6. Mandeep Final Thesis

8/12/2019 6. Mandeep Final Thesis

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CHAPTER 1:

INTRODUCTON TO JUST-IN-TIME (JIT)

1.1 JIT (JUST-IN-TIME)

Just-In-time (JIT) is defined in the APICS (American Production and Inventory Control

Society) dictionary as a philosophy of manufacturing based on planned elimination of all

waste and on continuous improvement of productivity. It also has been described as an

approach with the objective of producing the right part in the right place at the right time (in

other words, just in time). Waste results from any activity that adds cost without adding

value, such as the unnecessary moving of materials, the accumulation of excess inventory,

or the use of faulty production methods that create products requiring subsequent rework.

JIT (also known as lean production or stockless production) should improve profits and

return on investment by reducing inventory levels (increasing the inventory turnover rate),

reducing variability, improving product quality, reducing production and delivery lead

times, and reducing other costs (such as those associated with machine setup and equipment

breakdown). In a JIT system, underutilized (excess) capacity is used instead of buffer

inventories to hedge against problems that may arise.

JIT is just not a technique or set of techniques of manufacturing, but is an advanced

approach or philosophy which embraces both new and old techniques and provides a wide

range of benefits by renovation of existing manufacturing systems.

A simple definition of JIT is to produce and deliver finished goods just in time to be sold,

subassemblies just in time to be assembled into finished goods, fabricate parts just in time

to go into subassemblies, and purchase parts just in time to be transferred in to fabricated

parts.

In a nutshell, JIT is a system that produces the required items at the time and in the

quantities needed. It is an approach that combines apparently conflicting objectives of low

cost, high quality, manufacturing flexibility and delivery dependability. JIT is viewed as a

level of perfection achieved by continuous elimination of the wasteful use of resources. The

long term objectives of eliminating wastes in a manufacturing process that is so

streamlined, cost efficient, quality oriented and responsive to the customer needs that JIT

becomes a strategic weapon for productivity improvement. The basic elements of JIT were


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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. JIT began

to be adopted in the U.S. in the 1980's (General Electric was an early adopter), and the

JIT/lean concepts are now widely accepted and used.

1.2 HISTORY OF JIT

JIT is a manufacturing philosophy, which seeks to eliminate the ultimate source of waste;

Variability, in all of its forms throughout the producing processes, from purchasing through

distribution. By eliminating waste, JIT targets production with the minimum lead-time and

at the lowest total cost. The JIT philosophy has its roots after World War II when the

Japanese were striving to compete with the U.S. manufacturing system (also known asMass Production). Taichi Ohno was the founder of this philosophy in the 1940s when he

began developing a system that would enable Toyota to compete with U.S. automakers.

Note that the environment dominating U.S. manufacturing over the last five decades has

been based on the Material Requirements Planning (MRP) formalized by Joseph Orlicky,

Oliver Wight, and George Plossl. In an MRP environment, planning is performed based on

the independent (customers) demand, in an almost JIT basis. However, shop floor control

is performed based on a push philosophy in which manufacturing orders are introduced in

the system and pushed through production. This is the fundamental difference between JIT

and MRP.

According to Ohno, JIT rests on two pillars:

1. Just-in-time as it is described in the following chapters and

2. Autonomation or automation with human touch. This term refers to the installation of

one-touch automation so an operator will be able to place a part in a machine, initiate the

machine cycle, and move on and ii) fool proofing or poke yoke which is the

incorporation of sensors in the machines to signal abnormal conditions and even

automatically stop machines if necessary, so operators dont need to watch machines during

their cycle.

Ohno formulated the whole idea based on two concepts he encountered during visits in the

U.S.: An American supermarket and the cable cars in San Francisco. First, he was

impressed by the way American supermarkets supplied merchandise in a simple, productive

and, timely manner and attempted to develop a similar concept in manufacturing. Each


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workstation would become the internal customer for the preceding workstation. The former

would simply pick up the required parts from the latter, a supermarket shelf. The second

concept was analogous to a simple cable car operation. Ohno observed that the cable car

riders were pulling an overhead cord when they wanted to disembark. This cord produced a

similar sound signaling the cable car to stop the car. Ohno applied a similar system using

machine sensors. An operator will stop the operation of a machine using a cord whenever

he/she found a problem (autonomation) (Black and Hunter, 2003).

JIT manufacturing can be traced back to the late 1700s (Just In Time, Toyota). Eli

Whitney contributed his concept of interchangeable parts to the idea of JIT manufacturing

in 1799. This concept was developed when Whitney took a contract from the United States

Army to manufacture 10,000 muskets at the low price of $13.40 each. Over the next

several years manufactures overall focused on the development of individual technologies.

Through these years few people were concerned with the processes that each product went

through during production(Just In Time, Toyota).

Early industrial engineers in 1890 began to be concerned with individual work methods,

applying science to management, and all work elements. Frederick Taylor contributed the

idea of standardized work(Just In Time, Toyota). Frank Gilbert conducted a motion study,

which led to the development of process charting and organized labor tasks(Just In Time,

Toyota).

In 1914 Henry Ford introduced the idea of the moving assembly line to the world while

producing his Model-T Ford, thus revolutionized manufacturing. By 1916, Ford began to

implement the idea of JIT manufacturing(Wren, 1999).This reduced the inventory needed

from $60 million to $20 million dollars to produce the same number of vehicles (Wren,

1999).

The present idea of JIT manufacturing can be traced to Toyota motor company in Japan.

However, to begin use of JIT manufacturing in Japan, they first researched American

production methods focusing on Fords practices (Just In Time, Toyota). In Japan JIT

manufacturing is referred to as the Toyota Production

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American motor companies. The president of Toyota made a comment about the gap,

"Catch up with America in three years, otherwise the automobile industry of Japan will not

survive." JIT manufacturing is a result of limited demand, space, and resources in Japan

compared to America. By assessing and solving these problems Toyota was able to

increase efficiency and keep up with American auto manufacturing. Ten years after the

first introduction of the new production system Toyota successfully implemented this

technique across the company. This began started to be implemented into the western

world during the late 1970's to early 1980's.

1.3 PHILOSOPHY OF JIT

The first basic principle involved in JIT production approach is the elimination of waste. Ina JIT system, waste is defined as anything associated with the production process that does

not add value to the product. Thus, waste includes quality defects, inventories of all kinds,

time spent to move material and time spent in setting up the machines. If the implications of

managing the reduction in waste for the categories mentioned above are analyzed, it

becomes obvious why JIT is involved in all aspects of the management of production

Process. The second principle of JIT involves the management of people. JIT philosophy

assumes that people are capable and willing to take on more responsibility. If defective parts

are being produced, an individual can stop the production line. Once stopped, everyone

working on the line has the responsibility to solve the problem.

The production worker is also given the responsibility for the maintenance of his

equipment. Frequently, a production worker goes through a check list before starting to

operate the equipment similar to that done by a pilot before flying an aircraft. Along with

the new job responsibility for workers comes the responsibility for management to provide

the training, time, tools and, most important, the authority necessary to accomplish the job.

Figure 1.1 represents the JIT system.

Inventory is seen as incurring costs, or waste, instead of adding and storing value, contrary

to traditional accounting. This does not mean to say JIT is implemented without awareness

that removing inventory exposes pre-existing manufacturing issues. This way of working

encourages businesses to eliminate inventory that does not compensate for manufacturing

process issues, and to constantly improve those processes to require less inventory.


