Just-In-Time

PRESENTED TO:- PRESENTED BY:-Dr. Sameer Gupta Ridhima Gupta(27-MBA-09) Sahil Kandhari(28-MBA-09) Sandeep Gupta(30-MBA-09) Sumita Kumari(35-MBA-09) Varun Gupta(36-MBA-09) Ankush Gupta(41-MBA-09) Sem-III,TBS,Jammu

Logistics Management “Just In Time” (JIT)

• “Just In Time” (JIT) is an approach to managing logistics matters that aims at “reducing waste and redundant inventory by delivering products, components or materials just when an organization needs them”

The Global Supply Chain Forum

• Typically, customer orders trigger the process• Just In Time (JIT) is a production and inventory

control system in which materials are purchased and units are produced only as needed to meet actual customer demand.

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Just-In-Time

• Just-In-Time:

– JIT is a management approach that originated in Japan in 1950.– The basic elements of JIT were developed by Toyota in the 1950's,

and became known as the Toyota Production System (TPS). JIT was well-established in many Japanese factories by the early 1970's

– Uses a systems approach to develop and operate a manufacturing system

– JIT is a Pull supply process– Organizes the production process so that parts are available when

they are needed– A method for optimizing processes that involves continual

reduction of waste

Just-In-Time

• Central themes surrounding Just-in-time– Waste reduction– Simplicity– Quality or service improvement

Seven Wastes

• Defects• Overproducing• Idle / Unnecessary Inventory• Waiting• Unnecessary Process Steps• Unnecessary Worker Movement• Unnecessary Materials Movement

Common Causes of Waste

• Layout (distance)• Long setup time• Incapable processes• Poor maintenance• Poor work methods• Lack of training

• Inconsistent performance measures• Ineffective production planning • Lack of workplace organization• Poor supply quality/reliability

Objective of JIT • Produce only the products the customer

wants. • Produce products only at the rate that the

customer wants them. • Produce with perfect quality• Produce with minimum lead time.• Produce products with only those features

the customer wants. • Produce with no waste of labor, material or

equipment -- every movement must have a purpose so that there is zero idle inventory.

Just-In-Time• Pull Scheduling

– A system of controlling materials whereby the use signals to the maker or provider that more material is needed.

• Push Scheduling– A system of controlling materials

whereby makers and providers make or send material in response to a pre-set schedule, regardless of whether the next process needs them at the time.

supplier

buyer

Push: traditional way

Pull: Just-in-time

Pull Supply Models

• A supply chain based on the “pull” model is one where “a firm waits to produce product until customers demand it”

• The aim is to focus the production process on customer needs, reduce cycle time, minimize inventory and avoid the risk of excess production of unwanted product

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Push Supply Models

• A supply chain based on the “push” model is one where “a firm produces then pushes product through the channel without orders in hand”

• Production and inventory held are therefore guided by predictions or anticipation of customer demand

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BENEFITS OF JIT

• Funds that were tied up in inventories can be used elsewhere.

• Areas previously used, to store inventories can be used for other more productive uses.

• Throughput time is reduced, resulting in greater potential output and quicker response to customers.

• Defect rates are reduced, resulting in less waste and greater customer satisfaction.

Benefit: Real Business Example• Dell Computers:

Del Computer Corporation has finally tuned its Just-in-Time system so that an order for a customized personal computer that comes in over the internet at 9 AM. can be on a delivery truck to the customer by 9 P.M. In addition, Dell's low cost production system allows it to under price its rivals by 10% to 15%. This combination has made Dell the envy of the personal computer industry and has enabled the company to grow at five times the industry rate

Disadvantages of JIT

Implementing thorough JIT procedures can involve a major overhaul of your business systems - it may be difficult and expensive to introduce.

• JIT manufacturing also opens businesses to a number of risks, notably those associated with your supply chain. With no stocks to fall back on, a minor disruption in supplies to your business from just one supplier could force production to cease at very short notice.

Loss: Real Business Example

• Toyota the Developer of JIT SystemJust-in-time manufacturing system has many advantages, but they are vulnerable to unexpected disruptions in supply. A production line can quickly come to a halt if essential parts are unavailable. Toyota, the developer of JIT, found this out the hard way. One Saturday, a fire at Aisin seiki Company's plant in Aichi Prefecture stopped the delivery of all break parts to Toyota. By Tuesday, Toyota had to close down all of its Japanese assembly line. By the time the supply of break parts had been restored, Toyota had lost an estimated $15 billion in sales.

List of Companies that use just in time (JIT)

• Harley Davidson• Toyota Motor Company• General Motors• Ford Motor Company• Manufacturing Magic• Hawthorne Management Consulting

Just-in-time

• Activity

Computer Book/CD

Grocery

Dem

and uncertainty

Scale economics

Pull Push/Pull

Push

Just-in-time

• Just-in-time systemJIT Pyramid of key factors

Just-in-time

Minimum delay

Minimum inventory

2

1

Minimum defects

3

Simplicity and visibility

Minimum downtime

54

6

Level 1

Level 2

Level 3

Just-in-time

• Just-in-time system– Factor 1

• The top of the pyramid is full capability for JIT supply supported by Level 2 and Level 3 operation.

