Origins of JIT
The process of manufacturing has been significantly influenced by the turn of events in history. In the beginning of the 19th Century, Henry Ford pioneered the mass production system as a way for manufacturing organizations to organize, plan, control and evaluate their operations. Several operations management tools developed during that time sought to promote the mass production philosophy. During World War II, flexibility was a key requirement and this altered the manner in which operations management theory and practice developed. However, the events surrounding the oil crisis in 1972 had a significant impact on several of the operations management practices that we practice today.
Market recession put new pressures on the manufacturing system and demanded better methods of managing operations in manufacturing organizations. Customers increasingly demanded more options and also commitment to deliver products and services faster. In response to these changing requirements, new principles of managing operations were required. Managing the operations efficiently, developing alternative methods for quality management and creating responsive organizational structures were some of the newer requirements. Notable, Japanese manufacturers developed a set of tools and techniques, over a period of two decades, that addressed many of the above requirements.
Using these new capabilities, Japanese manufactures threatened to alter the forces of competition and sought to provide new value to customers. In the automobile sector, passenger car manufacturers such as Toyota and motorcycle manufacturers such as Kawasaki competed effectively with established giants in the US such as GM and Harley Davidson, respectively. While Japanese manufacturers could offer products that were of low cost and high quality, American manufactures were offering exactly the reverse, that is, low cost products at a high cost. The initial success of the Japanese manufacturers in the automotive sector was soon to be replicated in other sectors of the industry. Notable among them include electronic components such as resistors, memory chips and transistors and entertainment electronics products such as cameras and musical systems.
Before we understand the logic of JIT, it is important to note that the definition of waste is unique in Japanese manufacturing management literature. Any process or a set of activities that do not add value as perceived by the customer is classified as waste. Adopting such a definition would mean that having an inventory of material, unutilized capacity lost due to poor planning and scheduling or defects and rework are all considered as waste. Just in Time manufacturing is a new philosophy of manufacturing management that provides a set of tools and techniques to compete in the increasingly fierce market and enables organizations to provide better value in their offerings by constantly improving their operations and eliminating waste from the system.
Philosophy of JIT
The philosophy of JIT is in contradiction with this traditional thinking on solving such problems encountered in manufacturing systems. It works two ways. In the case of water flow, instead of pouring more water into the system to cover the newly grown structure, efforts will be made to “trim” the new growth and bring it back to a limit whereby the boat can continue to sail smoothly. In our manufacturing example, if there is a problem with the supplier, instead of increasing the safety stock, collaborative efforts will be launched with the suppliers to solve the problem.
However, the crux of JIT philosophy is to go step further and deliberately create some disturbances in the system in order to uncover problem areas. Once the problems are exposed, the organization will work towards solving the problem and restoring smooth production rates. Returning to our water flow example, what it means is that when the boat sails smoothly, pump out some water from the system and expose the tallest rock. Chisel the rock to a level that the boat can resume sailing smoothly. After a few rounds of smooth sailing, pump out some more water and continue the process.
In the manufacturing example, what it means is to have a method by which the buffer is withdrawn from the system. By withdrawing the buffer, new problems are exposed. By studying the problem, new methods will be devised to restore smooth production rates. After one cycle of this exercise is satisfactorily completed, begin the next cycle by could be progressively reduced even while smooth production rates are restored.
What makes JIT philosophy different from conventional thinking is the “deliberate” choice on the part of management to expose hidden problems even while the production system is operating at a certain level of equilibrium. Therefore, one can define JIT as an organization- wide mandate to systematically expose the hidden problems.
Elements of JIT Manufacturing
Although the logic of JIT is intuitively appealing, in reality, to practice JIT and reap the promised benefits, an organization needs to have several key elements in the manufacturing system.
Manufacturing Architectural Charges
Manufacturing architecture provides an overall framework in which the various activities, people, and issues that are related to the production and distribution of goods and services either directly or otherwise are organized. Essentially, manufacturing architecture defines the nature of the relationship between the various functional units in an organization and addresses issues relating to structure, systems, procedures and people. Through a careful choice of the system and structure issues, it tries to create a seamless structure that encompasses the entire value stream and brings about physical and logistical linkage among the functional units.
The most significant change required to practice JIT is to create a new manufacturing architecture. JIT emphasizes waste elimination and in order to perform this, the manufacturing architecture should be conducive. Figure 9.1.7 conveys the transformation schematically. Principles of making manufacturing architectural changes address two types of issues. The first is the structural issue. Structural issues confine to the physical aspects of carving out the new architecture. This includes the layout of machines and other resources on the shop floor and in the offices, and the organization structure and reporting relationships between employees in an organization.
The second is a set of logistical issues. Issues related to the systems, procedures and people are referred to as logistical issues. Organizations need to understand that changes in the structural issues need to be complemented by corresponding changes in logistical issues. Merely changing the physical aspects at the shop floor and the offices do not provided the desired improvements. The actual improvement and the benefits accrued are commensurate to the corresponding changes made in certain systems, procedures and people related issues. For example, the new structure will demand that skills of people be re-distributed in a different fashion. The predominant customer focus to the whole design will force radical changes in the systems used for measuring the performance and rewarding people in the organization. Making efforts to seamlessly integrate the supplier layer with other layers internal to an organization will call for new systems and procedures.
