Introduction
“Just in time” is a philosophy of management that intends to minimize wastes due from manufacturing processes. This is done by manufacturing only the correct amount and combination of the required components at an appropriate place and time. The criterion is that wasteful practices accrue from activities that incur costs without any revenue generation or addition of value to the product as it were. These are like transferring stocks from one store to another or by just storing them. In JIT the main objective intended is to reduce the operations that do not add value and those inventories whose turnover is too low.
The effect is a reduction in the time for materials to go through the production process, reduced lead times for deliveries, greater utilization of equipment, lowered space use, lowered costs and hence much more profits realized. This system found its beginnings in Japan and has been utilized since the early of 1970s. Taiichi Ohno who is its brain child aimed at meeting the demands of customers with minimized delays. Previously it was not simply intended to reduce waste but to attend to the precise needs that customers brought.
Also known as lean production, JIT has been able to successfully reduce the levels of inventory at different levels of production. This system also has the name, stockless production. Proper coordination among the stations is quite important so that what one station produces is exactly what the second station requires. While at it, a station will only draw in what it needs from the previous station.
It is important that various capacities of the stations that are involved are properly balanced and matched. This will help to totally reduce any hitches that are involved in the production processes. Queuing or stoppages in the manufacturing processes are minimized.
JIT incorporates the pull system which assists greatly in the movement of inventories through production lines. In this system, the needs of the subsequent station particularly affect what will have to be produced in the preceding station. Under JIT, processes are defined by how the pulling components in one station to another are enhanced.
JIT does work best in the production flows where change is not eminent and there is repetition of processes from time to time. This is particularly used mostly in the assembly of vehicles where each car will have to receive the same treatment as that previous one.
Semi conductor companies have equally used JIT in beneficial ways. However, not all the semiconductor companies utilize the JIT system since their operations are too complex to be accommodated by the system. JIT therefore does pose the challenge of having to effectively create a set up that can accommodate processes.
Benefits of JIT
JIT system has several benefits to it. Minimization of daily running expenses is one of the benefits that accrue to this method. Equally, greater performance and through put are witnessed in the utilization of this system. While the through put is being processed, quality is assured in the use of JIT. As previously noted, the delivery will be improved so that no stock outs are witnessed.
Customers are in a position to feel the satisfaction that they receive using JIT. Flexibility is an attribute that accrues to the system of JIT. This is in addition to the innovativeness that the system brings with it. All the benefits of this system tend to be woven in the quality, efficiency and effectiveness of the processes that are involved.
JIT Components
According to Hirano (2009), JIT has various components to it. These include the following: Production Leveling Good housekeeping, Small Lot Production, Setup Time Reduction. One of the most pronounced components is the Kamban. Kamban is mostly used as a communication tool in JIT. A label is attached to every box as the various components move through the assembly line.
A member of the next process does collect what is sent from the previous system and leaves a Kamban to indicate that the delivery of the specific parts was received. The same kamban is normally sent back to maintain records and order for new parts to be used. The kamban works to help in the coordination of inflows and outflows of the production.
Main benefits of JIT include
JIT systems have helped to improve the productivity of capital by the immense benefits that they have received. Set-up time has been reduced greatly. This will help to reduce to a great extent the inventory changeover time. Toyota has been able to benefit a lot from the quicker production rate caused by the reduced time for setting up.
Dell a computer company using this method has had an improvement in the flow of goods from the warehouse. Lot delay of inventories has been minimized while the flow of inventory has been very much improved. Multi skilled employees have been utilized through this system. There has been division of labor and specialization which has led to improved deployment of employees to their relevant positions, and higher quality at the shortest time. There are lowered defect rates in this system. Equally, the tied up capital is minimized as the inventory in the store will be that which is required. Capital is hence utilized effectively.
Production scheduling has been improved at great length. This is because there has been a synchrony between the demand in the market and the output that is consistently produced per unit of time. No output is produced if there exists no demand for the products. Savings have been realized from reduced overtime pay among other costs.
There has been an enhancement in the supplier relationships. This has been evident at Dell which acquires the suppliers from various suppliers before assembling their computers. No part shortages have been witnessed in this system. Regular supply has also been ensured anytime of day when the production process is in course. This is caused by the synchrony that is improved between the production demand and the optimal levels of inventory to be maintained.
A case of Dell
An order coming from a customer for a computer, will be processed and assembly of the computer done within 12 hours. The delivery of the same happens within this duration.
This system has led to immense cuts in production cost so that Dell has cut its price by between 10 and 15%. Equally the JIT has enabled the company to grow at five time what the industry rate is. The costs of storage are minimized. While Compaq and IBM stock in dealer shelves for months incurring the costs, Dell will simply order components on booking in of an order.
Minimization of costs is thus imperative. During this period Dell takes advantage of price fall in the parts. The parts are averagely 60 days newer than those of Compaq and IBM. A 6% advantage is realized through these components alone.
Electronic data interchange
According to Zimmerman (2003) EDI refers to the electronic transmission of data between organizations in a way that is structured. It is a Business to Business model of electronic commerce that has really enhanced the communications between companies. The procurement of supplies is made so much easier.
The traditional letter of inquiry can digitized so that instead of wasting time drafting and sending by mail, the letter is transmitted electronically via web based applications. Other documents like the catalogue, checking documents among others are also transmitted online.
Immense benefits have been derived from the use of EDI. Collaboration between companies has been very well facilitated. The speed of transaction processing has also been accelerated. The accuracy in the systems presents verifiable applications and therefore EDI.
