Just in Time Manufacturing

Just-In-Time Manufacturing

Just-In-Time manufacturing, commonly referred to as JIT, is a company wide philosophy aimed at eliminating a company's waste. Waste can be found in many forms. For example it can be defined in the material form such as plastic or metal scrap, or it can be defined in the administrative form as excessive overhead that slows production or adds an unnecessary expense. The basic theory behind JIT is a pull system that is driven by a demand of supplies. This results in a near zero inventory which reduces the normal cost of storing inventory. The end result of JIT is a company that runs on reduced costs, continuously improving quality and performance, faster delivery times as well as greater flexibility.

Throughout history, JIT manufacturing has been implemented on the largest of scales, such as automotive suppliers and assembly plants. This is due to the fact that only the larger companies have the funding to get past the typical high initial cost of setting up the JIT system. Also, JIT systems work best in a high volume, repetitive process which are both very common attributes of automotive assembly plants. The automotive companies also have the muscle to make the demands on their suppliers that are necessary to keep a JIT system running. If the suppliers are not dependable and dedicated to the process failure is inevitable. Customers place great trust and responsibility in the hands of their suppliers in a JIT situation. Any delays or shortages that a supplier comes across will almost always shut down the customers operations, causing backups and order delays. Any problems in a JIT system are felt like a domino effect from the bottom supplier all the way up to the final customer.

While the JIT system has many advantages that can be offered to companies there can be problems with the system as well. In recent history, Goodyear Tire & Rubber Company saw a large spike in the number of tires ordered from its customers. Unable to meet the new demand at the normal production rates, Goodyear was forced to skip scheduled machine maintenances and expedite shipping at higher costs. On top of that, line workers were forced to work longer than normal overtime shifts which cost the company more money but even worse caused workers to become highly stressed, less productive and much more likely to quit. The high turnover rate costs the company both money and time since trainings were more often needed for all of the replacement employees. All of this comes without the opportunity for Goodyear to raise its sales prices due to pressure from the competition. Goodyear isn't the only company feeling the pressures of JIT. Many other companies are delaying maintenance, running operations 24 hours a day and still looking for ways to improve productivity. "We leaned things out so much, got rid of so many people that we just don't have the capacity anymore," says Bill Swanton, vice president for manufacturing strategies at AMR Research Inc. in Cambridge, Mass (Galuszka 1999). There are new computer based options that these companies have to attempt to solve these problems.

New software programs teamed with networked computer systems allows for demand to be forecasted much better than before. This allows the manufacturers to ramp up when high demands are forecasted and to perform the necessary maintenance when times are a bit slower. The new software provides an advantage for the companies but comes with high fixed costs that many cannot afford at this time. Typical systems cost upwards of $100 million. Companies such as SAP AG offer these JIT system software/hardware packages that coordinate the supply chains for an even more effective JIT process. Analysts say that there is even more room for improvement using the web (Songini 2000). These elements allow the paired companies to share as much forecast and current information as possible which results in better communication and fewer unexpected spikes. Toyota Motor Company is famous for its efficiently coordinated JIT system. The main problem with Toyota's JIT system was that it was running on very low level technology and was highly manual (Singini 2000). The web has been introduced into Toyota's manufacturing plants so that when the company "feels" a surge of a certain color vehicle paint for example, it can update its orders via the web based system so that people work and paper work are minimized which allows for a quicker leaner ordering system.

A recent study done by the University of Michigan show that real-time software systems can increase JIT efficiency significantly. In the study, a company was viewed before and then after a real-time JIT system was implemented. The study showed that inventory was reduced by 60% in house. Inventory throughout the entire supply chain was reduced by 30%. Lead times were also cut by 75%. Transaction costs saw the most significant decrease, they were cut by 88% due to the web based ordering that minimized people time and paper work (Jergen 2002).

Another concern with JIT systems is the amount of wear and tear that is put on employees. Turnover rates in recent years for companies that have implemented JIT systems were seeing higher turnover rates than normal. The fact that workers were putting in longer hours than ever before combined with the added pressure they felt from management was for some too much to handle. Recently, more companies have recognized the value of employees that are already trained and familiar with the JIT system. In order to reduce turnover rates employers have offered higher pay and promised vacation days. For example, J.B. Hunt Transport Services Inc. was facing a turnover rate of 85% due to the grueling schedules the drivers were facing. J.B. Hunt's countermeasure to reverse the turnover rate was to increase pay by 33% and offering drivers the guarantee "home days" every 14 days. This reduced the excessively high turnover rate by nearly 41% in less than two years.

Another recent improvement that JIT companies have been using is automated part handling. For example, conveyor belts, tracks and special lifts eliminate the old method of people manually handling and transporting parts. The automated part handling not only increases productivity since the machines are quicker, but the quality of the final product is increased and scrap is decreased due to the elimination of human error. The conveyors and tracks don't need breaks, lunch, vacation or sick days; they only require routine maintenance checks. Previously, plants had to rely on hi-lo's and forklifts to move larger parts around. These machines added a safety risk due to due the fact that they were manually operated by drivers. Conveyors and tracks are much safer providing a better