While addressing the various aspects of manufacturing architecture, one should keep in mind that organization exists for customers. The art of creating customer focus is a matter of detail. At the highest level it may call for the creation of divisions and business units. However, at the lowest level it means that there will be dearly defined end results or products that relate directly to organizational resources as well as to a customer group.
Changing the layout, re-deploying the work force and redefining organization structure are not going be to be easy. They result in altered power structure of the various individuals in the organization, and call for a different working style and behavior. Efforts are required to design a better work place organization. Visual boards can play a major motivational role in directing improvements and increasing the ownership of product and process. They can play a leading role in linking all the functional areas of an organization through an information network. Without such exercises, the agenda of waste elimination using JIT may not be feasible.
The final outcome of the architectural changes made to a manufacturing organization is that a system having chain of customers-suppliers emerges. Beginning with marketing, which is the internal arm of the ultimate customer, a chain of preceding and succeeding processes is established. Finished goods (FG) stores will have a supplier relationship with marketing. Similarly, final assembly will become a supplier to FG stores. Manufacturing will resemble a linked chain with several links. Each link will have a supplier-customer relationship and will feed the material from the raw material stores right up to the final assembly. This chain structure will greatly aid material flow, production planning and control functions.
Lot Size Reduction
Addressing capacity issues in JIT requires a different approach compared to traditional thinking. Since JIT is about waste elimination, there is a greater emphasis to uncover maintenance. In Japanese manufacturing management, capacity is nothing but a sum of actual production and waste. Thus, if there is a mass manufacturer with an installed capacity for producing 25,00 items per month using a set of resources, but averages a monthly production of only 22,000, then the balance 3000 units lost is accounted as waste. A study of an auto-component manufacturing unit in Tamil Nadu showed that capacity losses in their organization (in monetary terms) were attributed to the following:
Underutilization of machine Rs. 14.99 million
(Which mainly consisted of lost time due to setup of machines)
Waste due to non-usage of machine Rs. 2.50 million
Not maintaining proper specifications Rs. 0.65 million
Total capacity lost Rs. 18.14 million
Therefore, one major source for waste elimination is setup time reduction. When setup time is reduced, it is obvious that the lot size will also be smaller. Imagine that there are two identical manufacturing setup in the first, the setup time is 12 hours and in the second the setup time is 30 minutes. Clearly, in the first case, it makes very little sense to setup a machine for 12 hours and engage in production for anything less than 12 hours. Therefore, the lot size will tend to be at least equal to the production for 12 hours. In contrast, in the second case, it is possible to setup the machine frequently and produce in smaller quantities. This increases the ability of the organization to respond to changes better. We have already seen the benefits that accrue to an organization on account of smaller lot sizes.
The earliest success stories in JIT have a strong component of setup time reduction initiatives. Shigeo Shingo developed the Single Minute Exchange Die (SMED) system to drive down setup time. The philosophy behind SMED is that there are internal and external operations involved in any setup of machines. Internal operations are those that require interruption of the machine for performing the setup operation. Therefore, it results in loss of capacity. For example, changing a die in a press or a cutting tool requires stopping of the machine. On the other hand, there are several operations pertaining to setup that could be done off-line. These operations are known as external operations and they do not result in any loss of capacity. Obvious examples include planning the setup operation, obtaining the set of tools and other resources required as well as obtaining the required authorizations.
SMED is a systematic method by which internal operations are progressively converted into external operations. Initially, there will be minimum use of technology to achieve this. However, as the SMED process proceeds, it may call for a very close study of the setup process and use of technology to make modifications on the equipment. Setup time reduction involves three stages. In the first stage, obvious imperfections in planning and procedural aspects are addressed. This may bring down the setup time from several hours to about an hour.
In the second stage, some technology in introduced to alter the design of fixtures, dies etc. This may bring down the setup time to less than 30 minutes. In the final stage, extensive use of advanced technologies, to make significant design changes on the equipment, will be required to bring down the setup to a “one touch setup” (of having a setup time of about 100 seconds). This results in uncovering large amounts of wasted capacity and making the system flexible and responsive to changes. Batch sizes eventually drop close to one, permitting manufactures to develop single piece flow system.
Kanban as Control Tool
Production control is primarily achieved by passing information pertaining to production to the respective work centers. The information typically consists of an authorization to produce a certain quantity of items beginning at a particular time. Although this appears to be a simple task, traditional manufacturing systems have experienced difficulties in performing this task. Traditional manufacturing systems have experienced difficulties in performing this task. This is partly due to bad structure emphasizing functional orientation. However, JIT systems make architectural changes and simplify the planning and control process to a large extent. Therefore, it is possible to devise alternative methods for production control. Typically, JIT manufacturers utilize a concept known as Kanban. Kanban is a Japanese word, which approximately denotes a card or a visible signal.
Taichii Ohno, the father of Toyota Production System conceived the logic of Kanban as a production control tool based on the stock replenishment process in a supermarket. In a super market, various goods are displayed on the shelf in limited numbers. As customers “pull out” their requirement, the inventory of items in display depletes. Therefore, at the end of the day (or as soon as the shelf empties), the shelves are refilled to the extent of consumption. The use of Kanban for production control is very similar.
A pre-determined quantity of items is to be stacked between every pair of succeeding and preceding processes. As the customer pulls out her requirement, the signal travels along the chain and each link in the chain schedules production only to the extent of refilling the stocking points. The signaling from the customer down to the raw material stores is done through Kanban. Kanban could be a card, an electrical signal or a message flashed through the web.