Course Notes Operations Management Simulation

16: Just-In-Time Systems

Charles E. Oyibo

Introduction

Just-in-time (JIT) refers to a production system in which both the movement of goods during production and deliveries from suppliers are carefully timed so that at each step of the process the next (usually small) batch arrives for processing just as the preceding batch is completed.

Loosely defined, JIT is a manufacturing concept which eliminated anything that does not add value to the product.

One aspect of JIT involves production planning and control (PPC), and the other is material requirements planning (MRP).

JIT Goals

The ultimate goal of JIT is a balanced system, that is, one that achieves a smooth, rapid flow of materials through the system, the idea is to make the process time as short as possible by using resources in the best possible way. The degree to which this overall goal is achieved depends on how well the following supporting goals are achieved:

1. Eliminate disruptions caused by poor quality, equipment breakdowns, changes to the schedule, late deliveries, etc.
2. Make the system flexible by reducing setup times and lead times. A flexible system is one that is robust enough to handle changes in the level of output while still maintaining balance and throughput speed. Setup times and delivery lead times prolong a process without adding any value to the product.
3. Eliminate waste, especially excess inventory. Waste represents unproductive resources. Inventory is an idle resource, taking up space and adding cost to the system. Other wastes include:
   • Overproduction--excessive use of manufacturing resources
   • Waiting time
   • Unnecessary transporting
   • Processing waste
   • Inefficient work methods--resulting from poor layout and material movement patterns
   • Product defects--requires rework costs and possible sales loss due to customer dissatisfaction

Big JIT vs. Little JIT: Big JIT focuses on vendor relationships, human relations, technology management, and materials and inventory management. Little JIT is more narrowly focused on scheduling materials and services for production.

Building Blocks for JIT System Foundation

(1) Product design; (2) Process design; (3) Personnel/Organizational Elements; (4) Manufacturing planning and control

Product Design

Three elements of product design are particularly important for JIT:

1. Standard parts and standard processing
2. Modular design
3. Highly capable production systems

Process Design

Seven aspects of Process design are particularly important for JIT system:

1. Small Lot Sizes. (In JIT philosophy, the ideal lot size is one unit).
2. Setup Time Reduction. (Workers can be trained to do their own setups; setup tools, equipment, and procedures should be simple and standardized; multipurpose equipment or attachments can also help to reduce setup time).
3. (Multiple) Manufacturing Cells. (Each cell contains the machines and tools needed to process families of parts having similar processing requirements. The benefits include reduced changeover times, high utilization of equipment, and ease of cross-training operators).
4. Limited Work in Process.
5. (Continuous) Quality Improvement (with a view to finding and eliminating the causes of problems so they do not continually crop up. The use of autonomation (jidoka in Japanese) to automatically detect defects during production by (1) detecting defects when they occur, and (2) stopping production to correct the cause of the defect).
6. Production Flexibility. (The overall goal of a JIT system is to achieve the ability to process a mix of products in a smooth flow. A potential obstacle is bottlenecks, which can be significantly reduced by process design).
7. Little Inventory Storage (as JIT systems are designed to minimize inventory storage... Recall: In JIT philosophy, inventory is waste; inventories are often used as buffers that tend to cover up recurring problems... Think: boat-water-rocks analogy. One way to minimize inventory storage is to have deliveries from suppliers go directly to the production floor, eliminating the need to store incoming parts and materials...and, at the other end completed units are shipped as soon as they are ready, eliminating the need to store finished goods).

Personnel/Organizational Elements

There are five elements of personnel and organization that are particularly important in JIT systems:

1. Workers as Assets. Well trained and motivated workers are the heart of a JIT system. They are given more authority than their counterparts in traditional systems, but they are also expected to do more.
2. Cross-Trained Workers. To perform several parts of a process and operate a variety of machines. This helps line balancing...
3. Continuous Improvement. Workers in JIT systems have greater responsibility for quality than workers in traditional systems and they are expected to more involved in problem solving and continuous improvement. [Andon: system of Lights used at each workstation to signal problems or slowdowns.]
4. Cost Accounting. Traditional accounting methods sometimes distort overhead allocation... An alternative method of allocating overhead is activity-based costing, which identifies traceable costs and then assigns those costs to various types of activities such as machine setup, inspections, machine hours, direct labor hours, and movement of materials. Specific jobs are then assigned overhead based on the percentage of activities they consume.
5. Leadership/Project Management. In JIT systems, managers are expected to be leaders and facilitators, not order givers. JIT encourages two-way communication between workers and managers.

