuous flow through the cell. Workers produce pars one at a time within cells and transport those parts between cells in small lots.
CLEANLINESS Environment is kept clean and free of waste so that any unusual occurrence are visible.
SCHEDULES: Schedules are prepared only for the final assembly line, in which several different models are assembled at the same line. Requirements for the component parts and subassemblies are then pulled through the system. The "PULL" element of JIT will not work unless production is uniform and lot sizes are low. Pull system is also used to order material from suppliers (fewer in numbers usually). They make be requested to make multiple deliveries of the same item in the same day, so the manufacturing system must be flexible.
QUALITY: Quality within JIT manufacturing is necessary, because without a quality program in JIT, the JIT will fail. Here we think about quality at the source and the Plan, Do, Check, Action with its statistical process control. Furthermore, techniques are also very important. The JIT technique is a pull system rather than a pull system, based on not producing things until they are needed. The well known Kanban card is used as a signal to produce. Moreover, integration also plays a key role in JIT systems. JIT integration can be found in four points of the manufacturing firm. The Accounting side, Engineering side, Customer side and Supplier side. At the accounting side, JIT has concern for WIP, utilization and overhead allocation and at the engineering side of JIT focuses on simultaneously and participative design of products and processes.
Just-In-Time Total Quality Management
Just-In-Time Total Quality Management is the mean of market and factory management within a humanistic environment of continuing improvement. Moreover, it means continuing improvement in social life, and working life. When applied to the factory, Kaizen means continual improvement involving managers and workers alike. When it comes to Total Quality Management, Japans strong industrial reputation is well-known around the world. Total quality control is the system, which Japan has developed to implement Kaizen or continuous improvement. The traditional description of Just-In-Time is a system for manufacturing and supplying goods that are needed. There are several important tools that are important for total quality management control, but there are seven that are even more important. These are relations diagram, affinity diagram, systematic diagram or tree diagram, matrix diagram,
matrix data analysis, process decision program chart, and arrow diagram. When used properly, these seven tools will help the total quality management system by eliminating defective products. Moreover, they will help in assisting to improve productivity, complete tasks on time, eliminate waste, and reduce lead time and inventory cost.
Pros and Cons of Just-in-Time
Pros of Just-In-Time:
Goals of JIT can vary, but there are a few that should be constant in any JIT system:
Cons of Just-In-Time:
Regardless of the great benefits of JIT, it has its limitations:
Case in which JIT has failed
Just in Time production allows companies to reduce both inventory and the entire production chain. It encourages the removal of all surplus, including surplus factories. Under normal business conditions this is not a problem. However, if there is any disruption at any given point in the supply chain, then all production grinds to a halt.
Evidence of the problem with Just in Time production became clear in the wake of Hurricane Katrina and Hurricane Rita, both of which hit the US Gulf coast in 2005. At that time, no new oil refineries had been built in the US since 1976. During that time period, companies actually shut down several refineries to reduce capacity. The old refineries still operating ran at full capacity, so no new refineries were needed according to Just in Time theory since they would only produce surplus gasoline. However, most of these refineries were clustered around the Gulf coast. When the Katrina hit, 15 oil refineries in Mississippi and Louisiana representing 20% of US refining capacity was shut down. Rita damaged another 16 refineries in Texas, accounting for 2.3 million barrels per day of capacity shut down.
The lack of surplus in oil refining caused a shock to the United States. Gasoline prices surged. Had companies not shut down refineries in order to reduce capacity according to Just in Time theory, particularly refineries on the west coast, then it is likely that gasoline prices would have remained stable.
US regular grade gasoline prices were $2.154 per gallon on November 28, 2005, down from a spike of $3.09 on September 19, 2005 in the immediate aftermath of the hurricane Katrina disaster
The work described in this case study was undertaken in a young, rapidly expanding company in the financial services sector with no previous experience with Total Quality Management (TQM). The quality project began with a two-day introductory awareness program covering concepts, cases, implementation strategies and imperatives of TQM. The program was conducted for the senior management team of the company. This program used interactive exercises and real life case studies to explain the concepts of TQM and to interest them in committing resources for a demonstration project.
Step 1. Define the Problem
1.1 Selecting the theme: A meeting of the senior management of the company was held. Brainstorming produced a list of around 10 problems. The list was prioritized using the weighted average table, followed by a structured discussion to arrive at a consensus on the two most important themes -- customer service and sales productivity.
Under the customer service theme, "Reducing the Turnaround Time from an Insurance Proposal to Policy" was selected as the most obvious and urgent problem. The company was young, and therefore had few claims to process so far. The proposal-to-policy process therefore impacted the greatest number of customers.