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FIGURE 1.1: JIT SYSTEMS

Increase in ROI

(Return On Investment)

Cost reduction through eliminating waste

and reduction in inventory of all sorts

Just In Time Production

Vendors Improvement inQuality

Smoothing Production

Reduced WIPhighlight

problems

Small

lot size

Stable

MPS

Quality minded,Team work,

Multifunctionwork force Equipment

and Layout

Kanban Pull System

Ideas for changing process

equipment training

Problem Solving Activity byManagement and Workers


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1.4 AN OVERVIEW OF FINANCIAL SERVICES (FSs)

This section overviews financial services and identifies specific characteristics of both

services and financial services. By defining those characteristics, one may determine the

differences between other services and FSs and distinguish the differences of FSs vs.

Manufacturing. This comparison is a prerequisite in determiningproper adjustments of the

JIT techniques to FSs.

Before starting this analysis, it is useful to present a definition of FSs. According to Meidan

(1972), Financial Services are defined as activities, benefits and satisfactions, connected

with the sale of money, that offer to users and customers financial-related value. FSs are

provided by the finance industry, which includes a wide variety of institutions such as

banks, investment companies, insurance companies etc, and aim to the sale and

management of the money.

1.4.1 Characteristics of Services

Services have distinct characteristics from manufacturing. These characteristics are

classified in three areas: Object of Transformation, Service Production, and Service Output.

Object of transformation refers to the customer, the information, and the materials, with

information being the dominant object in services. Service production refers to the

interaction with the customer and the production process. Finally, by using the object of

transformation and by taking under consideration the customer requirements the service

output is produced.

Object of Transformation

1. The objects of transformation in FSs are the customers, the information, and finally the

material. According to Apte et al. (1999), financial services such as banking, insurance etc.

are widely known as information intensive services due to the fact that are characterized by

information intensity. Information intensive services mainly involve gathering, elaboration,

and propagation of information.

Service Production


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2. Server dependence represents another characteristic of services, since in most cases the

server is required in order to a service to be produced and the service performance depends

on the skills and attitudes of the performer (Apte et al, 1999).

3.Customer Participation: In most services the customer also has significant participation

and is able to intervene in the entire provision process of the service, as well as to the nature

of the output. The level of the customer participation affects the level of uncertainty. This

may happen due to incomplete or missing information required to perform a task.

4. Insepararability characterizes the simultaneity of production and consumption.

Difficulties exist in managing the customer-performer interface since both of them

participate intensively in the production process. Therefore, effective communication is a

prerequisite for the successful completion of the process and the avoidance of uncertainty.

5. Perishabilityis referred to the nature of the produced products. The inseparability of the

production and consumption lead to the logical consequence that services cannot be stored

and kept in stock due to the fact that by the time the service production process has finished,

the product-service has already been consumed by the customer.

Service Output

6. Intangibility is another specific characteristic that distinguishes services from

manufacturing. The service effectiveness is directly depended on the server customer

communication, and, by extension, on the degree of intangibility of the service. Thus,

uncertainty as regard to intangibility is contingent upon the ambiguity in the relationship

between the service provider and the customer.

7. Heterogeneitylargely characterizes the nature of services. The customers involvement

renders unfeasible the standardization of the output. The wider the human involvement in

the servicing and delivery process, the higher the potential for heterogeneity in quality since

different technical and interpersonal skills are required for the provision of the service.

1.4.2 Types of Financial Services (FSs)

We distinguish two approaches in classifying FS. The first approach is due to Harrison

(2000), which classifies FS as direct and indirect services. The second approach is based on

the Standard Industrial Classification Code or North American Classification System

(NACS). Bellow is provided essential information on each approach in order to identify the

existing types of FSs.


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The classification of FSs according to Harrison is the following:

TABLE 1.1: CLASSIFICATION OF THE FSs.

# Direct financial services Indirect financial services

1. Loans Cash Accessibility

2. Investment Services Asset Security

3. Insurance Services Money Transfer

4. Pension Services Deferred Payment

5. Real Estate Services Financial Advice

The term direct refers to the final product-service that a financial institution offers and a

customer is motivated to purchase, while the term indirect refers to the services that are

indirectly offered during the purchase of the final product-service without further payment.

For example, the process of a loan provision includes both direct and indirect FSs. The

loan, which is the final product/service that a client purchases, represents the direct FS.

However, the provision of such a direct service involves financial advice for the selection

of a product as well as the possibility for deferred payment. These represent the indirect

FSs.

1.4.3 Differences between Manufacturing and FSs Operations

Significant differences exist between manufacturing and FSs. According to Levvit (1972),

the main difference between manufacturing and services and therefore, FSs is the fact that

service is presumed to be performed by individuals for other individuals whereas

manufacturing is presumed to be performed by machines. We distinguish the differences

between manufacturing and FSs operations into three categories concerning the types of

inputs, the production process, and the types of outputs.

Production Input

In FSs the objects being processed are the customer and information (intangible), while in

manufacturing the objects being processed are mainly the material and information. It

should be mentioned that although, information processing operations exist in both areas,

this is more pronounced in FSs.


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Production

In FSs intensive customer participation exists and influences the production process while

in manufacturing this participation is limited (in comparison) or none. Moreover, in most

cases server dependence exists in FSs, while in manufacturing production depends heavily

on machines. Inseparability between production and consumption exists in most types of

FSs, since by the time the process has finished; the service has already been consumed by

the customer. Therefore, FSs could be characterized as perishable due to the irrelevance of

inventory.

Production Output

The output of production in FSs is characterized in most cases by heterogeneity (variability)

and intangibility. The final product in the case of FSs is the service itself, while in

manufacturing the final product is a tangible good. Furthermore, production of FSs depends

and is depended by the customer, and thus, standardization is difficult to accomplish, while

in manufacturing standardization is a central concept. The nature of a FS is such that no

ownership of the provided service exists in contrast to manufacturing where the produced

products are purchased and owned by the customer. Finally, contracts are used to regulate

the rights of all parts involved while in manufacturing usually only an order composition is

required.

1.5 JIT AND WASTE

JIT describes waste as anything that is not necessary for the manufacturing of the product

or, is in excess, for example, buffer inventories to cover for defective parts in the production

lines or nonlinear building rates, labor hours spent on producing products that are not

necessary, labor hours spent reworking products because of poor quality or engineering

rework orders, and time invested in setting up machine tools before they start processing

parts. All this wasted time and material increases the cost of the product and lowers its

quality. JIT is a crusade to eliminate all forms of waste. It is also a drive to simplify the

manufacturing process in order to quickly detect problems and force immediate solutions.


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1.5.1Seven Wastes

Shigeo Shingo, a Japanese JIT authority and engineer at the Toyota Motor Company,

identifies seven wastes as being the targets of continuous improvement in production

processes. These are stated as under:

1. Waste of Overproduction: Can be eliminated by reduced set-up times, layoutmodification and reduced work in process. Make only what is needed to eliminate

overproduction.

2. Waste of Waiting: To reduce waiting of men, machine and material, eliminatebottlenecks and balance uneven loads by flexible workforce and equipments. Certain

modifications in layout can also reduce wastage in waiting.

3. Waste in Transportation Activities: To minimize transportation activities, modifylayouts by using 'U' shape production line, reduce conveyors and use standard

containers.

4. Waste in Processing Itself: Ask questions regarding the reason for existence of theprocesses and then why each process is necessary.

5. Waste of Stocks: To reduce inventories initiate JIT purchasing, produce only requiredquantity of products, follow pull type of production and reduce all other wastes.

6. Waste of Motion: Study motion for economy and consistency, which improves thequality. First improve the motions, then mechanize or automate. Otherwise, there is a

danger of automating the waste.

7. Waste of Making Defective Products: Reduce work in process. Follow pull system ofproduction. Produce only that much items which will be consumed immediately in next

process. That will give immediate warning about defective quality.

