Just in Time (JIT) Inventory System

Harley-Davidson saw its commanding lead in

heavyweight motorcycle falter when powerful
Japanese bikes appeared in the U.S. market. If Harley
was to stay on the road, the management had to
uncover the key element of Japanese success. Initially
they were baffled. Honda’s motorcycle plant in
Maryville, Ohio was staffed by US workers, just like
Harley’s. It bought parts from US suppliers, just as
Harley did. And it had no clear technological
advantages. After touring the plant in Maryville, they
found what they were looking for:
Honda turned out better motorcycles because of their
Japanese production system, specifically - the just in
time inventory control system.
 Just in Time (JIT) Inventory System

JIT is a production system where both the movements of

goods during production and deliveries from suppliers
are carefully timed so that at each of the process the
next (usually small) batch arrives for processing just
as the preceding batch is completed

Focus
To make a system with no idle items waiting to be
processed.
To optimize processes & procedures by continuously
pursuing waste reduction.
 EVOLUTION OF THE JIT CONCEPT
o Developed and generated at the Toyota Motor
Company of Japan by Taiichi Ohno and several of his
colleagues (1970s).
o The system concentrates on avoiding end-item and
intermediate-item storage.
o The benefits were no necessity of ‘people for
inventory control’, ‘space for inventory’, or ‘loan to
finance inventory’.
o It gives the officials a very little time (only three
minutes) to change the mold.
o It allows to realign the workforce more efficiently
when business is bad because company can train
workers to do more than one job.
o In USA, JIT was first adopted by the automobile
industry. Leading firms in other industries include –
Xerox, IBM, Apple, Black & Decker, and General
Electric.
 FEATURES OF JIT

• Low Inventory
– ‘Inventory is ‘evil’ according to JIT philosophy.
– Its main purpose is to minimize the amount of idle resources.
– That is why this is sometimes called ‘zero inventory program’ of stockless
production.

• People Involvement
– JIT has a strong management component.
– Success of JIT can be traced to the fact that the companies that use it train
the employees to have the appropriate skills, give them responsibility and
coordinate and motivate them.
– JIT philosophy of continuous improvement and minimization of waste
considers any activity that does not add value to the product or serve the
customers in some way to be waste. One form of waste that is
inconspicuous and difficult to combat is the under utilization of human
talent.
 FEATURES OF JIT (CONT.)

• People Involvement (Cont.)

– JIT seeks to utilize more fully the creative talents of the employees,
suppliers, contractors, and others who may contribute to the company’s
improvement.
– JIT is a philosophy that cuts across all phases of the manufacturing and
marketing activities in an organization. It is a strategy marked by an
environment of cooperation and coordination between buyers and sellers.
Short-term relationships are replaced by long-term commitments.

• Total Quality Control

– JIT interprets the term Total Quality Control as the achievement of zero
defect products that involves every department and every employee of the
company.
– According to the philosophy, quality should be assured and ensured for
every set of activities at the beginning level (source) – automatically the
output of the corresponding activities will be improved quality.
 BUILDING BLOCKS OF JIT
The design and operation of JIT system provide the foundation
(made up of four building blocks) for accomplishing the
following goals.

Ultimate Goal  A balanced rapid flow

 Eliminates disruptions/
Make the system flexible
Supporting Goals  Reduce setup & lead times
 Eliminate waste/
Minimize inventories
 BUILDING BLOCKS OF JIT (CONT.)
• FIRST: PRODUCT DESIGN
– In product design, three elements are key to the JIT system
– standard parts, modular design and quality.
– The first two elements relate to speed and simplicity.
– Quality is the sine qua non (“Without which not”) of JIT.
– Poor quality can create major disruptions as JIT is designed for
a smooth flow of work

• SECOND: PROCESS DESIGN

– Some aspects of process design are important for JIT
system
– small lot sizes
– set up time reduction
– manufacturing cells
– limited work in process
– quality improvement
– production flexibility
– little inventory storage
 BUILDING BLOCKS OF JIT (CONT.)
• THIRD: PERSONNEL/ORGANIZATIONAL ELEMENTS
– Five elements of personnel and organization are
particularly important for JIT system
– workers are assets
– cross-trained workers
– continuous improvement
– cost accounting and leadership
– project management

• FOURTH: MANUFACTURING PLANNING & CONTROL

– Five elements are considered vital
– level-loading
– pull systems
– visual record systems (Kanban system)
– close vendor relationships
– reduced transaction processing
 THE JIT GOAL
• Major objective of JIT is to have a balanced system
– one that achieves smooth, rapid flow of materials
– the right item at the right place at the right time
– to purchase and produce items only a short time before they are
needed to keep the work-in-process inventory very low
– The practice reduces working capital requirements, reduces the
need for floor space and shortens the flow through time because
materials spend very little time in queues
• Specifically
– Eliminate disruptions
– Make the system flexible
– Reduce setup times and lead times
– Minimize inventory investment
– Eliminate waste associated with queues
– React faster to demand changes
– Uncover any quality problem
 THE JIT GOAL (CONT.)