An appropriate cross functional group was set up to tackle this problem.
1.2 Problem = customer desire – current status. Current status: What did the individual group members think the turnaround is currently? As each member began thinking questions came up. "What type of policies do we address?" Medical policies or non-medical? The latter are take longer because of the medical examination of the client required. "Between what stages do we consider turnaround?" Perceptions varied, with each person thinking about the turnaround within their department. The key process stages were mapped:
Several sales branches in different parts of the country sent proposals into the Central Processing Center. After considerable debate it was agreed at first to consider turnaround between entry into the computer system at the Company Sales Branch and dispatch to the customer from the Central Processing Center (CPC). Later the entire cycle could be included. The perception of the length of turnaround by different members of the team was recorded. It was found that on an average Non-Medical Policies took 17 days and Medical Policies took 35 days.
Customer desire: What was the turnaround desired by the customer? Since a customer survey was not available, individual group members were asked to think as customers -- imagine they had just given a completed proposal form to a sales agent. When would they expect the policy in hand? From the customer's point of view they realized that they did not differentiate between medical and non-medical policies. Their perception averaged out six days for the required turnaround.
"Is this the average time or maximum time that you expect?" they were asked. "Maximum," they responded. It was clear therefore that the average must be less than six days. The importance of "variability" had struck home. For 99.7 percent delivery within the customer limit the metric was defined.
Therefore the average customer desire was less than 6 days and the current status was that of 64 days for non-medical policies and for medical policies it was 118 days. Therefore the problem was to reduce the non-medical policies from 64 to 6 days and medical policies from 118 to 6 days.
The performance requirement appeared daunting. Therefore the initial target taken in the Mission Sheet (project charter) was to reduce the turnaround by 50 percent -- to 32 and 59 days respectively.
In a session the factors causing large turnaround times from the principles of JIT were explained. These were Input arrival patterns
Typically it was found that waiting times constitute the bulk of processing turnaround times. Process Mapping (Value Stream Mapping in Lean) was undertaken. The aggregate results are summarized below:
Number of operations 84
Number of handovers 13
In-house processing time (estimated) 126 man-mins.
Range of individual stage time 2 to 13 mins.
To check this estimate it was decided to collect data -- run two policies without waiting and record the time at each stage. The trial results amazed everyone: Policy No. 1 took 100 minutes and Policy No. 2 took 97 minutes. Almost instantly the mindset changed from doubt to desire: "Why can't we process every proposal in this way?"
In the introductory program of TQM during the JIT session the advantages of flow versus batch processing had been dramatically demonstrated using a simple exercise. Using that background a balanced flow line was designed as follows:
Changing the mindset of the employees so they will accept and welcome change is critical to building a self-sustaining culture of improvement. In this case, the line personnel were involved in a Quality Mindset Program so that they understood the reasons for change and the concepts behind them and are keen to experiment with new methods of working. The line was ready for a test run.
Testing in stages is a critical stage. It allows modification of ideas based upon practical experience and equally importantly ensures acceptance of the new methods gradually by the operating personnel.
Stage 1: Run five proposals flowing through the system and confirm results. The test produced the following results:
Average turnaround time: < 1 day
In-house processing time: 76 mins.
There was jubilation in the team. The productivity had increased by 24 percent.
Stage 2: It was agreed to run the new system for five days -- and compute the average turnaround to measure the improvement. It was agreed that only in-house processing was covered at this stage and that the test would involve all policies at the CPC but only one branch as a model. This model, once proved, could be replicated at other branches.
The test results showed a significant reduction in turnaround:
1. For all non-medical policies from 64 to 42 days or 34%
2. For policies of the model branch from 64 to 27 days of 60%
The Mission Sheet goal of 50 percent reduction had been bettered for the combined model branch and CPC. Further analysis of the data revealed other measures which could reduce the turnaround further. Overall reduction reached an amazing 75 percent. Turnaround, which had been pegged at 64 days, was now happening at 99.7 percent on-time delivery in 15 days.
Regular operations with the new system was planned to commence. However, two weeks later it was still not implemented. One of the personnel on the line in CPC had been released by his department for the five-day trial to sit on the line but was not released on a regular basis. The departmental head had not attended the TQM awareness program and therefore did not understand why this change was required.
There were two options -- mandate the change or change the mindset to accept the change. Since the latter option produces a robust implementation that will not break down under pressures it was agreed that the group would summarize TQM, the journey and the results obtained in the project so far and also simulate the process with a simple exercise in front of the department head. This session was highly successful and led to the release of the person concerned on a regular basis.
A quality improvement story was compiled by the project Leader for training and motivating all employees.