1.5.2 Role of Inventory

Traditionally, inventory has been considered as an asset. In a JIT environment, inventory is

considered a liability. First, in a JIT philosophy inventory is waste. It adds to cost but does

not contribute to the value of the final product. Second, the JIT philosophy involves a

never-ending cycle of problem identification and solution. Inventory permits many

problems to be hidden, and thus is a hindrance to never-ending improvement.

In the Figure 1.2, inventory is viewed as the water in a lake while production problems are

viewed as rocks below the surface. With sufficient inventory the problems are covered up.

For example, suppose a firm has significant scheduling or quality problems. High levels of


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inventory will permit operations to continue however working around these problems with

inventory often means that the problems are never solved.

Inventory

Problems

FIGURE 1.2: INVENTORY HIDES PROBLEMS

In JIT systems, inventory levels are gradually lowered to expose problems so they may be

solved. The inventory is not drastically reduced all at once. Doing so might present an

insurmountable set of problems. Instead, the inventory is gradually lowered so that

problems may be chipped away a little at a time. In this way, problems that might have

surfaced later with catastrophic results are dealt with before they appear unannounced. More

importantly; this approach provides a continuing reduction in the underlying costs of

operation and a continuing improvement in the firms competitive position.

It should be emphasized that inventory reduction is not the major objective but the major

goal is the continuing identification and solution of problems. In organizations that correctly

implement JIT, each employee starts looking for problems and problems are viewed as

opportunities for making improvements. Figure 1.2 and 1.3 shows the inventory hides

problems and problems exposed by inventory reduction respectively.


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FIGURE 1.3: PROBLEMS EXPOSED BY INVENTORY REDUCTION

1.6 ELEMENTS OF JIT

TABLE 1.2 ELEMENTS OF JIT

S. No. ELEMENTS

NAMEDETAILS

1 OrganizationPolicies

To provide direction and to indicate to the work forthat management is concerned and involved, cover awide range of subjects, customer service.

2 Communicationand InformationSharing.

No communication gap between Employers andEmployees so that there is no time laps in collectingthe information again and again.

3 People Strategy Positive attitude towards workforce.

4Team Work

Working together should be heavily emphasized bytop management and followed by JIT team.

5 EmployeeTraining

Training should be given to the employeesregarding JIT implementation.

6Expert Lectures

Enrich the employees technical knowledge with thehelp of the expert lectures.

7Housekeeping(orderliness,cleanliness,discipline, safety)

Housekeeping is the starting point of improvementactivities. It brings hidden problems to the surfaceand eventually eliminates these problems. It notonly cleans up the workplace but also boosts themorale of employees.

8 Infrastructure(Aesthetic Value)

Good organizational building with attractivefacilities attracts the customers.

9Job Satisfaction

Satisfaction of employees in terms of working

condition, salary, recognition etc.


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10 EmployeeFeedback andSuggestions

Employee suggestions should be encouraged andrewarded while keeping both formal and informallines of communication open.

11 Judoka (use ofmodern/automatic

aid)

Use of modern computers and automation.

12

Quality Circles

The quality circle is a group of volunteer employeeswho meet on a regular basis to discuss quality

problems. The possible solutions to the problems arethen discussed and proposed to the management.

13

Schedule Stability

Schedule should be stable. The master schedulewhich is usually prepared in weekly buckets can beconverted into the material requirements plan in daily

buckets.

14

Sole Sourcing

Traditionally, buyers regard price as a major factor toselect vendors and tend to have multiple sourcing toavoid locking themselves into sole source. Thedownside of this strategy is that it is hard to maintaina long-term relationship while JIT relies very muchon vendor loyalty.

15 Group IncentiveScheme

Incentives should be given to the employees fortheir good work.

16 Frequent andReliable Service

Service as fast as possible and reliable.

17Error Prevention(Poka Yoke)

PokaYoke, also called mistake proofing, is a simplemethod to prevent defects from occurring in

business processes.18

Top ManagementSupport

Top Management Support has been recognized asthe most important factor in the implementation ofJIT because JIT is an innovative approach, whichrequires changes throughout the organization aswell as the commitment of all people within theorganization.

19 Value AdditionServices

Skill development program to enhance the technicalknowledge and communication skill.

20

Standardization

Standardization is the development of a set ofdefined reference conditions and procedures

(standards) to consistently apply to a process orartifact to obtain consistent results.

21Degree ofComplexity

Processes should be kept simple to preventvariability: the more complicated a process is the

bigger the number of defects opportunities.

22EmployeeEmpowerment

Employee empowerment is creating a workingenvironment where an employee is allowed to makehis own decisions in specific work-relatedsituations.

23CustomerAwareness

The world is changing, and it can be challenging tokeep up. Western Springs National Bank and Trustwants to ensure that all its banking partners areeducated, aware, and safe against the threats facing


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us.

24 ErgonomicsDesign (WorkingConditions)

Ergonomicsdesign focuses on the compatibility ofobjects and environments with the humans usingthem.

25

CustomerSatisfaction

Customer satisfaction, abusinessterm,is a measure

of how products and services supplied by acompany meet or surpass customer expectation.Customer satisfaction is defined as "the number ofcustomers, or percentage of total customers, whosereported experience with a firm, its products, or itsservices (ratings) exceeds specified satisfactiongoals."

26Commitment

An agreement to perform a particular activity at acertain time in the future under certaincircumstances.

1.7 JIT PURCHASING

JIT purchasing is normally implemented as the last component, especially for small

manufacturers, due to lack of bargaining power with their suppliers. Small manufacturers

normally do not give enough sales to their vendors and are forced to order in large batches

and store a large amount of raw material or they will suffer a highest-cost to get the

materials just-in-time.

However, several possible solutions have been suggested by different authors. The easiest

solution is to find JIT suppliers, as more and more companies are striving for JIT. If this is

not possible, companies can implement JIT purchasing for parts with higher turnover and

use order point methods for the rest.

There are also several steps that can be applied to establish JIT purchasing and partnership

with vendors. First, companies may use group technology to reduce the number of

components and group them according to their families. Then they may reduce the numberof suppliers and purchase a certain family of products in a blanket order. This will increase

the order volume and thus the leverage.

1.7.1 Management Commitment to JIT

JIT can be thought of as functioning somewhat like a religion. It has its leaders, who inspire

and guide and also its believers, who implement and follow. As with a religion both groups

are necessary.
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After instituting a JIT system, a manufacturing company will have to walk on the edge of

disaster for quite some time. Its employees are going to do more with less. They are going

to point out defects and problems as soon as they occur. They are going to stop a

production line if there is a problem and not start it again until the problem is solved.

The company is going to make commitments to single source suppliers for a longer time

and refrain from always buying the cheapest parts. All these actions need the support of a

solid commitment by management. Management is a very important force in any company.

Their endorsement of the JIT systems is required at the very start, with time; JIT results will

reissue them that the company is doing the right thing. Everyone including the managers

will have to preserve even if there are no immediate improvements. In the end, the

managers will win by showing that the JIT system delivers and the company and its

customers will win too.

1.7.2 Commitment at All Levels

One of the problems encountered when talking about implementing a JIT system is that the

manufacturers get scared at the thought of more work and less results, many manufacturing

organizations operate according to old-fashioned ideas that conflict head on with JIT

principles. For example, in manufacturing it was always assumed that second source

suppliers were good for backup. It was also believed that buffer inventories ensured success

in meeting production schedules and that the production line must never be stopped except

in a matter of life and death. Finally, fixing quality problems was normally postponed for

the sake of production output, possibly with the assumption that time and volume would

take care of the problem.