Advantages of using EDI
There has been an improved efficiency rate by use of EDI just as much as there has been cost savings realized. Lowered error rates and quicker processing times are witnessed compared to paper based systems. The inventory that companies have to hold has greatly been reduced by tying the products to be manufactured to the inventories that are ordered. Postage costs have been reduced just as much as the expenses that are incurred and the space that would originally have been accommodated.
EDI has lowered the delivery times of the supplies from previously days to hours. Procter & Gamble is an example of a company that has immensely benefited from the use of EDI. EDI has been used strategically as a marketing instrument to present the company as being attractive. The collaboration that Sony and Samsung have been involved in has worked to benefit both firms as they endeavor to achieve their objectives.
The firms have been able to use EDI to exchange information, collaborate and share ideas on their production techniques. Through this the firms have been able to share information on the current trends that are affecting the electronics market and the current needs that could be exploited.
Lowes and Home Depot have able to utilize the EDI system to maintain their competitive advantage. Strategic advantage is also used by the firm in using EDI to position it as adorable to the clients.
Toyota’s use of EDI
Small and medium sized suppliers collaborate with Toyota to pick supplies from them and distribute to their own clients. Through this system, Toyota receives several purchase orders, functional acknowledgements, invoices, advanced ship notices and purchase order acknowledgements. By use of this EDI, Toyota has been able to achieve a myriad of benefits.
Customers can access from any computer without having to install software, no staff requirements and more time is allowed to grow business. Toyota EDI systems allow for customization of the EDI system to suit every customers requirements and this helps to realize more efficiency.
The revenues realized by Toyota from using this EDI have grown in a commendable way. There has been wider customer reach as compared to the use of the traditional systems. Efficiencies have equally grown at high levels with more time saved in the procurement and sale processes.
The traditional supply chain management and new technologies
Traditional supply chain management involved the following steps: A letter of inquiry from the buyer being sent out to the supplier which would then be responded to by a catalogue from the supplier informing of what the available products were.
A purchase order would then be sent out to the supplier with the list of supplies that the buyer was interested in. on receipt of this, the goods would be dispatched to the buyer for processing and further they would be supplied to the customers.
According to Mentzer (2001), the whole procedure was not only long but it was costly and inefficient. With the onset of the information technology age, there have been several improvements. The business to business models have become very effective.
Procurement information systems have been widely used in the supply chain management and the logistics support. The right time to procure and the suppliers can be best identified by the use of these systems. Transportation tracking systems are used to monitor the supplies and ensure that no losses occur along the way. In case something happens to the supplies while they are on the way, information can be sent to the purchaser in real time.
Enterprise resource planning software is a web based application that is being used currently by organizations to overcome challenges of having weaknesses in material allocation in the production processes (Hamilton, 2003). The supply chain is very adequately handled at all stages in the organization by the use of this information technology application. Management of resources is enhanced with the minimization of losses in the process.
Sourcing information systems are yet another application of information technology in the process of supply chain management. These information systems enable firms to identify the best suppliers of their resources. (Wilson, 2004) Competitive bids can be obtained in the process and hence cost savings experienced.
Decision support systems are applicable in the current supply chains. This systems help to provide information on areas of decision like when to change a supplier, when to order among other decisions that affect the supply chain. Logistics can be better managed inefficient ways by use of these systems.
Expert systems use artificial intelligence and have an immense role in the current trends in supply chain management (Yokoo, 2008). These help to make decisions on several issues which would be made by executives. Strategic decisions as relates to supply chain management can be supported by these systems.
An analysis or extrapolation of the subject or problem
Just in Time systems are confirmed in terms of the wide array of benefits that they have offered. They have been so attractive such that most of the automobile companies have decided to adopt them. However, this system is not just difficult to implement but is also far from perfect in some instances. It is worth noting that not all industries may operate effectively using this type of production system.
The major assumption taken in implementing this system is that the sources of supply and the channels would be reliable at all times. Any delays therefore would lead to a crash in the system.
Very exorbitant costs are involved in setting it up and hence firms need to find strategies of overcoming this. Equally, special training is needed just as much as the training of those involved. All these factors need to be considered. Supplier relations need to be upbeat when using this technique.
Electronic data interchange has realized awesome benefits. Even greater benefits are anticipated. However this system does assume that most of the clients’ use these web based applications. Those clients who do not have access to these web based application may be left out.
Organizations need to adopt the click and mortar style of electronic commerce so that they can accommodate both the clients who use these applications and those who do not use those (Riley, 2009). However, according to the Corporate EFT Report (2001) with more globalization EDI offers the future of cost cutting measures, improved efficiency, and higher revenues.
References
Wilson, D. (2004). Managing information: IT for business processes. London: MPG books Ltd. E-Commerce Growth Prospects Remain Strong.” Corporate EFT Report, January 17, 2001.
Hirano, H. (2009). JIT Implementation Manual: The Complete Guide to Just-In-Time Manufacturing. New York: CRC Press.
Hamilton, S. (2003). Maximizing your ERP system: a practical guide for managers New York: McGraw Hill.
Riley, M. (2009). Management Information Systems (4th ed.). Singhad Rd: Bagad technical Publications Pune.
Mentzer, T. (2001). Supply chain management. New Delhi: Sage publications.
Yokoo, M. (2008). Electronic Commerce: Theory and Practice. Berlin: Springer Verlag.
Zimmerman, J. (2003). Doing Business with the Government Using EDI: A Guide for Small Businesses. New Jersey: John Wiley & sons.