• Disruptions are occurred by a variety of factors, such as poor quality,

equipment breakdowns, changes to the schedule, and late deliveries.
These should be eliminated as much as possible.
• A Flexible System is one, which is robust enough to handle a mix of
products, often on a daily basis, and to changes in the level of output
while still maintaining balance and throughout speed.
• Setup Time and Deliveries Lead Times prolong a process adding a
value to the product. The continuous process of JIT reduces the
disrupting setup times and the lead times, as next batch of production
is ready exactly when the preceding batch is completed.
• Inventory (Idle Resources) takes up space and adds cost to the
system, which should be minimized. JIT can minimize the inventory a
lot. As the requirements and the deliveries coincide, so no need of
storing for the future requirements.
• Waste represents an unproductive resource. In the JIT philosophy,
waste includes: over production, waiting line, unnecessary
transporting, inventory scrap, inefficient work.
 THE SEVEN WASTES
Waste of Eliminate by reducing set up times, synchronizing quantities and timing
Production between processes, compacting layout, visibility, and so forth. Make only what
is needed now.
Waste of Eliminate through synchronizing workflow as much as possible, and balance
Waiting uneven loads by flexible workers and equipment.

Waste of Establish layouts and locations to make transport and handling unnecessary if
Transportation possible. Then rationalize transport and material handling that cannot be
eliminated.
Waste of First question why this part or product should be made at all, then why each
Processing process is necessary. Extend thinking between economy of scale or speed.
Itself
Waste of Reduce by shortening setup times and lead times, by synchronizing work flows
Stocks and improving work skills, and even by smoothing fluctuations in demand for
the product. Reducing all the other wastes reduce the waste of stocks.

Waste of Study motion for economy consistency. Economy improves productivity, and
Motion consistency improves quality. First improve the motions, then mechanize or
automate. Otherwise there is danger of automating waste.
Waste of Develop the production process to prevent defects from being made so as to
Making eliminate inspection. At each process, accept no defect and make no defect.
Defective Make processes “failsafe” to do this. From a quality process comes a quality
Products product – automatically.
 BENEFITS OF JIT SYSTEM

• Reduced levels of in-process inventories purchased goods and

finished goods.
• Reduced space requirements.
• Increased product quality and reduced scrap and rework.
• Reduced manufactures lead times.
• Greater flexibility in changing the production mix.
• Smoother productivity flow with fewer disruptions caused by
problems due to quality, shorter setup times, and multi-skilled
workers who can help each other and substitute for others.
• Increased productivity levels and utilization of equipment.
• Worker participation levels and utilization of equipment.
• Worker participation in problem solving.
• Pressure to build good relationships with vendors.
• Reduction in the need for certain indirect labor, such as
material handlers.
 DRAWBACKS OF JIT SYSTEM

“…… Those who believe in the (JIT) system say it eliminate

wastes and frees up much needed space that was once used to
house large chunks of inventory. But the system obviously has
some bugs in it, and purchasing managers say they need to be
worked out. This is evident from the survey, which reported
that 47% of participants say … they are having efficiency
problems.
……and partial success can be very troublesome. The 47% who
report JIT-related efficiency problems say these problems can
quickly become big problems when assembly lines are forced
to shut down.
Some purchasing managers say they have run into problems with
getting suppliers to keep the needed stock ready to be
delivered. In fact, 33% of the survey participants say missed
supply deadlines are a problem.
Twenty one percent of those surveyed say supply quality is a
problem.
And 33% say supplier commitment is an area that needs to be
improved.”
 DRAWBACKS OF JIT SYSTEM

• JIT may result in increased worker idle time.

• May decrease the production rate.
• Slow to react to changes in demand.
• It ignores known information about future demand patterns.
• Decrease opportunity for multiple sourcing.
• Suppliers must react more quickly.
• Improved reliability required of suppliers.
 COMPARISON OF JIT AND TRADITIONAL APPROACH
FACTORS JIT TRADITIONAL APPROACH
Inventory A liability. Every effort must be expended to do An Asset. It protects against forecast
away with it. errors, machine problems, and late
vendor deliveries.
Size Immediate needs only. A minimum replenishment Formulas
quantity is desired for both manufactured and
purchased parts.
Setups Make them insignificant. This requires either Low priority issue. Maximum
extremely rapid change over to minimize the output is the usual goal.
impact on production or the availability of extra
machines.
Queues Eliminate them. When problem occur, identify the Necessary investment. Queues
causes and correct them. permit following operations to
continue in the event of a problem
with feeding operation.
Vendors Co-workers. Multiple deliveries for all active items Adversaries. Multiple source are the
are expected daily. The vendor takes care of the rule, and it’s typical to play them off
needs of the customer, and the customer treats the against each other.
vendor as an extension of the factory.
Quality Zero effects. If quality is not 100 %, production is Tolerate some scram.
in jeopardy.
Maintenance Constant. Machine breakdowns must be minimal. It is not given that much
As required. Not critical because of queues. importance.
Lead Times Keep them short. This simplifies the job of The longer the better. Most foreman
marketing, purchasing, and manufacturing, as it and purchasing agents want more
reduces the need for expanding. lead-time not less.