Middle management, front-line supervisors and workers need to embrace the JIT system

totally or it won't work. The question becomes, how does a company make believers of

these people? Probably the only way to achieve this goal is to use training and participation.

The company should immediately start training program for the people involved in the

program. It is also critical that they participate in the definition and execution of the JIT

goals. This participation is vital to the success of the system. Therefore, the company

should not try to save time and money in training. The reward will show later when it gets

universal participation in JIT system.

1.7.3 Human Resource Management (HRM) in JIT


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A full scale implementation of JIT requires a major overhaul of the manufacturing system.

This has caused a significant change in the worker roles. One important requirement for full

scale implementation of JIT is an increase in the level of technical skills and flexibility of

workers. Use of group technology and manufacturing cells requires multi skilled workers.

Workers must be assignable to different machines within a cell or to a different cell

depending on production requirements for the cell. The impacts of JIT characteristics on

worker roles and HRM practices have been studied by many researchers. Workers in JIT

systems have to be able to set up their own machines sometimes help in setting up other

machines which require more than operation to set up.

Workers are expected to be familiar with their machines and equipment, understand their

actions and operations and be able to perform routine, basic inspection and maintenance. A

JIT worker needs to be a team player with excellent communication and interpersonal

skills. Every worker needs to work in harmony with other workers. To a large extent, the

work activities are coordinated by workers' mutual adjustment, instead of the use of direct

supervision.

This calls for interaction and collaboration amongst the workers. Thus the focus is on

cooperation and not on competition. JIT places great emphasis on worker discipline. A

worker in often required to operate more than one machine and sometimes move from one

machine to another in a tightly controlled cycle. This requires multiple technical skills, and

can result in restrictions on worker's time and action.

Thus, JIT expands worker roles and responsibilities greatly. With emphasis on minimum

inventory and zero defects, there is little room for the workers to commit mistakes. Workers

therefore have to perform very well all the time. There is much less room for absenteeism,

poor performance etc.

The substantive changes in the worker role brought about by JIT have implications for a

variety of human resource management issues, policies and practices in particular in the

area of employee motivation, staffing, training and employee development, compensation

and reward systems.

It isbelieved that JIT enhances the employees interest and involvement with their work, as

it calls for a sharp break with the monotony of task specific jobs, and adds greater variety of

tasks, skills and responsibility to their jobs. So it greatly improves employee motivation.

However, there is another facet of JIT.


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Some employees at the Tennessee plant of Nissan have complained that production rate is

practically burning them out. So, to date, there is conclusive evidence to evaluate the

impact of JIT on employee motivation. The issue therefore needs further investigation.

Training and development plays a pivotal role in a JIT environment. Both attitude change

and skill development are necessary. First, employees at all levels in the organization must

understand and accept the need for JIT change. This process must begin with the

management. Figure 1.4 shows attitude changes in implementing JIT.

FIGURE 1.4: ATTITUDE CHANGES IN IMPLEMENTING JIT

1.7.4 JIT and the Competition

The JIT system is the second shock wave to jolt U.S. industry. The first one, of course

occurred when the Japanese competition proved that their products were of better qualitythan ours, particularly in such industries as automobiles and electronics.

Right after the first shock wave, U.S. industry sent hordes of technicians to Japan to figure

out how the Japanese were producing products of such high quality. At the time, they

discovered the value of the quality circles. Soon many American companies embraced the

concept; only abandon it later when they didn't obtain the same results as their Japanese

counterparts.

The lesson is that quality circles were more than a procedure to improve quality. They

involved a total commitment to manufacture products according to very high standards.

Little Boys

Complacency

Inventory as Asset

It is not my Job

Serial Vertical Communication

I am not allowed to

The Big Picture

Competitiveness

Inventory as Liability

It is Everyones Job

Open Communication

I am Encouraged to


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Americans saw the process only as a procedure and they failed as a result. It wasn't until

later that they realized that not only were the procedures of great importance, but so was a

true commitment on the part of the management and the workers to make the system work.

Quality required involvement at all levels of the company.

With JIT the same problem recurs. Most U.S. companies are trying to embrace the concept

now, thinking that it will be the cure for all their ills. But before they go any further, they

must realize that JIT involves an all-out war against waste in any shape or form. Also, a JIT

system will only succeed when management, workers, and suppliers make a strong

commitment to work together in solving the problems associated with it. Partial

commitment or top management non involvement will result in failure.

At this point, your first thought is probably that this commitment will be very difficult to

achieve, for traditionally management, workers, and suppliers have been considered to be

adversaries and to have conflicting goals.

One of the first objectives of a JIT system is to change this perception and turn their

relationships into partnerships, set common goals, and create win-win situations. This is

particularly true regarding the relationship between manufacturers and suppliers, for

manufacturers will have to make long term commitments to suppliers and will depend very

heavily on their performance in order to meet production goals.

The beginning of JIT can be traced back to Toyota in the years after World War II. At that

time, Toyota was near bankruptcy as the result, management started a crusade to improve

the company's productivity and the quality of its goods. It took Toyota many years to

implement this goal and the process affected all the levels in the company. But the effort

created one of the most efficient companies ever. The Toyota way of operation evolved into

the Toyota system. Many papers described the system and many people studied Toyota's

astounding success in reducing inventory levels and improving quality.

One of the concepts developed under the Toyota system was to move materials to work

centers (1) in a continuous flow rather than in a batch mode, (2) in the smallest possible

quantities, and (3) only when the parts were necessary to build products. Toyota also

became very efficient in reducing the setup time of dies in their press machines. This gave

their work centers the flexibility to process small production lots very efficiently.

The Toyota system also applied other commonsensical concepts, such as the kanban system

where the materials are moved on the floor in a pull fashion and controlled by a card called

a kanban. Toyota also gave authority to the workers to stop the production line whenever

something went wrong in the production process. Finally, they automated many tasks with


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machines requiring very little supervision from operators. These machines would stop when

something went wrong, allowing one worker to operate many machines without

compromising the quality of the parts.

In nutshell, the Toyota system evolved into the JIT system. This is especially clear with

regard to the emphasis on eliminating waste in all the aspects of the manufacturing process

and with regard to the definition of waste as anything that does not add any value to the

product.

1.8 JIT IMPLEMENTATION ASPECTS

JIT is a management philosophy affecting every aspect of an organization not only

manufacturing but also marketing, human resource management, planning and all other

organizational functions. Successful JIT implementation requires not only commitment of

everyone within an organization but also the suppliers and often of the customers as well. In

the literature, following factors have been suggested for successful JIT implementation:

1. Top Management Support: Top Management Support has been recognized as themost important factor in the implementation of JIT because JIT is an innovative

approach, which requires changes throughout the organization as well as the

commitment of all people within the organization.

2. Employee's Participation and Bottom up Management: Employees participationand bottom up management have been recognized as important factors for successful

JIT implementation because they lead to the improvement of performance in quality,

productivity and flexibility. It is achieved through teamwork, education; flexibility in

work practices and skills, simple payment schemes appropriates skill training,

appointment to management positions who understand production.

3. Education and Training: Education and training plays a vital role in a JITenvironment. Both attitude change and skill development are necessary. Management

and employees at all levels in the organization must understand and accept the need

for JIT change. It is important that all levels of management understand JIT

philosophy, how JIT operates, the expected benefits and needs for JIT

implementation. Management also needs to understand the nature of the attitudinal

skill and knowledge levels changes required of them and their employees. One


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important requirement for full scale implementation of JIT is an increase in the level

of technical skills and flexibility of workers. Others include better interpersonal and

communication skills, stricter adherence to procedures and schedule, increased

judgment and responsibility and greater dedication and commitment.