– Factor 2• ‘Delay’ and ‘inventory’ interact positively with each

other• The concept of Kanban

– Factor 3• Defect → delay → inventory

Just-in-time• Just-in-time system

– Factor 3• Defect → delay → inventory

Bad design

Machine downtime

Unreliable supplier

Poor quality

Inefficient layout

Inventory hides

problems

Just-in-time

• Just-in-time system– Factor 4

Breakdowns

Planned maintenance

Changeover

Machine downtime

Safety stocks

Preventive maintenance

Flexible production

Just-in-time

• Just-in-time system– Factor 5

• Simply and visible process help to reduce inventory and could be better maintained.

– Factor 6• It’s more difficult to see the flow of a process with

increased inventory.

Just-in-time

• Case: Automobile

• Case: Cake

Just-in-time

• Demand characteristics and planning approaches– Economic order quantities (EOQ)

Buffer stock

Reorder point

Usage rateRecorder quantityStock

Lead time Time

Just-in-time

• Assumptions in Economic Order Quantity Model– Demand is deterministic. There is no uncertainty about the

quantity or timing of demand.– Demand is constant over time. In fact, it can be represented as a

straight line, so that if annual demand is 365 units this translates into a daily demand of one unit.

– A production run incurs a constant setup cost. Regardless of the size of the lot or the status of the factory, the setup cost is the same.

– Products can be analyzed singly. There is only a single product.

• Notation

– D = Demand rate (in units per year).

– c = Unit production cost, not counting setup or

inventory costs (in dollars per unit).

– A = Constant setup (ordering) cost to produce

(purchase) a lot (in dollars).

– h = Holding cost (in dollars per unit per year)

– Q = Lot size (in units); this is the decision variable

Just-in-time

• EOQ model– Average inventory level

– The holding cost per unit

– The setup cost per unit

– The production cost per unit

2

Q

D

hQ

D

hQ

22

Q

A

c

Just-in-time

• EOQ model

)quantityorder economic(2

02

)(

)unitpertcostotal(2

)(

*

2

h

ADQ

Q

A

D

h

dQ

QdY

cQ

A

D

hQQY

Just-in-time

• Practice– Pam runs a mail-order business for gym

equipment.  Annual demand for the TricoFlexers is 16,000.  The annual holding cost per unit is $2.50 and the cost to place an order is $50.  What is the economic order quantity?

orderper units8005.2

50160002*

Q

Just-in-time

• Demand characteristics and planning approaches– Periodic order quantity (POQ) and target stock

levels

Economic order quantityHow much to order?

When to order? Periodic order quantity

Just-in-timeEconomic order quantity with uncertain demand

Week No. Demand Order quantity

Inventory end

Inventory start

Inventory holding

1 100 1,000 900 1,000 950

2 100 0 800 900 850

3 200 0 600 800 700

4 400 0 200 600 400

5 800 1,000 400 200 300

6 1,000 1,000 400 400 400

7 800 1,000 600 400 500

8 400 0 200 600 400

9 100 0 100 200 150

10 200 1,000 900 100 500

Sum 4,100 5,000 5,100 5,200 5,150

Average 410 500 510 520 515

Just-in-timePeriodic order quantity (POQ) with uncertain demand

Week No. Demand Order quantity

Inventory end

Inventory start

Inventory holding

1 100 200 100 200 150

2 100 0 0 100 50

3 200 600 400 600 500

4 400 0 0 400 200

5 800 1,800 1,000 1,800 1,400

6 1,000 0 0 1,000 500

7 800 1,200 400 1,200 800

8 400 0 0 400 200

9 100 300 200 300 250

10 200 0 0 200 100

Sum 4,100 4,100 2,100 6,200 4,150

Average 410 410 210 620 415

Just-in-time

• Target stock level (TSL)

– Periodic order quantity = Target stock level – Stock on hand – Stock on order

– TSL = cycle stock + safety stock

constant

Just-in-time• JIT and material requirements planning (MRP)

– Material requirements planning (MRP) - A methodology for defining the raw material requirements for a specific item, component, or sub-assembly ordered by a customer, or required by a business process.

– MRP systems will usually define what is needed, when it is needed, and by having access to current inventories and pre-existing commitment of that inventory to other orders to other customers, will indicate what additional items need to be ordered to fulfill this order.

Just-in-time• Feature of MRP

– MRP is based on JIT Pull scheduling logic

– MRP is good at planning, but weak at control

– JIT is good at control, but weak at planning

• TPS Vs. FPS

JIT 35

Kanban Production Control Systems

• Simple, paperless procedures

• Signals/visual systems– Posted schedules

• Containers– Standard size, small

• Factors: Material Handling consideration proximity of work centers

JIT 36

Kanban Production Control Systems (Cont.)

• Kanban…Cards• Production Card---”P” Card:

– Part #, Quantity to be produced, Supply work center #, etc.

• Conveyance (Move) Card---”C” Card:– Part #, Container Capacity, Source, Destination, etc.

1-card system: Move card and an empty space

2-card system

JIT 37

Difference Between JIT and JIC Approach

Difference Between JIC and JIT Approach

JIT 38

THANK YOU