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CHAPTER 9

IMPLEMENTATION OF JUST-IN-TIME(JIT) CONCEPT IN INDIAN INDUSTRIES

9.1 INTRODUCTION:

Just-in-Time (JIT) is one of the most sophisticated techniques which has wide reach¬

ing applications. This technique is widely implemented in

abroad. Until now the JIT ideal was just limited to the Western advanced coun¬

tries and Japan. But due to technical advancement and globalisation, today India

is also implementing this concept in various industries moving gradually from the

traditional inventory methods.

The word Just-in-Time (JIT) is synonymous with Toyota Production System

(TPS). After the successful implementation of JIT at Toyota, other industries in

the Western World implemented the concept of JIT. The onslought was more in the

automobile industries.

The case studies of the industries that have completely implemented JIT concepts

features of JIT to reduce the overall cost have been

presented in this chapter. A tabular form below represents brief summary of some

efforts made by some industries1.

various organisations

and those who have used some

AchievementsImplementation SchemeNo. Name of theindustry

The company sloted its suppliersinto three categories and applieddifferent purchasing strategies to

them. The inventories for LV class

items (Rs.1000 and above) were

for more than one shift. The

The company never ranout of stock.average inventories hadfallen down from 30davs in 1994 to 12 davstoday. The applicationof .11 I' helped the com¬

pany to possess one ofthe most efficient pro¬curement systems.

AutoBajaj1.TheLtd.

never

orders were placed weekly.

class items (between Rs.500 and

Rs. 1 000), ordering frequency was

fortnightly, For ‘<T class items, or¬

dering freuency was monthly, butthe actual delivery policy was con¬

trolled through Kanban.

IT

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The Theory and Practice of Total Cost Management

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AchievementsNo. Implementation SchemeName of theindustry

The ultimate result ofadopting JIT was highproductivity arid a leansupply chain. The com¬

pany thus saves Rs.8.50crores per year.

2. Asliok This is another leading automo¬

bile company of India. The com-

towered inventories help-Leyland

panylessly which led to a setback in

profit making. Then, Ashok Ley-

land applied the concept of Just-* t IV

in-i ime its shop floor(JIT)under the project named ‘OSCARS’. OSCARS stands for Op

on

Ionising Supply Chain and Ra¬tionalising Sourcing. Under OS¬CARS, the company classified thevarious components into three cat¬

egories, ‘Avised different’ delivery systemsaiming at cutting down inventory

holdings. Apart from this, Project

OSCARS started a pull based sys¬

tem on Ashok Leyland’s shopfioor,where each stage produces only asmuch as the next stage needs.

B’ and ‘C' and de-

Samlel achieved bof hproduction-costefficiency and produc¬tion lead time efficiency.Down-time was broughtdown from 5 percent in11)97 to less than l per¬cent in September 1998for 14- inch tube line.

Samtel Colour Samtel relocated its vendors closeto its Ghaziabad plant. Thus, thecompany’s most outsourced raw

material are delivered twice a day.

Thus, the raw materials are sup¬

plied as and when required be¬cause of geographical proximity.

3.

1 hey also formed Saintel Quality MovementCircles. On the wastagefront, the mid size linehas lowered the figfrom 7 percent in April1997 to 4 per cent today.

u re

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No. AchievementsName of theindustryEscortTractors

Implementation Scheme

4. Prior to reengineeringthere were 21 workers in

any shift and had a lead

time of 19 days. To-

I ’he company went in for BusinessProcess Reengineering (BPR).The Farm Trac Division of Escortscreated four individual profit cen¬

tres and located them in each of day, the process requires

ly 12 workers per shiftthe buildings, instead of dispers- on

mg subassemblies across available and lead time has fallen

down to 8 hours.area. They extended their effortsto Supply Chain Management andin turn, reduced the number ofvendors.

5. W i pro

CorporationThe company’s invento¬

ries shrunk from 15 days

in 1992 to 3 days in1998.

