Just-In-Time (JIT) and Lean Manufacturing

Just-in-Time (JIT) and Lean Manufacturing

Just-in-Time is a strategy put to practice in accounting principles, which induces increases in investment returns of an industry by decreasing work-in-progress stock and all of its related costs. This strategy of JIT is leading to noticeable improvements in the rate of return on investments, productivity and the level of quality of a manufacturing industry's output. Connected with Japanese management techniques, just-in-time production (JIT) are set of rules which help in carrying out organized plans. According to this philosophy of managing production, manufacturing organizations should not hold or stock material more than that is necessary for quick production or circulation. To be exact, a producer should not take delivery of unprocessed materials or goods from its suppliers possibly just hours prior to they will be used in manufacturing, and the output of the firm should be transferred to its consumers as soon as possible after the raw material is completely transformed into manufactured goods and they must not keep a stock of raw or finished goods. Progressively more and more popularity is given to Just in Time production, which is also knows as JIT. The objective of lean manufacturing is "to eliminate the eight wastes of lean-overproduction, motion, inventory, waiting, transportation, defects, underutilized people, and extra processing. Lean targets non-value-added activities.These are the same activities that contribute to poor product quality." (Peterman, 2001, p. 24) in other terminology, lean manufacturing searches for those actions that do not add value and then removes those activities or processes. Anything referred to as non-valued added means it is an "activity that does not add market form or function or is not necessary" (Peterman, 2001, p. 24). Lean manufacturing is projected to remove, decrease, simplify or assimilate non-value added activities.

This research paper gives details about the fundamental concept to attain JIT production and clarify the meaning of Lean manufacturing which is associated with it.

Just-in-Time (JIT) and Lean Manufacturing

Just-in-time is a very wide philosophy that highlights generalization and incessantly reducing waste in each and every part of production activity. This entails that the purpose of the just-in-time philosophy is best aimed at an organization in its entirety. In order for a proficient Just-in-Time operation the theory of backflush accounting is also adopted. The most important seeks of just-in-time are associated with those of total quality management (TQM). The prime focus is on the removal of waste and activities that are of no use hence giving a manufacture of commodities which possess 'zero defects'. Just like TQM, the just-in-time philosophy centers on the on-time-delivery to the purchaser. The philosophy enhances the performance of the departments of purchasing, production and sales. It emphasizes on quick sales so that the price of stocking is reduced. The nonexistence of stock render decisions concerning cost-flow conjectures (such as weighted average or first-in, first-out) or stock costing methods (such as absorption or marginal costing) are insignificant. This is because all of the production costs in accordance to a period, surge directly into cost of goods sold. When the old stock is consumed, the information sent to the manufacturing department for the order of new stock by immediate means is the key to the success of JIT philosophy. This helps in saving the warehousing space and costs required to keep the stock. However the commodity levels in stock are determined by usual demands but in case of a sudden ascend in demand the firm can suffer the problem of customer service. 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 worthwhile to buy for other than immediate needs. We buy 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." The Job costing is also decreased by the speedy conversion of direct materials to finished good which are then sold immediately. The established and standard costing systems track costs as goods pass from raw materials, to work in progress, to finished goods and finally to sales. And this type of system is known as 'Sequential Tracking System' because the accounting system entries come in the similar arrangement as purchases and manufacturing. At times the management tries to track both direct material and labor time to individual operations and products and thus this process can prove to be very expensive in accordance to sequential tracking. The execution of a Just-in-Time philosophy can result in a change in the character played by the management accountant. This is because the standard management accounting techniques are rendered to be improper owing to their inaptness for use in conjunction with just-in-time operations. For example, habitual variance study centers on making the most of capacity utilization while trying to lessen costs. The minimization of costs will always remain an important concern. On the other hand, the focus on value appreciation has increased while trying to decrease the costs. Management is as a result required to give financial and non-financial information concerning supplier performance, on-time deliveries, cycle times, and the quantity of faulty items produced. And thus these new duties for the management department have resulted in definite changes in the processes and accounting techniques in order to facilitate the provision of such information. And here comes the application of backflush accounting systems which are very helpful in improving the performance of just-in-time operations. This accounting system centers on the productivity of an organization and then works accordingly while assigning costs between costs of goods sold and inventories. Backflush accounting improves the costing system as it disregards both labor variances and work-in-progress. (C.Drury)

For a flourishing performance of JIT many added conditions are thought out. These conditions consist of small lot sizes, short setup and changeover times, proficient and effectual quality controls, and perhaps most of all, planning the whole production process to reduce backups and get the most out of the effectiveness of human and machine labor. The details first and foremost focus on 'assembly' manufacturing. It includes service organizations and administrative departments, making this philosophy applicable greatly broader. The steps taken to achieve proper and profitable JIT are,

JIT production includes the knowledge of the profits and fame (i.e. The objective), which are to be achieved with JIT. The objective fundamentally decreases product throughput times. It lessens or diminishes conventional stock and also focuses the mind on quality and set-up times and Offers a theoretical structure for tactical growth in many areas

Value stream mapping is an important tool that assists you to observe and realize the flow of objects and information as a product or service creates its way through the value stream.

The 5S program is introduced which ascertains a well-organized, proficient and safe and sound place of work.

Line integration has a setup of a flow model, which is very significant to mark troubles right away. It also eradicates or decreases intermediate stock.

One-piece flow production is when parts are made one at a time and passed on to the next process. It helps to detect the defects immediately and prevents a huge amount of loss. It is also known as make one, move one.

