Just-In-Time Manufacturing

Abstract

An introduction to just-in-time manufacturing (JIT), this article covers the history of JIT from the Ford Motor Company to the Toyota Production System (TPS) and beyond, and explores the eight wastes identified in TPS and many of the JIT practices and methods (Focused Factory, Small Lot Production, SMED and Quick Changeover, Group Technology, Kanban, 5S, and more). Key success factors are explored, including the importance of a culture of quality. Applications of JIT in multiple industries are discussed, as well as the impact of globalization.

Overview

Manufacturing is the process of combining raw materials or assemblies for the creation of new products, which may be consumer-ready or which may be used in other manufacturing processes. Simple in theory, the manufacturing process is obviously complex in practice. One of the most studied areas is the efficient and cost-effective flow of materials through the supply chain.

JIT and the Traditional Supply Chain. The supply chain refers to the process of bringing an end product to market, from the production of raw materials to the consumer. Historically, this was a long path with materials, parts, and products stockpiled in warehouses and other storage facilities and drawn upon as needed by each entity in the chain. Producers of raw materials would keep producing and filling up their warehouses in anticipation of orders. Manufacturers would produce parts, assemblies, and finished goods in large quantities to attain economies of scale and reduce the number of machine setups. Retailers would then buy in quantities sufficient to meet expected consumer demand over weeks and even months.

Just-in-time manufacturing (JIT) turns this traditional supply chain on its head. It has its roots in a very simple idea, espoused succinctly by Henry Ford, "If transportation were perfect and an even flow of materials could be assured, it would not be necessary to carry any stock whatsoever." Why does it matter? In one phrase—cost reduction.

Beyond the obvious costs of the warehouse itself (lease or mortgage, utilities, and property taxes), are the labor costs involved with managing the inventory—receiving, storing, picking, and transporting. Add to that the equipment and systems needed to support these processes. Lastly, one must consider the opportunity cost of money that is tied up in inventory that is not being used immediately.

The Development of JIT Manufacturing. While Ford understood the value and concept of JIT, it was in the 1950s that Toyota first fully implemented the concept and expanded it with the total quality management system (TQM) to create the Toyota Production System (TPS), also know more generically as "lean manufacturing." The founder of Toyota, Toyoda Kiichiro, after observing that American automobile factories were nine times more productive than Toyota, challenged his chief engineer, Taiichi Ohno, to catch up with American automakers in three years. Ohno not only did that but also created a system that was to be an enduring model for efficient manufacturing the whole world over.

Ohno identified eight wastes that account for up to 95 percent of all costs in traditional manufacturing:

• Overproduction — Producing more than a customer needs, which incurs heavy warehousing, equipment, and labor costs.
• Waiting — Any machine or human in a wait state, no matter what they are waiting for, represents lost money and opportunity.
• Transportation — Materials that are transported from the supplier to any location (e.g. warehouse) other than the point-of-use creates unnecessary transportation costs in time and money.
• Non-Value-Added Processing — Quality control (traditional processes of inspecting completed products and fixing defects after production is complete) is unnecessary in a manufacturing environment where products are produced without defects (quality assurance).
• Excess Inventory — Carrying more inventory than is needed, from raw materials to finished goods, incurs expensive warehouse space and labor.
• Defects — Product defects incur labor, space, equipment, and time costs.
• Excess Motion — Incurring more motion than is necessary to carry out a task wastes time and labor.
• Underutilized People — Failure to leverage the skills, creativity, time, and other attributes of people results in wasted opportunities for organizational, team, and individual efficiency improvements.

TPS was developed to address each of these wastes and is centered on a set of fourteen guiding principles that must be adopted in order for specific methods and techniques to succeed. Indeed, many implementations of JIT practices have failed due to a failure to adopt organization-wide policies and practices that support JIT.

The Spread of JIT/TQM Manufacturing. After Toyota's outstanding success with TPS in meeting and exceeding American manufacturing production at significantly lower costs, manufacturers around the globe rapidly adopted and emulated TPS-based practices throughout the 1980s, 1990s, and beyond. A 2006 survey of US manufacturers by IndustryWeek and the Manufacturing Performance Institute for the 2006 Census of Manufacturers showed that just-in-time supplier deliveries were at the top of the list of most commonly used methods for managing inventories, with over 43 percent of respondents reporting its use in their operations.