Wipro Corporation implementedthe JIT technique to its firm. Jtcut its vendor base from 140 to 70and concentrated on single sourcesof supply. It developed its suppli¬ers within a radius of 50 km.SBL concentrated on vendor- SBL ordered asbestos

need-6. Sundaram

Brake Linings buyer relationship- They deveb on

oped a structured sourcing system determined basis, cut

with John Manville Co. (JMC) ting costs significantly,

a

(SBL)

of Canada, Thus, both SBL and

JMC follow JIT schedule.Hewlett Packard hasone of the most effi¬cient procurement sys-terns which caters very

good services to itscustomers,

(HP) In-Hewlett-Packarddia wanted to reach its customers

HewlettPackard (HP)India

7.

much faster than it could haveIt utilises warehouseotherwise.

facilities of Airfreight Ltd. (AFL)in different parts of the country.

The warehouses (in Bangalore and

Mumbai) are connected also by V-

Sat to HP’sDelhi and Singapore

offices. Once an order is placed.

it immediately notifies the ware¬

house nearest to the customer,

which assembles the machine and

delivers it.

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No. Name of theindustryBlue Star

AchievementsImplementation Scheme

8. This yielded better re-t

suits for the companyand could now concen¬

trate on improving per¬

formance of its supply-chain.

Their refrigeration manufacturerwas suffering from an average on-

time delivery record of just 33 percent. The plant was strugglingdue to high inventories.it restructured through SupplyChain Management (SCM). Aninitial audit revealed that just 10percent of its 449 vendors ac¬

counted for 60 percent of busi¬ness. The company then focussedon those vendors who supply crit¬ical components - which also de¬manded downsizing the supplierbase. Thus, it reduced the numberof suppliers to 142 using a modelnamed ‘Mutual Vulnerability1.PWC introduced a 2-bin systemtoKanban on the shop floor for au¬tomatic replenishment of C-ciassitems such as rubber part, nutsand bolts, without piling up skyreaching inventories. For this,they have developed a software

which requisitions supplies fromvendors in right quantity and at

right time.

Then

9. P ricewaterHouse Coop

(PWC)

Order-to-The plantDelivery cycle time hasdropped from 103 daysers

to 34 days. The work-in-progress has droppedon an average from 22chillers to 6 chillerswhile on-time deliveriesstart at 94 percent.

9.2 IMPLEMENTATION OF JIT IN BAJAJ AUTO LTD.

We discuss here the case study of Bajan Auto Ltd. who has fully implemented JIT

by using the concept of ABC/ Analysis.

Auto slotted its suppliers into three categories and applied different ptir-Bajaj

chasing strategies to each one of them. This enabled the company to retain its

lead of between 10 and 15 percent over its competitors in the manufacture of its 2-

average

The company had divided its 3,000 - and-odd components that go into

A’, ‘B’ and ‘C\ The first consisted of high value

(Rs.1000 and above) items; the second, medium value (between Rs.500 and Rs.1000);

and the third, low value (below Rs.500). This classification helped the managers to

wheelers.

scooters into three categories -

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build inventories in inverse proportion to the average cost of each genere. Thus inven¬

tories for ‘A‘-class items are never more than for one shift. Even then the company

did not run out of stock. This was only because of JIT. The orders were placed every

week and the daily deliveries were made. In order to ensure that the inventory-level is

kept at minimum, Bajaj Auto got rid of quality inspection of these products. Instead

it became mandatory for vendors to conform to its self-certification programme under

which they guarantee the quality of their output and feed their supplies directly

the production line. 174 out of 1000 of its vendors fell in this category. Bajaj saved

to

on inventory pile-ups and quality based rejection. For B’-class items, the ordering

classfrequency was once a fortnight, and the inventory-ceiling,

items, the ordering cycle

. one week. For

controlled by thewas monthly, but the actual delivery was

Kanban process. Under the Kanban system, the requirements for the production line

for a particular component are indicated visually through cards which the suppliers

use to deliver exactly as much as is required.

This was not enough just to cut down the costs. This would result in forcing the

suppliers to hold more inventories. Thus the vendors push away from the company.

Bajan Auto, hence communicates its tentative production-plan 3-mont.hs ahead ol

schedule, the semi-final is relayed to them 45-days ahead, and the final production

scheduel is frozen to 30 days in advance.

The overall impact of these strategies was that the average inventories had fallen

from 30 days in 1994 to 12 days today.