4. Team Work: Involvement of people at all levels of an organization paramount in JITimplementation aspects. The creation and maintenance teams are the mechanism by

which this involvement occurs.

5. Quality:One of the basic requirements for a successful implementation of JIT is theexistence of total quality management principles. JIT experts advise against the

implementation of JIT unless a company has made a full commitment to quality. JIT

requires quality throughout the process from the supplier through manufacturing all

the way to the customer. Commonly used programs in support of JIT include zero

defects, statistical process control, process data collection; worker centered quality

control, use of poka yoke stop devices etc. Employees must perform their tasks

correctly the first time. The use of quality circles and kaizen concepts are helpful in

this regard.

6. Commitment: To enable suppliers to deal with customers in a confident manner, theymust be backed by the level of commitment given by manufacturers. Without a

partnership between the customer and supplier, there will always be hesitation instead

of trust. The concept of trust and commitment in JIT is used to build partnerships and

to reduce the needs for materials-production control, receiving inspection or inventory

buffers that many companies have constructed. Contracts used by JIT manufacturing

company to record the details of an agreement usually stress the level of commitment.

1.9 BENEFITS OF JIT

Just in Time aims to reduce waste and improve quality, bringing a whole range of

benefits to manufacturing businesses of any size, as well as retailers with complex

supply chains. These benefits include:

1. Standardization: It refers to the elimination of the heterogeneity in services inorder to simplify, improve and standardize processes and the related performance ofthe employees involved. Many service scholars support that in services,


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standardization is limited or can be dangerous due to the different appreciation of

the service by the customer; however, all Banks have examples, where the

standardization of certain job activities resulted in significant productivity increases

by reducing the time required to complete an activity and standardizing the service

output (e.g. money transfers).

2. Cellular Organization: Cell layout is comprised of staff performing a variety oftasks working on a family of financial products with similar characteristics. This

could be accomplished by cross training the employees and rotating them. While in

several banks this is a common practice, we couldnt suggest that all financial

organizations apply the cellular organization in all of their activities. This is mainly

because the activities involved are too specialized, requiring extensive experience

for their execution.

3. Competitive Advantage: Lean manufacturing helps create a more flexible businessthat has better communication with customers and suppliers, and can react more

quickly to market demands. Many businesses find greater customer loyalty is a

welcome by-product of adopting this new way of working. Implementing JIT

working will help your business move towards industry best practice and keep up

with competitors.

4. Improved Job Satisfaction: JIT demands active participation in the productionprocess from employees. It increases their skills, gives them greater responsibility

and fosters an interest in the performance of the whole company, rather than just

their department or team.

5. Flexibility: System's flexibility i.e. response to change improves. The change mayinvolve variations in quantity of customers, type of services, routing pattern,

alternate materials, workforce availability, etc.

In most applications, the benefits reported have been dramatic. However, a point

commonly made by most implementing organizations is that there are so many intangible

and non-quantifiable benefits of JIT, that it is grossly erroneous to assess JIT's impact

purely from quantified benefits. As such, traditional methods normally adopted to evaluate

investment proposals, with their heavy bias on financial evaluation, do not apply in JITsituations. A long term view of the benefits, rather than immediate short term benefits is


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also very much stressed. Finally, most firms emphasize development of new measures of

performance in many to evaluate accurately the effects of JIT.

1.10 SUMMARY

JIT can be summarized, as a system to eliminate waste and achieve excellence in an entire

organization. The sole purpose of JIT is to eliminate waste. JIT means doing the job right

the first time and permanently solving problems as soon as they appear.


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CHAPTER 2:

LITERATURE REVIEW

Ebrahimpour and Schonberger (1984)identified problems of developing countries like

India, where stress is on maintaining efficiency rather than reducing cost in contrast to

developed countries where better infrastructure and practices automatically result in

efficiency. They have also suggested JIT and TQC (Total Quality Control) for developing

countries to solve such problems.

Demmy and Constable (1988)discussed various techniques of JlT such as quality, work

methods, layout, relationships with customers and suppliers and production scheduling

and control. It was concluded that JIT is a philosophy of eliminating waste and

involvement of people in the management. JIT techniques are particularly useful in

repetitive industries whose environments are high volume production of relatively few

end products.

Gupta and Haragu (1991)had shown that, JIT is not just a way to reduce inventory but

it is a mean of solving problems that block the building of an excellent manufacturing

organization. Its applications and benefits apply not only to the shop floor but also to the

marketing, purchasing and accounting aspects. But benefits from this system cannot be

achieved overnight. It is a slow process and takes 5 to 10 years to obtain optimum results.

Ebrahimpour and Withers (1993) identified two manufacturing philosophies namely

Static optimization which means that the emphasis is on management of the workforce,

functional autonomy, cost minimization and maintaining stability. Second philosophy is

Dynamic evolution which means the philosophy of continual improvement. Theyconducted a survey of 221, US based firms with the help of questionnaire based on five

point Likert scale. They analyze the data using ANOVA and tested at the 0.05

significance. Responses from non-JIT firms were indicative static optimization

philosophy. Whereas JIT firms responses indicates that they are using dynamic evolution

philosophy.

Su (1994) had shown the benefits of implementing JIT such as reduced space

requirement, reduced inventory investment, reduced manufacturing lead time and


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increased equipment utilization etc. They also raised some issues for the managers to be

aware of before implementing JIT such as cooperation between management and the

workforce, adhere to daily schedules, changes in layout, revision of purchase agreements,

small containers use etc. He conducted his study in a heavy industry of Korea and

identified the important activities which the company has followed for implementing JIT.

Mahesh Mathur (1994) presented the design and operation of a computer simulation

model developed on a SLAM SYSTEM to compare the buildup of set up costs and

inventory carrying costs with varying lot sizes. While reduction of lot sizes is a necessary

step towards implementation of 'Just-In-Time' (JIT) in a job shop environment, a careful

cost study is required to determine the optimum lot size under the present set up

conditions.

Banerjee and Kim (1995)have presented an integrated JIT inventory model with a single

buyer and supplier showing that a point optimal integrated inventory replenishment

policy, as opposed to independently derived policies for one buyer and supplier, results in

significant economic benefits for both parties.

Nassimberi (1995)has analyzed nature of the relationship between principal operational

JIT practices, i.e. the practices that create the link between buyers and suppliers

operation chains. The study was carried out on the basis of a survey of 457 respondents in

different areas from 50 Italian plants. The study has demonstrated that the practices

considered show 3 main underlying factors: delivery synchronization, design and

interaction on quality. Each of these factors is partly independent from-others and can be

interpreted as a distinct type of buyer supplier interaction.

Zhiwei Zhu and Paul H. Meredith (1995) defined the critical elements in JIT

implementation. The objective of their research was to fill the gap by organizing an

overall picture of a JIT implementation process from the views of both practitioners and

academicians and by comparing findings based on studies employing different research

methods.

Huan Neng Chiu (1995) identified the problem of determining a best order-up-to-level

and review interval policy for a fixed-life perishable product under the assumption that the

lead time is positive. After the analysis of the behavioral pattern of the perish abilityprocess, a simple yet good approximation to the expected outdating is developed. Two


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extended bounds on the expected outdating and the total expected costs of holding

inventory, ordering, backlogging are derived to construct a heuristic (R, T) model.

Roger M. Hill (1996)considered the application of the Bayesian approach to parameter

estimation to the single period inventory model. We assume complete prior ignorance of

the values that the (single) unknown parameter of the demand distribution might take and

express this by using a uniform prior over the permitted range of parameter values.