JIT has enabled a different world. Today's supply chain increasingly moves small amounts of product at a time, delivered directly onto the factory floor or retail shelves, rather than into warehouses. Manufacturing has been revolutionized with investments that focus on improved flexibility in volume, product, and delivery; increased production speed; and waste reduction. All this has worked to provide faster product to market rates at reduced costs.

Importance of JIT Systems. Thus, it becomes clear why a JIT system is important to manufacturers. First, and most obvious, it saves the cost of warehouses, related equipment, and the people needed to manage the inventory in those warehouses. Second, it eliminates the need to predict far in advance how much material will be needed, thereby reducing wasted materials. And it enables the manufacturer to respond to customer requests in a fraction of the time previously required. In a world of aggressive cost competition, JIT enables a highly cost-effective way to manufacture if it is well implemented.

One can imagine, however, just how tricky this process can be. Materials planning must be highly accurate and efficient; suppliers must able to efficiently, quickly, and cost-effectively produce small lots of materials; and effective contingency plans must be in place to counter disruptions in the supply chain, such as natural disasters, accidents, or union strikes. Thus, there is considerable risk, and that risk has a demonstrated inverse relation to profitability. Yet, even so, companies utilizing the JIT model are generally more profitable than those that are not, even adjusting for the increased risk involved.

Implementation of JIT Systems. JIT manufacturing implementation is typically made up of a group of programs, each contributing specific methods for achieving a JIT model. Some of the common programs implemented are as follows:

The Focused Factory. The focused factory, a term coined by Wickham Skinner in a 1974 article for the Harvard Business Review, is the philosophy of allowing a factory (or self-contained production unit within a physical plant) a limited product mix for a particular market. Rather than expanding a factory's capabilities when adding new products and markets, the focused factory model dictates the creation of new factories. At the core of this model, Skinner (1974) says, is the philosophy that "simplicity, repetition, experience, and homogeneity of tasks breed competence" (p. 115). Manufacturers that have implemented this model have consistently shown reduced cycle times and improved on-time deliveries.

Small Lots. Small lots production refers to the proactive reduction of batch sizes to the smallest lot possible. This reduces inventory carrying costs and facilitates reduced lead and cycle times, which enables faster turn-around time for customers.

Reduced setup times (the elapsed time between production runs used to change over machines) aid the JIT process by making it more feasible for manufacturers to produce small lots. The longer the setup time, the costlier it is to produce small lots of product. In the JIT world is the Single Minute Exchange of Dies (SMED) method, also often referred to as "quick changeover." This was introduced in TPS and was applied to the changeover of dies but today has much wider applications. Simplistically, SMED is the practice of completing as many steps in the changeover process as possible while a production run is still in process, and reducing and improving the efficiency of the steps that must be completed during the changeover.

Group Technology. Group technology involves grouping parts that have physical similarities or are used for similar manufacturing processes to reduce work-in-progress and lead times. Instead of the traditional factory layout with similar machines grouped together and work-in-progress moving from area to area, individual factory cells (cell manufacturing) are created with all the machines necessary to complete the production of a particular product or group of products.

Kanban. Kanban is a Japanese word meaning sign and refers to a signaling system that is in wide use in JIT manufacturing to ensure the just-in-time delivery of parts and materials, as they are needed. Kanban is a "pull" system—when a product or material is needed, a signal is sent to replenish the product or material. This flows all the way up the supply chain, with each entity in the chain sending a signal up the chain for its own replenishment after responding to a signal further down in the chain.

On the factory floor, this has historically been done with cards—when a cart or bin is empty, the card at the bottom is used to signal for more material. A good analogy is a checkbook. The kanban would be the ticket slipped in at the point where replenishments should be ordered.

Many systems, especially those spanning companies or plants, now use electronic kanban. A good example is in retail, where the checkout system creates the signal to suppliers when an inventory item reaches the reorder point.