Pull system is in which a production method is organized in which the production of an item starts only when there is actual demand from a customer. It is the next vital step to ensure that goods are not pushed into the manufacturing process any longer (hoping some date they will come out at the other end), but 'pulled' the time the purchaser asks for it.

Line balancing is the process of aligning processes within a definite manufacturing line, and feeder lines to consuming lines that reduces variations in production levels and operation downtime.

Standardization is the procedure of keeping procedures and equipment as constant as achievable.

But on the other hand Just in time (JIT) is not a direct solution to all the problems. Implementing this strategy could make the company change all the ways in which a company works. The strategy in this way of working comes from many different disciplines including statistics, industrial engineering, production management and behavioral science. In JIT inventory is seen as incurring costs or waste instead of adding value. In JIT environment, industries are encouraged to eliminate inventory that does not reimburse for production issues and to build up processes that help in keeping a low amount of inventory. This strategy concerns all about containing "the right material, at the right time, at the right place, and in the exact amount." When JIT was newly introduced all the deliveries were done by bicycles which were handled by humans, although with the rise in scale came the adoption of van and lorries for the deliveries. And this in turn has other problems which were highlighted by Cusumano (1994). Firstly the time which is wasted while the vans are stuck in traffic jams, this can result in late deliveries, the inventory which is used in transporting inventory and lastly the scrap material which is wasted (e.g. petrol or diesel burned). JIT unconditionally presumes a level of input cost constancy such that it is advantageous to stock inputs at today's prices. If input prices are anticipated to rise storing inputs may be sought-after.

The leading problem with Just in Time strategy is that it leaves the supplier and downstream consumers open to supply shocks and large supply or demand changes. For internal causes this was seen as a feature rather than a bug by Ohno, who used the analogy of lowering the level of water in a river in order to expose the rocks to explain how removing inventory showed where flow of production was interrupted. Once the barriers were exposed, they could be removed; since one of the main barriers was rework, lowering inventory forced each shop to improve its own quality or cause a holdup in the next downstream area." If the stock levels reach the minimum there are many consignments of the same part coming all over the day, there is a possibility that they may incur an interruption in the flow of supply. And thus to tackle this kind of problem the firm has to use many suppliers to have the desired goods at the required time. Toyota uses two suppliers in order to avoid any disruption in the course. Toyota believes in keeping up high value relations with its total supplier network. Therefore, a strong, long-standing relationship with a small number of suppliers is chosen to temporary, price-based relationships with contending suppliers. Toyota has also been using a durable relationship with its old suppliers. And they also send their workers to their suppliers to enhance the performance of the supply. This long-term relationship has also been used by Toyota to send Toyota staff into their suppliers to improve their suppliers' processes. These involvements are lasting for twenty years and therefore result in better margins for Toyota, the supplier and as well as lower final costs and a more consistent supply sequence. As noted by Liker (2003) and Womack and Jones (2003), it would finally be advantageous to establish coordinated flow and associated JIT all the way back through the supply flow. However, nobody followed this in detail all the way back through the procedures of the raw materials. Most of the raw materials cannot be grown or discovered instantly and hence require time in accordance with the weather and natural play. The part of JIT which is presently supposed to be impossible is the synchronized part of flow. However the part of this that is currently viewed as impossible is the synchronized part of flow and the linked part of JIT. However these two can be enforced in remote process islands within the raw materials flow. (Wikipedia)

Lean manufacturing is a general procedure management philosophy, which came up from the Toyota Production System (also known as TPS) and also from some other sources. It is well-known and popular for it centers on decreasing of the real Toyota seven wastes, in order to increase overall client value but has a number of latest key perspectives on how to do this. Lean is often associated with six sigma for the reason that the methodology's stress on reduction of process variation (or its converse smoothness) and Toyota's combined usage (with the TPS). The constant and permanent progress of Toyota company from a small manufacturing company to a leading and most popular car company stresses on our mind to find out what made it grow faster and with a constant speed. The answer is its different way of production and processes, the plans and the strategies; it had made "lean" a burning matter in management science in the first decade of the 21st century.

U.S. production firms always try to raise the profit margin and for the achievement of this goal they kept on seeking for effective policies that will improve or tend to improve the quality of output, decrease cost and build up a competitive place to enlarge their market share, beginning efforts can be associated to Eli Whitney and Henry Ford.

The Machine That Changed the World," a book written by James Womack in 1990. Womack's book was a clear-cut explanation of the history of automobile manufacturing joint with a study of Japanese, American, and European automotive assembly plants. The popularity of "lean manufacturing" theory in the factories of America was made in large part by the Massachusetts Institute of Technology lessons of the process from mass production toward production as written and described in Womack's book.

A new slogan was coined, as to which is now frequently referred to as "Lean Manufacturing." (Peterman, pg 24)

Peterman stated that about 95% of a company's total lead time is filled with non-value added activities. These consist of waste in several areas including: machine setup, inspection, waiting, storage, and transport, order dealing out, machine collapse and so on.

These activities often contribute to lower qualities. Examples include: damage during transportation, rework double handling; misidentification in storage; loss in storage; setup adjustments that results in a marginal product; breakdowns of machines instead of preventive maintenance; and inspection vs. process capability. The most awful waste of time, however, is usually a lack of communication or miscommunication among operators of different components during the procedure between raw material and the finished good. (Peterman, 2001, p. 24)

To manufacture a new product, lean manufacturing requires a reduced amount of everything in contrast with mass production: reduced waste, reduced human effort, reduced investment in tools, reduced manufacturing space and reduced engineering time. William M. Feld described five fundamental elements for lean management in the book "Lean Manufacturing" (p. 4).