CASE STUDY OF ASHOK LEYLAND WHICH IM¬

PLEMENTED JIT9.3

Ashok Leyland, another leading automobile industry in India, implemented JI T and

reached the targets of reduced inventory control and high level of productivity. Al¬

most 18 months ago. Ashok Leyland had to allow tower inventories helplessly. The

company’s profits had crashed from Its.124.93 crores to a meagre Its.18.-11 crores.

The company was fighting for its survival.

Then began Project OSCARS which stands for Optimising Supply Chain and

Rationalising Sourcing - aimed at vendor selection and development, better planning

and scheduling, and inventory control process. Until then the company was main¬

taining inventories worth 45 days, in comparison to 3 lo 5 days globally. This was

because the components were ordered by Ashok Leyland on the basis of an annual

production schedule which was going haywire.

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Under the Project Oscar, the 5000-and-odd components which the company used

were categorised into ‘A!, ‘B’ and ‘C!. A items amounted to 75 percent of the total

cost of components, ‘B! items, 18 percent and ‘C’ items, 7 percent. Based on this

the company devised different delivery systems for each category, aimed at cutting

inventory holdings. For the supply of ‘A class items, a JIT system was utilized. Under

this the plant sent a JIT card, specifying the part number, quantity and the unloading

location to the supplier, who promptly despatched the required consignment directly

to the assembly line. Project OSCAll devised a funnel-planning system, covering ()

weeks of requirements. The broadest part- stands for the tentative requirement of the 1

last two weeks out of the six (6). The middle part of the semifrozen requirement for

the middle 2 weeks and the narrowest, part and the frozen requirement for the first two

weeks. So the vendor knows roughly when to expect the JIT card. Simultaneously,

Project OSCARs started a pull-based system on Ashok LeyIand shopfloor, where

each stage produces only as much as the next stage needs. The ultimate result of

adopting JIT was high productivity and a lean supply chain. The company thus save

Rs.8.50 crores a year. There are many more companies which used JIT and other

related techniques like Business Process Re-engineering (BPR) to achieve the major

targets like elimination of waste, reduction in lead time, high level of flexibility etc.

Also one of the major factors that make JIT superior to the traditional techniques is

the geographical proximity of the single source of supply which is utilized by many

companies.

The case studies of some of the industries that implemented JIT and other related

ideals partially, in order to achieve the above mentioned factors are discussed below:

SAMTEL COLOUR USING THE BENEFIT OF GE¬

OGRAPHICAL PROXIMITY9.4

Samlel Colour is the manufacturer of colour picture lubes.

cost efficiency and production lead time efficiency. In order to ephasize

Ihoy concentrated on

production

the former aspects, Samtel relocated its vendors close to its Ghaziabad plant.on

Thus the company’s most out sourced raw material - electron guns and deflection

yokes are delivered twice a day. This implies that tlic materials are supplied as and

when required. This shows that Samtel has applied JI I technique to its supply policy.

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9.5 WIPRO ACHIEVED REDUCTION IN INVENTORIESBY STICKING TO SINGLE SOURCE OF SUPPLY

Similarly, Wipro Corporation also achieved remarkable results by implementing JIT,

firstly, the dot-matrix printer division reduced its procurement costs by 50% by

curtailing its vendor base from 140 to TO and focussing on single source of supply as

much as possible. Also the unit developed its suppliers within a 50 km radius. HenceV

company’s inventories shrunk from 15 days in 1992 to 3 days in 1998.the

9.6 SUNDARAM BRAKE LININGS USED THE VENDORBUYER RELATIONSHIP TO REDUCE COSTS

Sundaram Brake Linings (SBL) used the heart of supply chain management - the

supplier-vendor relationship. The closer and more dependent they

the better is the outcome. SBL used the principle of single sourcing to slice through

its bills for asbestos. Initially it bought from three different suppliers. This resultedin increased transaction costs. So they changed their tact and developed a structured

sourcing system with John Manville Co. (JMC) of Canada. Now SBL provides

JMC with a 12-week requirement schedule which the latter meets by delivering every

Monday. Thus SBL saves on inventory pile-ups and enjoys the flexibility of changing

the combination of different kinds of asbestos upto 3 weeks before each shipment.