5S. 5S is a methodology for eliminating wasted time by having an organized workplace where everything is in its place. The five "S"s are:

• "Seiri" (or separating): Storing or discarding any materials or tools not needed for the task at hand.
• "Seiton" (or sorting): Having tools and materials arranged for efficient workflow.
• "Seiso"(or cleaning): Keeping the workplace clean and neat.
• "Seiketsu" (or standardizing): Doing the same tasks in the same way every time.
• "Shitsuki" (or sustaining): Maintaining the standards and practices developed with the first four "S"s.

Total Productive Maintenance (TPM). TPM focuses on keeping all equipment in top condition to avoid breakdowns and delays in the manufacturing process.

Visual control is based on the premise that information presented visually is comprehended far faster than words.

Multifunctional employee is related to Cell Manufacturing, where employees are trained in multiple facets of the cell's technologies. Even outside of cell manufacturing, employees with multiple skill sets create organizational adaptability.

Uniform plant loading is a method of planning production so that the manufacturing processes throughout the factory are fully utilized, avoiding idling and overloads.

A quality circle is a TQM method used to minimize or eliminate rework due to defects. Comprised of a team of workers, its purpose is to identify improvements to processes that will reduce errors.

Key Success Factors. In order to successfully implement JIT, operations must be highly integrated and synchronized, with empowered workers who can resolve problems on the spot to keep production moving and who are enabled to influence the production process to eliminate waste and improve productivity. This foundation is typically provided in a TQM environment, discussed further later in this article.

Also critical to success is the readiness and willingness of one's suppliers to work with the JIT system. It is no good to implement JIT when your suppliers and/or their suppliers cannot accommodate it. When a company along the supply chain is unable or unwilling to implement JIT policies and practices, inventory must be stored somewhere. Either the supplier will stockpile it and pass the cost on to the manufacturer implicitly or explicitly or the manufacturer will store the inventory. Either way, the manufacturer has lost the key benefit of JIT—reduced inventory and subsequently lower costs.

The Marriage of JIT and Quality. American quality guru W. Edwards Deming introduced quality management to Japan in the 1950s, which formed the foundation for their TPS. Total Quality Management (TQM) was well implemented before the introduction of JIT and provided an environment in which JIT could thrive. When US manufacturing companies began implementing JIT in the 1980s, TQM had not yet taken hold, and JIT met with mixed success. Once these companies realized the importance of TQM in the success of JIT, a TQM revolution began that continues in virtually every industry.

TQM is a management philosophy and practice that continuously improves the quality of products and processes in order to achieve customer satisfaction. TQM operates at all levels of the organization—everyone in the company has responsibility for quality. Because TQM has broader application in the organization and because it unifies the organizational entities by providing a cross-departmental philosophy for quality and process improvement, it lays a foundation upon which JIT programs can succeed.

Applications

Successful Integrations of JIT Systems. There have been some notable successes, small and large, with implementations of JIT in the United States. Through implementation of JIT, and with some pro bono consulting support from Toyota, the Louisville, Kentucky–based American Printing House for the Blind Inc. was able to produce an IRS publication in one week with five people that had previously required twelve people and three weeks to produce.

After implementing JIT, Austin, Texas–based Factory Logic Software increased its production volume of fastener systems to 300,000 units annually with slightly more than 50 backorders per month. Prior to its implementation, it was producing about 200,000 units with an average of 800 backorders per month (Krizner, 2008).

JIT, of course, has applications from production of raw materials all the way to the consumer markets. Wal-Mart brought JIT to its retail stores to create one of the most cost-efficient retail supply chains in the world, requiring its suppliers to provide just-in-time inventory to its shelves, and going even further to Vendor Managed Inventory (VMI), which puts the responsibility of its inventory management in the hands of its suppliers.

The principles of JIT are also being applied to other areas, as well. In a survey conducted in 2005, Mohammad Z. Meybodi, associate professor of operations management in the School of Business at Indiana University Kokomo, found that organizations that applied JIT principles (empowered teams and quality practices, specifically) to New Product Development (NPD) developed significantly better quality products in a much shorter time span and with significantly less cost.

