Tutorials Supply ChainIt should be kept in mind that “just in time” is not a simple step by step method, but an entire philosophy that must be observed in order to avoid the downfalls. The ideas comprising “just in time” philosophy come from many different fields, such as industrial engineering, behavioral science, statistics, and production management. When it comes to how inventory is treated according to the “just in time” scheme, one must learn how inventory is to be viewed, the way it expresses certain practices within the company’s management, as well as the philosophy’s main principles.
As opposed to the traditional view of inventory, “just in time” views inventory as being wasteful, in that it incurs costs, rather than adding value to a company. This does not mean that inventory should be removed altogether at the expense of manufacturing. Rather, it expounds the idea that a company could save costs by eliminating inventory that does not compensate for issues related to manufacturing. Also, processes must be constantly upgraded so that the need for inventory is reduced.
What is more, anytime that inventory is permitted to accumulate, a downward spiral begins wherein any and all inventory is admitted. As a result, the management of a company might wish to accumulate inventory to mask any problems within the production process, rather than dealing with the problem directly. Such problems might include machinery related difficulties, a lack of flexibility among employees, backup problems at work stations, or inadequate capacity.
Within the “just in time” system, managers adopt the policy that it is best to have the right materials at the right moment in the right place and in the right amount.
While some of the first results at Toyota were less than ideal, the company nonetheless found itself making a lot more money, as inventory was built out and then sold. Thus, upper management became incredibly enthusiastic about “just in time” right off the bat. Another positive effect of “just in time” was the fact that the factory’s response time fell to just one day. Customer satisfaction thus resulted, as cars could then be provided within a couple days of the minimum economic shipping delay. Cars could also be built to order all of a sudden, which meant eliminating the risk that they might not get sold. This eliminated a lot of the risk involved, as Toyota’s return on equity was improved greatly.
Every part in the factory had to perfectly fit, because there was no longer any choice about which part to use. As a result, there was a quality assurance crisis, as well as a major improvement in the quality of products. Toyota eventually decided to redesign every single part of their cars in order to get ride of tolerances. At the same time, they implemented statistical controls. Suppliers of parts had to be tested and trained to assure delivery as well as quality. In many cases, multiple suppliers were eliminated altogether.
Whenever a problem occurred on the production line, it would have to be stopped or at least slowed down significantly. If there was no inventory, that meant to a line could not operate from in process inventory until the problem was fixed. A lot of people working at Toyota during this time thought that that would be the end of “just in time.” The first week that the process was implemented, line stops occurred nearly every hour. But by the time the first month came to an end, line stops only occurred a couple times a day. At the end of six months’ time, there was so little economic effect resulting from line stops that Toyota allowed any worker on the line to pull a stop to inspect the product for quality improvements. Even with this installed, there were only a few line stops per week.
Thus, Toyota’s factory became the envy of everyone in the world of manufacturing. Since then, tons of factories around the world have adopted the “just in time” process.
“Just in time” as a philosophy has been used widely on every level of the supply chain – not just in the automobile industry, either. In the realm of commerce, implementing a “just in time” strategy resulted in the elimination of warehouse spaces that previously linked the factory to a retailer.
“Just in time” allows for supplies to circulate around the clock. This keeps the workers working, while the management can focus their energies on turnover as well as meeting deadlines. The company thus works harder to meet goals and attain benefits, which can come in the form of wage increases or promotion.
First Page: Supply Chain Management : Just In Time