McLachlin (1997)suggested that there should be an active supplier audit and certification

programme and they should be involved in new product development. He also suggested

use of mistake proof devices and the items should be inspected at the immediate

workstation to minimize the number of rejections. He recommended lesser use of

conveyors in material handling.

Chandra and Kodali (1998)identified different elements of JIT and given explanation of

each element. The elements were classified in four categories depending upon their

characteristics. Analytic Hierarchy process has been explained to enable the decision

maker to represent the simultaneous interaction of many factors in complex, unstructured

situation.

Jen-Ming Chen (1998) proposed a generalized dynamic programming model for

inventory items with Weibull distributed deterioration. The proposed model extends the

past works by incorporating a time-varying deterioration rate of Weibull distribution

which is a general form of exponentially decaying functions. In this model, the demand

rate is assumed to be time-proportional, shortages are allowed and completely

backordered and the effects of inflation and time-value of money are taken into

consideration. The solutions of the model determined the optimal replenishment schedule

over a finite planning horizon so that the present worth of total cost associated with the

inventory system is minimized.

Huson and Nanda (1999)made an attempt to measure the impact of JIT on accounting

measures of performance. Their results show that after JIT adoption firms reduced their

labor content in facilities, increased inventory turnover and enhanced earnings. There was

no significant impact on price charged by the firm. They concluded that JIT is

necessitated by increasing in competitive pressure, demand of variety of products and aneed for flexible production systems.


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Dixit Garg and S.G. Deshmukh (1999) reviewed and classified the literature on JIT

purchasing. The importance of attributes in JIT purchasing has been identified. A survey

of the attributes was carried out in Indian context. The relative importance of such

attributes is highlighted.

Duffuaa and Andijani (1999) suggested an integrated simulation model for effective

planning of maintenance operations for Saudi Arabian Airlines (SAUDIA). According to

them, an effective maintenance system was essential for SAUDIA in order to meet its

objectives. These objectives include minimal flight cancellation, minimal delays, minimal

repair turn time and effective utilization of maintenance resources. The integration model

as proposed consisted of several modules. These were planning and scheduling,

organization, supply, quality control and performance measures.

Fullerton and McWatters (2000)measured the degree of implementation of JIT in US

by taking a sample of 2ll companies. With the help of ANOVA (Analysis of Variance)

test 28% of the responses indicate that the firms have had significant improvements in

their operations since implementing JIT. More than 61% of the responses were positive,

whereas only 5% of the responses were negative with respect to changes after adopting

JIT.

Zhang Chunning and Arun Kumar (2000) highlighted the centralization of

warehousing and the control of non-production goods, such as soft goods (gauze and

towel), surgical sets, and so on, with JIT philosophy and Process-Oriented concept of

supply chain management in a health care system JIT emphasizes the importance of waste

elimination within repetitive processes through improved quality, reduced setup, reduced

lot size, greater preventive maintenance and training, and linear production. While process

orientation not only results in optimized co-ordination of various functions, but alsoresults in less complexity of the execution structure within a process.

R. S. M. Lau (2000) revealed that the synergistic effects of joint JIT-TQM were more

obvious when comparing to those companies with no JIT or TQM. Companies

implementing both JIT and TQM were also found to be superior when comparing to those

JIT companies. However, the synergistic benefits of joint JIT-TQM were found marginal,

at best, when comparing to TQM companies. He also suggested that JIT companies might

tend to focus more on the technical aspects rather than human aspects of implementation.


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Cua et al. (2001) presented an integrating framework and helped to untangle the

overlapping manufacturing practices of TQM, JIT and TPM. This was done by specifying

a common set of human and strategic practices that were shared by all three programs.

This left a set of basic techniques that were unique to each of the three programs. This

study was one of the few to empirically demonstrate the importance of joint

implementation of manufacturing programs. The findings from these empirical analyses

demonstrated the importance of implementing the practices and techniques belonging to

all three programs. Each component of integrating framework represented a different

aspect of improvement initiatives aimed towards product, process, and equipment

development.

Yan Dong et al. (2001) developed a model and tested it to determine whether the use of

JIT purchasing reduces logistics costs for both suppliers and buyers. The results indicated

that JIT purchasing directly reduces costs only for buyers. An indirect path, however, was

found between JIT purchasing and logistics costs for suppliers. To the extent that JIT

purchasing may result in suppliers adopting JIT manufacturing techniques, then suppliers

too can benefit, at least indirectly, from JIT purchasing.

York Y. Woo et al. (2001) considered an integrated inventory system where a single

vendor purchases and processes raw materials in order to deliver finished items to

multiple buyers. The vendor and all buyers are willing to invest in reducing the ordering

cost in order to decrease their joint total cost. The amount of investment determines the

planned ordering cost and hence affects their replenishment decisions. An analytical

model is derived in which the planned ordering cost is a general function of the

expenditure to operate the new ordering system, and also a solution procedure to find the

optimal investment and replenishment decisions for both vendor and buyers is developed.

Hitoshi Hohjo and Yoshinobu Teraoka (2003)examined a duopolistic inventory model

with reallocation of excess demands on a plane market. This inventory problem is

interpreted as one of the square games with pure strategies of continuous cardinary.

Customers move according to the rectilinear distance over a plane market and choose a

player whom they first visit with a probability dependent on their positions. This model

can be interpreted as one of the unit- square games with pure strategies of continuous

cardinary.


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Rajesh Piplania and S. Viswanathan (2003)developed a model to analyze and evaluate

the SOI (supplier owned inventory) strategy. They conducted a numerical study to

understand how the various model parameters affect the total costs under the SOI

arrangement. The numerical study reveals that the total supply chain costs will never be

higher under the SOI arrangement. They modeled and performed a numerical study on the

effect of supplier-owned inventory strategy on the costs for the whole supply chain. The

SOI arrangement is always beneficial for the supply chain as a whole. The costs under

SOI decrease as the percentage share of total demand from the SOI-buyer increases. The

supplier also can benefit from SOI with lower costs especially when the holding cost for

the inventory at the buyers premises is lower.

Jing-Wen Li (2003) showed thatpull systems exhibit greater potential than push systems

in helping job-shop manufacturers achieve competitive advantage through continuous

improvement. However, realization of the benefits of adopting pull systems in job-shop

environments is closely related to the implementation of other three essential job-shop JIT

concepts, i.e. cellular manufacturing (and the effected set up time reduction), One-piece

Production and Conveyance (OPC), and adapting material handling performance to OPC

operation.

Emel Laptali Oral et al. (2003)analyzed Turkish prefabrication sector as a case study. A

questionnaire survey and a number of interviews were undertaken with Turkish

prefabrication companies. Frequency, Thurstones Paired Comparisons and correlation

coefficient analysis were used to evaluate the questionnaire results. The results

unexpectedly showed that inflation was not an obstacle against implementation of JIT by

Turkish prefabrication companies, as it had a trivial effect on the companies supply-chain

policies.

Riccardo Fiorito (2003) had shown that inventory changes are not a models nuisance.

Inventory changes can help macro econometric models to balance the supply and the

demand side and to endogenize utilization variables without resorting to an arbitrary

potential output level. Both results stem from formulating inventory augmented

production functions in which inventory changes act as a stationary error correction

mechanism between value added and inputs on one side and value added and final sales

on the other.


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Seung-Lae Kim and Daesung Ha (2003) developed a buyersupplier coordination

model to facilitate frequent deliveries in small lot sizes in a manufacturing supply chain.