But even beyond the supply chain, JIT principles have been applied to a host of other applications. "Just-in-time learning" technologies have been introduced to provide the right information at the right time for a host of applications—from figuring out how to fix a leaky faucet to making the best diagnosis in a complex medical case. The most effective technologies focus on the immediate need (just like in manufacturing), zeroing in on the right information based on the specific problem at hand.

Discourse

Risks of JIT Manufacturing. One of the key risks with JIT is that the world is not a perfect place. It is easy to get caught up in the frenzy of JIT, believing that it is the now de facto accepted standard for manufacturing. But it is not without its risks and is not necessarily for every business application. The success of JIT depends on the ability of the supplier to avoid disruptions to its production, correctly predict demand, and achieve reliable, fast transportation. All manner of events can disrupt the supply of materials, from natural disasters to union strikes, which can have devastating effects on production if the company is not properly equipped to adjust or has little control over its supply chain.

JIT Constraints. Dr. Tony Polito of East Carolina University and Dr. Kevin Watson of the University of New Orleans identified five major constraints on JIT practices that should be considered before a company decides to pursue JIT.

• The first is customer-driven and economic conditions. Successful JIT requires a relatively stable pricing model for supplies, reasonably level customer demand, and a reliable supply of material. When materials pricing and consumer demand fluctuate significantly or scarcity issues are common, traditional manufacturing processes perform better.
• The second constraint is logistics. There must be a reliable means for getting the materials from the supplier to the manufacturer. Transportation strikes, natural disasters, or remote locations with unreliable transportation can all adversely impact the supply chain. Generally speaking, the riskier the logistics, the more inventory the company should keep on hand.
• Third, organizational culture and conditions can affect JIT practices. It goes without saying that a culture with poor worker and/or supplier relationships or with practices that are contrary to the worker empowerment model needed to support JIT must resolve these issues prior to implementing JIT.
• The fourth constraint is intractable accounting and finance practices. Traditional companies typically focus on improvement of measures—inventory turns, sales, machine efficiency, etc.—rather than improvement of processes, which is at the core of JIT. Without a willingness and ability to change this, companies will be unsuccessful with JIT.
• The fifth and last constraint is small supplier difficulties. Small suppliers generally lack the customers their high-volume counterparts possess. They must purchase in smaller quantities and lack the clout with their own suppliers to push JIT practices.

Implications of Globalization. In 2004, Goldman Sachs coined the acronym BRIC to refer to four countries—Brazil, Russia, India, and China—that they predicted would comprise four of the new "G6" (six largest economies) by 2050; the other two were the United States and Japan. In their 2005 year-end update report, they reported that each of those countries grew more strongly than predicted, with more countries emerging behind them.

With rising freight rates, infrastructure disrepair, and the new cost of security in both time and money, JIT manufacturing has become much more complicated. Mark Crone, director, supply chain planning and analysis at Limited Brands Inc. identified risks to lead time (more potential constraints that can slow shipments) and cost (fuel cost fluctuations, forced changes in transportation modes to meet production schedules). He predicted that JIT manufacturing would take a severe hit as globalization increases and companies find they need to increase stock to hedge against these risks.

An analysis conducted in the 1990s by Vinod Singhal of the Georgia Institute of Technology and Kevin Hendricks of the University of Western Ontario supported this contention and identified a severe level of fragility in supply chains due to the extension of outsourcing. Combined with the practice of JIT, where inventories are lean, the researchers found there was very little room for error and likened disruptions that occurred to "heart attacks." In such a situation, close management of the supply chain and good communication and relationships with suppliers are the keys to success.

Nevertheless, retail giant Wal-Mart unabashedly abandoned its former "Made in America" philosophy to embrace global suppliers and put the same constraints on them as on its domestic suppliers. The question is whether these suppliers will be able to meet those demands cost-effectively.

Crone made three recommendations for easing the lead time and costs associated with global supply chains. First, he recommended reducing transport content. That is, moving to more regional and coastal distribution centers and moving to a direct-to-destination delivery model where possible to minimize handling and reduce overall distance traveled. Second, and supporting his predicted hit to JIT, is doing larger shipments to gain cost efficiencies. Last, he suggested considering carefully before deciding to source overseas. The risks might well outweigh the benefits.