This would have been impossible and SBL negotiated with multiple sources of supply.

Looking at the vendor’s ability to match with its schedule, SBL ordered asbestos on

a need-determined basis thus cutting costs significantly.

each otherare on

9.7 CARD-SIGNALLING SYSTEM USED BY RANEMADRAS

Ilane Madras is a steering gear manufacturing company where cellular lines riot only

increased throughout time, but also reduced the cycle time. At the core of it, they

used the card signalling system of Kanban and just-in-time inventory management.

To minimise, work-in-progress Rane employed a card signalling system. Every stage

in the process is an internal customer and parts are supplied only against demand.

However a minimum is maintained to prevent the stoppage of the line in case there

problem. Rane is now helping its vendors to employ Kanban and eventually, it

will have a system where its nearby vendors will produce as per a Kanban coming

from Rane’s shopfloor. The ultimate result of the implementation of JIT i

is a

is thatout

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the inventory turnover for llano's raw materia1 lias gone up by 30 percent and the

material inventory has come down to 5 days from 7 days in 1996.raw

9.8 ESCORT TRACTORS l JSED BPRTO REDUCE COSTS

Escort is a leading Tractor conmpany of India. iiy using B)’R a concept similar to

JI1, Escort reduced the cost per tractor by 20 per cent. Rear Axle unit targeted a

cost reduction of Rs.84.80 per unit. Willi the current output of 20,000 rear axles, it

amounts to a cut of Rs.lG.96 lakh(i) 72.6 percent increase in productivity, (ii) increase in capacity by 12,868 tractors,

(iii) 100 percent conformance to schedule, (iv) 60 percent reduction in inventories.(v) 50 percent reduction in manshift per tractor and (vi) 75 percent reduction in lead

time.

The ultimate gains after implementing HER weres.

Some other applications may briefly be bihglighted also as under"*:

9.9 JINDAL VIJAYANAGAR STEEL

File company began the production of hot rolled and cold rolled steel colls at its new

plant. Then, the company took the responsibility of supplying at the time and place

specified by the buyer - on a JIT basis. The company uses a fleet of 50 hired Volvo

trucks, each of which has a capacity of carrying 60 tonnes. The trucks are run round

the clock, with drivers relieving one another every 8 hours, on different routes. This

enables shortest permissible delays.

The company estimates show that the travel time have slashed down drastically.

The travel Lime has been reduced by 50 percent.

9.10 FEDERAL EXPRESS

its logistics from Federal Express, The company’s long cycle

multiple sourcing of components which

Compaq out. sources

killing 30-40 days. The reason wasLime was

assembled in a central warehouse in Europe. Phis was the reason for rise inwere

costs.

So Federal Express overhauled the system extensively,

assembled products are sent to its ori distribution centre

,md then sold to dealers on a cost-insurance freight basis

hi the new chain, the

directly from the factory

. An e-mail track -and- trace

Business Today, ‘Leading at Logistics' (The Fortnightly magazine on e-Business) Feb7-2 1 , 2000] 1 202

as

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system covers the entire order-to-deliver spectrum. This has resulted in a significant

reduction in cycle time to 10 days,

9,11 CEAT TYRES

Ceat lyres* objective was to slash down inventories by implementing JIT. Their pro

duction and planning systems

waswere not properly synchronized. The answer to this

Logistic management1, Ceat set up six despatch centres. These were selected af-

ten plotting the locations of all the 125 selling points and keeping a 48 hours travelling

tune. With this all that was needed was to replenish stocks anywhere in the country,

Thus Ceat could scale down its inventory of finished products. They have also set

infolech infrastructure such that the despatch centres could communicate theirrequirements to the plants on a JIT basis*

up an

Thus3 we have made a humble attempt to highlight the industries which have

extensively applied JIT system and have acquired the benefits to a great extent. Butthis is just a begining of JIT application for Indian Industries to becomepetitive and thereby to achieve not only profit and progress but also for establishingdominance in the global market.

more com-

3Source: The 7th Business Today Anniversary Issue - "The Theory and Practice of Total CostManagement'1 dated Jan, 7, 1999.

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