Manufacturing Planning and Control

1. Level loading. The emphasis in a JIT system being on achieving stable, level daily mix schedules--level capacity loading.
2. Pull systems. Traditional production environments use a push system: when work is finished at a workstation, the output is pushed to the next station. Conversely in a pull system, control of moving the work rests with the following operation: each workstation pulls the output from the preceding station as it is needed. Hence, a pull system works in response to demand from the next stage, whereas in a push system, work moves as it is completed, without regard for the next station's readiness for the work. JIT systems use pull systems.
3. Visual systems. In pull systems, work flow is dictated by "next-step-demand" (demand for work or material from the preceding station), usually using a device called a kanban card. (Kanban [Japanese] = "signal" or "visible record"). We compute the ideal number of kanban cards using the formula: N = [DT(1+X)] ÷ C... where N=Total number of containers (1 card per container), D=Planned usage rate or using work center, T=Average waiting time for replenishment of parts plus average production time for a container of parts, X=Policy variable set by management that reflects possible inefficiency in the system (the closer to 0, the more efficient the system), and C=Capacity of a standard container (should be no more than 10% if daily usage of the part). Note: D and T must use the same unit.
4. Close vendor relationships. Buyers work with vendors to help them achieve the desired quality levels and to impress upon them the importance of consistent, high-quality goods The ultimate goal of a buyer is to be able to certify a vendor as a producer of high-quality goods; the implication of certification being that the vendor can be relied on to deliver high-quality goods with the need for buyer inspection. (Recall that inspection is view as inefficient in JIT systems as it does not add value to the product). Ideally, suppliers themselves should be operating under JIT systems, and should be willing and able to ship in small lots on a regular basis. JIT purchasing is enhanced by long-term relationships between buyers and vendors, and finally, JIT systems tend to benefit more from supplier tiers (1st, 2nd, 3rd, etc., hence having fewer relationships) than having to interact with numerous suppliers.
5. Reduced transaction processing. Traditional manufacturing systems often have many built-in transactions that do not add value. JIT systems eliminate many of these transactions and their related costs:
   • (a) Logistical transactions: ordering, execution, confirmation of materials transported from one location to another; related costs cover shipping and receiving personnel, expediting orders, data entry, and data processing;
   • (b) Balancing transactions: forecasting, production planning, production control, procurement, scheduling, and order processing;
   • (c) Quality transactions: determining and communicating specifications, monitoring, recording, and followup activities; costs relate to appraisal, prevention, internal failures--scrap, rework, retesting, delays, administration activities, and external failures--warrantee costs, product liability, returns, potential loss of future business;
   • (d) Change transactions: engineering changes and the ensuing changes generated in specifications, bills of materials, scheduling, processing instructions, etc.
6. Preventive maintenance and housekeeping. Because JIT systems have very little in-process inventory, equipment breakdowns can be extremely disruptive. To minimize breakdowns, companies use preventive maintenance programs, which emphasize maintaining equipment in good operating condition and replacing parts that have a tendency to fail, before they fail. Additionally, companies must be prepared for occasional equipment failures that occur in spite of preventive maintenance. Housekeeping involving keeping the workplace free of any materials that are not needed for production, because those materials take up space and may cause disruptions to the workflow.

Planning a Successful Conversion to a JIT System

1. Obtain top management's commitment to the conversion.
2. Decide which portions of current operations will need the most effort to convert.
3. Obtain the support and cooperation of workers; provide training programs and adequate information.
4. Take steps to reduce set-up time while maintaining the current system by identifying and eliminating existing problems (bottlenecks, poor quality, etc.).
5. Gradually convert operations, beginning at the end of the process and working backward, making sure that the conversation is relatively successful at each stage before moving on.
6. Take steps to convert suppliers to JIT... Start by narrowing the list of vendors... Establish long-term commitments... Insist on high standards of quality and adherence to strict delivery schedules.
7. Be prepared to encounter obstacles to conversion...

JIT systems require a cooperative spirit among workers, management, and vendors. Unless that is present, it is doubtful that a truly effective JIT system can be achieved.

The Downside of conversion

The key consideration are the time and cost requirements for successful conversion, which can be substantial. Another consideration pertains to small lot sizes. While small lot sizes allow flexibility in changing the product mix and reduced carrying costs and space requirements, they typically result in (1) increased transportation costs, and (2) traffic congestion due to frequent deliveries.

JIT in Services

When JIT is used in the context of services, the focus is often on the time needed to perform a service--because speed is often an important order winner for services. Some services have inventories of some sort, so inventory reduction is another aspect of JIT that can apply to services. Other ways JIT benefits can be achieved in services are:

• Eliminate disruptions.
• Make the system flexible (this should be balanced with standardization)
• Reduce setup times and processing times. Avoid carrying large inventories.
• Eliminate wastes (errors, duplicate work). Keep emphasis on quality and uniform service.
• Minimize work-in-process (e.g. order waiting to be processed, calls waiting to be answered, packages waiting to be delivered, trucks waiting to be loaded/unloaded, applications waiting to be processed, etc.)
• Simplify the process, especially where customers are part of the system (e.g. self services operations).

JIT II

JIT II is applied to the practice of allowing vendors to manage some aspects of buying their products or services for the buyer. It is a philosophy that involves empowering suppliers to assume the responsibilities ordinarily carried by the company's own buyers. Those responsibilities might include planning, transaction processing, and dealing with quality and delivery on problems that relate to a supplier's product. It might mean having supplier personnel on-site, or managing responsibilities through electronic links from the supplier's site.

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Page Last Updated: Tuesday December 7, 2004 7:52 PM