Conclusion

JIT has clearly had a radical impact on manufacturing paradigms the world over and Toyota continues to lead the charge, practicing its TPS and achieving continued success and profitability in the auto industry. More and more manufacturers are implementing JIT and, if they are careful about how they are applying it and embedding organization-wide philosophies, are succeeding with it. However, today's pace of globalization is putting increasing strain on JIT, and it is yet unclear how JIT will transform to meet the new world order. Undoubtedly, the world will continue to watch companies such as Toyota and Wal-Mart to get the answer to that question.

Terms and Concepts

5S: A methodology for organizing the workplace for maximum efficiency.

Cell Manufacturing: The practice of grouping all machines required to produce a product in order to minimize cycle-time and lead time.

Focused Factory: The practice of limiting the variety of products that are produced within a manufacturing unit in order to improve efficiencies and reduce setup times.

Group Technology: The practice of grouping similar parts in the manufacturing process to reduce lead time and cycle time. This practice enables cell manufacturing.

Kanban: A pull system that involves signals to indicate the need for more materials or parts.

Lean Manufacturing: A more generic term used to describe the Toyota Production System (TPS) or other practices focused on improving efficiencies and reducing costs in manufacturing.

Multifunctional Employees: The concept and practice of ensuring varied skill sets in employees to achieve maximum flexibility and reduce the risk of delay in the manufacturing process.

Quality Assurance: The practice of improving processes and empowering employees to make decisions that enable avoidance of errors and defects.

Quality Circle: A TQM practice for continuously improving the manufacturing process to avoid defects and rework.

Quality Control: The practice of identifying defects in products after they are produced, such as inspections.

Quick Changeover: A more generic term for the practice of minimizing setup time between production runs.

Single Minute Exchange of Dies (SMED): A philosophy and methodology for decreasing the amount of setup time between production runs.

Small Lots: The philosophy and practice of manufacturing items in small lots to decrease lead times.

Supply Chain: All entities involved in the delivery of goods from raw materials to finished goods and onto the retail shelf.

Total Productive Maintenance (TPM): A practice of placing high importance on preventative maintenance of equipment to avoid costly downtime and disruptions to the JIT supply.

Total Quality Management (TQM): A formalized philosophy and practice developed by Toyota for TPS that focuses on continuous improvements in processes and product.

Uniform Plant Loading: A planning philosophy and methodology aimed at eliminating idling or overload in any manufacturing unit.

Visual Controls: A philosophy and practice of using visual cues to convey information to improve speed of communication within the plant.

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Suggested Reading

Ford, H. (2006). My life and work. Charleston, SC: BiblioBazaar.

Liker, J. (2004). The Toyota way: Fourteen management principles from the world's greatest manufacturer. New York: McGraw-Hill.

Marley, R., & Metrejean, E. (2016). A model of academic career sustainability utilizing a just in time teaching approach. Journal of Theoretical Accounting Research, 11(2), 15-27. Retrieved December 28, 2016 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=113641302&site=ehost-live&scope=site

Ohno, T. (1988). Toyota production system: Beyond large-scale production. New York: Productivity Press.

Polito, T., & Watson, K. (2006). Just-in-time under fire: The five major constraints upon JIT practices. Journal of American Academy of Business, Cambridge, 9, 8–13. Retrieved from EBSCO Online Database Business Source Premier. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=19384791&site=ehost-live.

Vokurka, R.J., & Lummus, R. R., & Krumwiede, D. (2007). Improving manufacturing flexibility: The enduring value of JIT and TQM. SAM Advanced Management Journal (07497075), 72, 14–21. Retrieved from EBSCO Online Database Business Source Premier. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=24688726&site=ehost-live.

Vuppalapati, K., Sanjay L. A., and Gupta, T. (1995). JIT and TQM: A case for joint implementation. International Journal of Operations & Production Management, 15 84–94. Retrieved from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=1723259&site=ehost-live.

Wilson, L. (2015). How to implement Lean Manufacturing. 2nd ed. New York: McGraw.