The proposed model, based on the integrated total relevant costs of both buyer and

supplier, determines optimal order quantity, the number of deliveries/setups, and shipping

quantity over a finite planning horizon in a relatively simple JIT single buyer single

supplier scenario. The results have shown that the integrated buyersupplier strategy of

facilitating multiple deliveries in small lots can save cost over the conventional single-

delivery policy.

Chinho Lin and Yihsu Lin (2004) proposed a cooperative inventory policy between

supplier and buyer. Unlike other studies, the authors considered the case of deteriorating

items and permit the completed back-order in the problem. The authors solved the

problem without the condition of equal replenishments periods during a specified

planning horizon and present a procedure to find the optimal solution. They specified the

characteristic of the deterioration of inventory stock while being stored by the supplier or

the buyer as well as during delivery. Intuitively, deteriorating items may require further

concerns in cooperative actions between supplier and buyer due to their mutual concern

on the matter.

Hung-Chi Chang (2004)has given two models. The first model showed that both higher

service level and lower joint total expected cost could be obtained by ordering cost

reduction. Meanwhile, the second model showed that for any given backorder ratio, , the

order quantity, ordering cost and joint total expected cost increase and the number of

shipments decrease with increasing scaling parameter, .

Cengiz Hakseve and John Moussourakis (2005) presented a mixed-integer

programming model to optimize the two fundamental decisions of inventory managementfor ordering multiple inventory items subject to multiple resource constraints. They also

determined whether a fixed cycle for all products or an independent cycle for each should

be used for a lower total cost. The solution of the model does not seem to require

excessive central processing unit (cpu) time as indicated by the computational experience

reported in this paper. They presented a viable model that may aid managers in meeting

challenges like How much (or many) to order and when to order.. This model not

only can handle any number of linear constraints but also, with the right optimization

software, can be solved on a PC in a matter of seconds or minutes.


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Telsung and Patil (2006) concluded that work culture in JIT implemented companies

have a positive impact on competitive advantage. The work culture system consists of

those human resource practices that provide a cooperative and communicative atmosphere

so that tasks within and across the functional units are coordinated.

Wakchaure et al. (2006) had found out the elements of JIT from extensive literature

survey. The differences in manufacturing philosophies of India and Japan have been

shown. It was concluded that, Indian industries are practicing lot size reduction, quality

circles, set up time reduction, kaizen, WIP reduction, preventive maintenance and many

more elements of JIT which is an indicator of applicability of JIT in Indian manufacturing

industries. The potential benefits of JlT implementation in Indian organizations are not in

doubt.

H.M. Wee et al. (2007) developed an optimal inventory model for items with imperfect

quality and shortage backordering. Such implicit assumption is reasonable in view of the

fact that poor-quality items do exist during production. They are usually picked up during

the screening process and are withdrawn from stock instantaneously. It is assumed that all

customers are willing to wait for new supply when there is a shortage. The analysis

showed that our model is a generalization of the models in current literatures. An

algorithm and numerical analysis developed showed that this model always results in

better performance.

Hesham K. Alfares (2007)considers the inventory policy for an item with a stock-level

dependent demand rate and a storage-time dependent holding cost. The holding cost per

unit of the item per unit time is assumed to be an increasing function of the time spent in

storage. Two time-dependent holding cost step functions are considered: Retroactive

holding cost increase, and incremental holding cost increase. He concluded that theoptimal order quantity and the cycle time decrease when the holding cost increases.

Hsin Rau et al. (2007) provided a general and simple algorithm to obtain an optimal

solution for three inventory models with a replenishment batching policy, production

batching policy, and an integrated replenishment/production batching policy in a

manufacturing system under a finite time horizon and linear trend in demand. In addition,

demonstrations of applicability are performed. The replenishment or production model


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can be deemed a special case of the integrated model. Only one general equation and

solution procedure is used to obtain the optimal solution for all three models.

Liang-Yuh Ouyang et al. (2007)developed an integrated inventory model which jointly

determines the optimal order quantity, reorder point, process quality, lead time and the

frequency of deliveries simultaneously. The authors extended Yang and Pans (2004)

model by including shortage cost and taking reorder point as one of the decision variables.

The results reveal that taking the reorder point as a decision variable will improve the

system performance and annual joint total expected cost.

A. Aparna (2007)studied the inventory problem under the pricing structure for a Just-in-

Time (JIT) system. The supplier offers the buyer a price discount, which the buyer finds

beneficial to him and hence, orders more frequently. This allows both the buyer and the

supplier to have less amount of inventory and thus, both minimized the cost. An analysis

of how the supplier structures the terms and conditions of an optimal quantity schedule are

discussed.

Kit-Nam Francis Leung (2008)used the elementary techniques of differential calculus to

investigate the sensitivity analysis of Montgomery et al.s inventory model with a mixture

of backorders and lost sales and generalized Chu and Chungs model. The authors

provided three numerical examples to demonstrate their findings, and remark the

interpretation of the global minimum of the average annual cost at which the complete

backordering occurs.

Kun-Jen Chung et al. (2009) had shown that the total cost function per unit time is

convex by a rigorous proof. This paper derives the closed forms for the upper and lower

bounds on the optimal cycle time of the total cost function per unit time, thereby enabling

straightforward application of the standard bisection algorithm to numerically compute the

optimal cycle time. They also developed the upper and lower bounds for optimal cycle

time (T*), thereby, enabling straightforward application of the standard bisection

algorithm to numerically compute T*.

Shuo-Yan Chou et al. (2009) proposed an improved solution procedure for the same

inventory model with fuzzy constraints, based on the maxmin operator. The authors

reviewed the solution procedure by Roy and Maiti that is based on KuhnTucker


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approach to point out their questionable results. This approach is compared with Roy and

Maitis approach to explain why it can solve the problem and Roy and Maitis cannot.

Dowlatshahia and Farzam Tahamb (2009) analyzed which aspects of the JIT

philosophy are also applicable to small and medium sized enterprises (SMEs). Based on a

literature review and with a particular focus on four data sources, challenges to JIT

implementation in SMEs are analyzed. A conceptual framework and a set of hypotheses

are developed which describe the barriers to, and enablers of, JIT implementation in

SMEs.

Wang Xue-feng and Chen Zhi-xiang (2009) have tried to solve a multi-operations order

sequencing problem with revised ACO algorithm, and the result as well as the calculation

efficiency is more satisfactory compared with those granted by simulated annealing

algorithm. Order sequencing problem is a common decision making problem in

production management and has been widely studied and applied.

Tomofumi Sumita et al. (2009)proposed the multiple-layers SECCIS model. At the

stage of execution, the inventory level will be adjusted according to changes in quantity,

quality, price or the date that the materials are procured or the products are ordered. If

such changes fluctuate within the assumptions of the model, the inventory control system

can cope with them based on the mathematical model. However, inventory adjustment

based on the mathematical model is difficult when unexpected rapid change occurs. For

those purposes, the multiple-layers SECCIS model is proposed.

Zhang Qinghua et al. (2009) studied the medical equipment production and analyzed the

characteristics and problems in mixed production of original equipment and maintenance

spare part. Based on the research result, the paper brought out the MRP and JIT

integration solution applied in maintenance spare part production.

Xiaoying Liang, Houmin Yan (2010) developed the optimal inventory allocation and

upgrade, and inventory replenishment policies, and demonstrates that the optimal control

can be characterized by a switching curve. The seller has two decisions: inventory

commitment and inventory replenishment. The former addresses, within an inventory

cycle, how on-hand inventories are allocated between the two classes of customers. The

latter addresses, between inventory cycles, how the inventory is replenished.


