The just-in-time model of inventory management has worked wonders for global manufacturing behemoths. But it needs superb strategic planning to get the desired results
A bomber an hour is not a slogan. Neither is it a bestseller. It is the rate at which automotive giant Ford had manufactured B-24 Liberator bombers in Willow Run, the aircraft manufacturing and assembly plant in San Diego, during World War II.
Charles Sorenson, Vice-President of Production for Ford and the man behind the floor layout came out with a plan for manufacturing an amazing 18 bombers a day on average. That was the predecessor of just-in-time, literally, the Big Bang in the history of cost-effective inventory planning.
Just-in-time (JIT) is a management philosophy that focuses on executing tasks as and when required, eliminating the need of maintaining an inventory. The tasks could be anything, ranging from acquiring and supply of raw materials to processing and shipment. The basic concept involved is reduction of wastes at every step. The waste could be in the form of time (machine-setup time, idle time, transportation time, etc.), product (excess production, defective batch, etc.) and raw materials (inventory and stock-piling of raw materials and assembly components). To be able to execute tasks just in time, the raw materials, assembly components and the machine need to be on-hand. Stock-piling increases costs and, in many cases, has been found to make the system sluggish. Reducing the inventory of such materials makes the system lean and exposes its weaknesses, which can then be rectified.
The JIT concept came up as a result of Japan’s extensive efforts in beating the American automobile industry to become an industrial giant. First employed in the Toyota manufacturing plant in Japan in the early 1970s, it was conceptualized with inspiration drawn from Willow Run. Although started in a manufacturing plant as a quality control measure, it has, however, grown into a complete management philosophy over the years. Goran Svensson, a professor from Oslo School of Management, Norway, has defined its basis as that “no non-essential activity should be committed prior, during and after any production phases and wherever beneficial, outsourcing is regarded as good as in-house production.”
| DARE/what is just-in-time (JIT)? |
| It is a management technique that focuses on executing tasks as and when required, eliminating the need of maintaining an inventory. |
| The task could be anything, ranging from acquiring and supply of raw materials to processing and shipment. |
| According to The Association of Operations Management, JIT is the philosophy of manufacturing based on planned elimination of all waste and on continuous improvement of productivity. |
| The model has been highly successful in manufacturing industries, particularly automotive. Other sectors such as logistics, services and recruitment and staffing too have benefited. |
The Implementation
JIT, at a micro level, aims at the reduction of inventory. Lowering inventory levels is seen to be as important as shedding extra flab. As the basis is to cut down on wastes and to ensure that a raw material or a specific item is available only when its need arises, implementing companies employed several mechanisms to make the system efficient. An early system, mastered by Toyota, was the Kanban system. Kanban, in Japanese, means a card. It’s a pull mechanism that relies on putting orders through cards for specific quantities of items as and when they get used on the shop floor. Kanbans, or cards, containing product details are used to acquire raw materials and other components from the suppliers depending on the rate of production and usage.
| DARE/the JIT principle |
| Waste identification and reduction for saving on inventory costs |
| Following sources of wastes in manufacturing have been identified: Downtime Machine setup time Overproduction Worker idle time Intra-factory transportation time Work-in-process time Inventory Defective batch |
In an automated setup on the shop floor, this pull mechanism can be initiated by a signal, such as an infrared emitter. The signal would be triggered when the stock for immediate requirement falls below a certain level, thereby initiating a demand for the concerned material throughout the supply chain. Kanbans have now also been incorporated into the ERP (enterprise resource planning) systems of implementing companies. Known as e-Kanbans, they help in better penetration of the demand signaling in the supply chain and reduce human errors to a significant extent.
JIT lies in the heart of lean manufacturing. Often, companies have been able to cut costs ranging from 25% to 30%, thanks to the implementation of JIT. It requires effective measures at every step of the manufacturing process, right from the ordering of supplies from vendors to quality testing of the finished product. Alertness and agility is the name of the game, which is why an effective information backbone is required to track the movement of items to, on and from the shop floor. SHADOW, a software tool recently unveiled by Intelligent Business Systems (IBS), is one such inventory planning mechanism based on JIT.
How good is just-in-time in the Indian context? Can JIT be teamed up with certain other inventory planning systems required in the case of natural disasters and the ongoing food-fuel crisis? How can JIT be skillfully employed, if at all, in a financial services setup? |
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