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Just in time (JIT) is a production strategy that strives to improve a business ' return on investment by reducing in-process inventory and associated carrying costs. Just in time is a type of operations management approach which originated in Japan in the 1950s. It was adopted by Toyota and other Japanese manufacturing firms, with excellent results: Toyota and other companies that adopted the approach ended up raising productivity (through the elimination of waste) significantly.[1] To meet JIT objectives, the process relies on signals or Kanban (看板?, Kanban) between different points, which are involved in the process, which tell production when to make the next part. Kanban are usually ' tickets ' but can be simple visual signals, such as the presence or absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organization's return on investment, quality, and efficiency. To achieve continuous improvement key areas of focus could be flow, employee involvement and quality.JIT relies on other elements in the inventory chain as well. For instance, its effective application cannot be independent of other key components of a lean manufacturing system or it can "end up with the opposite of the desired result."[2] In recent years manufacturers have continued to try to hone forecasting methods such as applying a trailing 13-week average as a better predictor for JIT planning; however, some research demonstrates that basing JIT on the presumption of stability is inherently flawed.[3]Contents [hide] 1 Philosophy2 Transaction cost approach3 Environmental concernsfor Price change5 Quality volatility6 Supply stability7 JIT implementation design7.11 Effects7.2 Benefits7.3 Problems7.3.1 Within a JIT system7.3.2 Within a raw material stream7.3.3 Oil8 Business models following similar approach8.1 Vendor-managed inventory8. to Customer-managed inventory9 Early use of a JIT system10 See also11 References12 Further readingPhilosophy [edit]The philosophy of JIT is simple: the storage of unused inventory is a waste of resources. JIT inventory systems expose hidden cost of keeping inventory, and are therefore not a simple solution for a company to adopt it. The company must follow an array of new methods to manage the consequences of the change. The ideas in this way of working come from many different disciplines including statistics, industrial engineering, production management, and behavioral science. The JIT inventory philosophy defines how inventory is viewed and how it relates to management.Inventory is seen as incurring costs, or waste, instead of adding and storing value, contrary to traditional accounting. This does not mean to say JIT is implemented without an awareness that removing inventory exposes pre-existing manufacturing issues. This way of working encourages businesses to eliminate inventory that does not compensate for manufacturing process issues, and to constantly improve those processes to require less inventory. Secondly, allowing any stock habituates management to stock keeping. Management may be tempted to keep stock to hide production problems. These problems include backups at work centers, machine reliability, process variability, lack of flexibility of employees and equipment, and inadequate capacity.In short, the Just-in-Time inventory system focus in having "the right material, at the right time, at the right place, and in the exact amount", without the safety net of inventory. The JIT system has broad implications for implementers.Transaction cost approach [edit]JIT helps in keeping inventory to minimum in a firm. However, a firm may simply be outsourcing their input inventory to suppliers, even if those suppliers don't use Just-in-Time (Naj 1993). Newman (1994) investigated this effect and found that suppliers in Japan charged JIT customers, on average, a 5a price premium.Environmental concerns [edit]During the birth of JIT, multiple daily deliveries were often made by bicycle. Increased scale has required a move to vans and trucks (lorries). Cusumano (1994) highlighted the potential and actual problems this causes with regard to gridlock and burning of fossil fuels. This violates three JIT waste guidelines:Time—wasted in traffic jamsInventory—specifically pipeline (in transport) inventoryScrap—fuel burned while not physically movingPrice change [edit]Because Just-In-Time manufacturers do not store raw materials, they can be affected more drastically by the effects of changing prices.Quality volatility [edit]JIT implicitly assumes that input parts quality remains constant over time. If not, firms may hoard high-quality inputs. As with price volatility, a solution is to work with selected suppliers to help them improve their processes to reduce variation and costs. Longer term price agreements can then be negotiated and agreed-on quality standards made the responsibility of the supplier. Fixing up of standards for volatility of quality according to the quality circleKarmarker (1989) highlights the importance of relatively stable demand, which helps ensure efficient capital utilization rates. Karmarker cost production.Supply stability [edit]In the U.s. the 1992 railway strikes caused General Motors to idle a 75, 000-worker plant because they had no supply. Consistent Quality is one of the major issue. Product recall or Recall for spare replacement is one of the major hidden cost and draw back of JIT.JIT implementation design [edit]Based on a diagram modeled after the one used by Hewlett-Packard's Boise plant to accomplish its JIT program.1) F Design Flow Process– F Redesign/relayout for flow – L Reduce lot sizes – O Link operations – W Balance workstation capacity – M Preventive maintenance – S Reduce setup Times2) Q Total Quality Control– C worker compliance – I Automatic inspection – M quality measures – M fail-safe methods – W Worker participation3) S Stabilize Schedule– S Level schedule – W Establish freeze windows – UC Underutilize Capacity4) K Kanban Pull System– D Demand pull – B Backflush – L Reduce lot sizes5) V Work with Vendors– L Reduce lead time – D Frequent deliveries – U Project usage requirements – Q Quality expectations6) I Further Reduce Inventory in Other Areas– S Stores – T Transit – C Implement carrousel to reduce motion waste – C Implement conveyor belts to reduce motion waste7) P Improve Product Design– P Standard production configuration – P Standardize and reduce the number of parts – P Process design with product design – Q Quality expectationsEffects [edit]A surprising effect of JIT was that car factory response time fell to about a day. This improved customer satisfaction by providing vehicles within a day or two of the minimum economic shipping delay.Also, the factory began building many vehicles to order, eliminating the risk they would not be sold. This improved the company return on equity.Since assemblers no longer had a choice of which part to use, every part had to fit perfectly. This caused a quality assurance crisis, which led to a dramatic improvement in product quality. Eventually, Toyota redesigned every part of its vehicles to widen tolerances, while simultaneously implementing careful statistical controls for quality control. Toyota had to test and train parts suppliers to assure quality and delivery. In some cases, the company eliminated multiple suppliers.When a process or parts quality problem surfaced on the production line, the entire production line had to be slowed or even stopped. No inventory meant a line could not operate from in-process inventory while a production problem was fixed. Many people in Toyota predicted that the initiative would be abandoned for this reason. In the first week, line stops occurred almost hourly. But by the end of the first month, the rate had fallen to a few line stops per day. After six months, line stops had so little economic effect that Toyota installed an overhead pull-line, similar to a bus bell-pull, that let any worker on the line order a line stop for a process or quality problem. Even with this, line stops fell to a few per week.The result was a factory that has been studied worldwide. It has been widely emulated, but not always with the expected results, as many firms fail to adopt the full system.[4]The just-in-time philosophy was also applied to other segments of the supply chain in several types of industries. In the commercial sector, it meant eliminating one or all of the warehouses in the link between a factory and a retail establishment. Examples in sales, marketing, and customer service involve applying information systems and mobile hardware to deliver customer information as needed, and reducing waste by video conferencing to cut travel time.[5]Benefits [edit]Main benefits of JIT include:Reduced setup time. Cutting setup time allows the company to reduce or eliminate inventory for "changeover" time. The tool used here is SMED (single-minute exchange of dies).The flow of goods from warehouse to shelves improves. Small or individual piece lot sizes reduce lot delay inventories, which simplifies inventory flow and its management.Employees with multiple skills are used more efficiently. Having employees trained to work on different parts of the process allows companies to move workers where they are needed.Production scheduling and work hour consistency synchronized with demand. If there is no demand for a product at the time, it is not made. This saves the company money, either by not having to pay workers overtime or by having them focus on other work or participate in training.Increased emphasis on supplier relationships. A company without inventory does not want a supply system problem that
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