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Chao-Kuei Huang (2010) developed an integrated inventory model to determine the

optimal policy under conditions of order processing cost reduction and permissible delay

in payments. Both the vendor and the buyer participate in order processing cost reduction

by applying information technologies. The order processing cost can be reduced by

certain expenditures and will affect lot-size decisions.

Zhou Xin and Huo Jiazhen (2010) considered a single buyer and single supplier to

coordinate their ordering and setup policies in JIT environment with quantitative bargain

power analysis. The buyer dominant and supplier dominant cases were extended into

quantitative bargain power analysis and included into special cases when bargain power

factor is minimum or maximum. How the optimal polices and cost varies with bargain

power factors are demonstrated in numerical examples.

Geraldine Strack and Yves Pochet (2010) evaluated the value of integrating tactical

warehouse and inventory decisions. A global model is presented which takes into account

the replenishment decision at inventory management level, the allocation of products to

warehouse systems and the assignment of products to storage locations at the ware house

management level. In order to solve this global model, we have presented two heuristics

which illustrate two possible levels of integration.

Liang-Hsuan Chen and Fu-Sen Kang (2010)developed the integrated inventory models

with permissible delay in payment, in which customers demand is sensitive to the buyers

price. The models consider the two-level trade credit policy in the vendorbuyer and

buyercustomer relationships in supply chain management.

A. Gunasekaran and J. Lyu (2010) suggested that implementation of JIT in a small

company should start with layout revision, schedule stability, and the development of

long-term supplier-customer relationships. Top management commitment is necessary to

ensure the effectiveness and success of implementing JIT in a small company.

Jing-Wen Li (2010)presented an investigation of the effects of adopting a pull system in

a job-shop environment in contrast to a push system considering the implementation of

Just-in-Time production. Implementation of pull systems in job-shop environments should

be coordinated with a set of core supporting Just-in-Time concepts, i.e. cellular

manufacturing, one-piece production and conveyance, and adaptive material-handlingperformance.


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Colin Paterson et al. (2011)has shown that lateral transshipments have been applied in

many different types of inventory system in a varied range of industries. They have

primarily classified the models based on whether they look to transship proactively, at a

single point in time or reactive once demand has been realized.

Aksoy and Ozturka(2011)used a novel approach based on a neural network for supplier

selection and performance evaluation in JIT production environments. In the neural

network based supplier selection system, suppliers are represented as an input vector in

terms of quality, JIT delivery performance, location and price, and they are presented to

the NN to successfully select the appropriate suppliers. If required, more criteria in this

approach can be considered by the user. In the supplier performance evaluation system,

suppliers are evaluated according to their quality performance, which includes six sub

criteria.

Inman et al. (2011) theorized and tested a structural model incorporating agile

manufacturing as the focal construct. The model includes the primary components of JIT

(JIT-purchasing and JIT-production) as antecedents and operational performance and firm

performance as consequences to agile manufacturing. Using data collected from

production and operations managers working for large U.S. manufacturers, the model is

assessed following a structural equation modeling methodology. The results indicated that

JIT-purchasing has a direct positive relationship with agile manufacturing while the

positive relationship between JIT production and agile manufacturing is mediated by JIT-

purchasing. The results also indicated that agile manufacturing has a direct positive

relationship with the operational performance of the firm, that the operational

performance of the firm has a direct positive relationship with the marketing performance

of the firm.

Khorshidian et al. (2011) proposed a new model, with non-linear terms and integer

variables which cannot be solved efficiently for large size problems due to its NP-

hardness. To solve the model for real size applications, genetic algorithm is applied. These

genetic procedures are also quite close to the optimum and provided an optimal solution

for most of the test problems. Numerical examples showed that this algorithm is efficient

and effective.


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CHAPTER 3:

PRESENT WORK

3.1 INTRODUCTION

Financial Services (FSs) are recently attracting growing interest due to the competitive

pressures resulting from the globalization through numerous mergers, the distribution of

their products and services through alternative channels and their shift from products to

customers. Thus, banks that provide a wide range of financial services, are dealing with

complex processes as well as complex systems that impede productivity and increase

operational costs. In fact, banks are becoming less efficient than the recent past; the huge

investments in Information Technology systems oftentimes increase complexity and may

not result in expected ROIs. Many researchers are focusing on this sector in order to

improve the performance of financial services and reduce associated costs. Researchers

hope that financial services can reap similar benefits to those of manufacturing, and seek

to close the gap in productivity between financial institutions and manufacturing

industries.

3.2 MOTIVATION OF PRESENT WORK

Tewari, P.C. identified detailed list of 26 elements of JIT system derived by JlT

implementation which are suitable for banks. But all elements of JIT may not be easy to

implement. Therefore, there is a necessity to find out those elements of JIT system which

are easy and which are difficult to implement in Indian context. Hence a case study of a

bank can give useful insights on the basis of listed elements and benefits to achieve the

above mentioned objectives. Indian banks can become competitive by successful

implementation of JIT. As JIT benefits are visible in all areas such as quality, delivery

time, service cost etc. A suitable framework for implementation can be helpful. Before

elucidation of such a framework, it is useful to identify problems that may be encountered

during implementation.

The conducted case study identifies some problems. Survey of these common problems

will help to simplify the work in financial services like banks in India. The main purpose of

JIT is to eliminate wastage of all types. Present work analyses some vital issues in Indian

banks in JIT context on the basis of a questionnaire followed by several visits and


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conducting interviews with the middle management and top level executives. Figure 3.1

shows the flow diagram of the methodology adopted.

FIGURE 3.1

Identification of JIT Elements

Preparation of Questionnaire

Circulation of Questionnaire

Data Collection

Analysis and Survey

Observations/Conclusions

Scope for Future Work

Literature Survey

Case Study

Discussion about Questionnaire

Final Questionnaire


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RESEARCH METHODOLOGY

3.3 OBJECTIVES OF PRESENT WORK

The objectives of research work with respect to Indian banks are as follows:

1. To find out those elements which are important in Indian banks?2. To find out those elements which are easy to implement in Indian context?3. To identify those elements which are highly difficult to implement?4. To find out the scope of JIT implementation in Indian banks by way of a case study.

3.4 METHODOLOGY

Every essential element of JIT may not be easily implemented and some elements are

difficult to implement. These problems may be related to in appropriate understanding of

JIT methodology or may be related to technical, operational and human problems.

There are some questions related to JIT system:

1. Which are the essential elements of JIT?2. Which elements are important and difficult to implement?3. Which elements can be easily implemented?4. Which elements are highly beneficial in banks?

This section details the procedures for the study in the following subsections:

Research design, Instrument, Survey participants Data collection, and Data analysis.

3.4.1 Research Design

This study employed non-experimental quantitative research. Specifically, the design

involves mail survey method, which is the most frequently used descriptive research design.

This research design requires responses from the banking personnel and further requires

quantitative data analyses. To increase the internal and external validity, the sampling

procedure in this study applied the stratified random sampling technique.

3.4.2 Instrument


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A survey was designed to find out the most important elements of JIT which are easy to

implement in banks. The survey consists of comparison based on following common

parameters. The parameters are Organization Policies, Communication and Information

Sharing, People Strategy, Team Work, Employee Training, Quality Circles, Group

Incentive Scheme, Top Management Support, Employee Empowerment and Customer

Satisfaction etc.

3.4.3 Survey Participants

A questionnaire regarding the importance and difficulties of JIT elements was designed and

distributed in various banks. This study uses a mail survey to distribute and gather the data.

A mail survey provides the most appropriate method to obtain relevant, up-to-date

information from a large sample of banks.

3.4.4 Data Collection

Data were collected following the self-administered mail survey method. Self-administered

mail survey has the advantages of relatively low cost and easy access to widely

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