“An inventory strategy companies employ to

increase efficiency and decrease waste by receiving

goods only as they are needed in the production process, thereby reducing

inventory costs.”

Pull (demand) driven inventory system in which materials, parts, sub-assemblies, and support items are delivered just when needed and neither sooner nor later. Its objective is to eliminate product inventories from the supply chain.

Origin : JAPAN.Initially known as : Toyota Production System.Taiichi Ohno : father/originator of JIT.Scenario After Second world war.Taiichi Ohno Examined American Industry.Devised a new system based on elimination of waste.Just-in-time

Taiichi Ohno

• Flexible resources • Cellular layouts• Pull production system• Small-lot production• Quick setups• Uniform production• Quality at the source• Supplier networks

Flexible Resources•Multifunctional Workers•General Purpose Machines•Study Operators & Improve Operations•Standard Operating Routine

Cellular Layouts•They Group Dissimilar Machines In Manufacturing Cell To Produce Family Of Parts•Work Flows In One Direction Through Cell•Cycle Time Adjusted By Changing Worker Paths•Cells Operated By Worker Teams Who Are Cross-trained

Pull Production System:

•A Pull System Where The Production Or Movement Of The Next Batch Of Material Is Not Started Until The User Signals A Need For It•The User Comes To The Producer To Withdraw Materials In The Quantity Needed At The Time Needed•The Producer Produces Only The Exact Quantity Withdrawn By The User

Small-Lot Production.

•Requires less space & capital investment•Moves processes closer together•Makes quality problems easier to detect•Makes processes more dependent on each other•Inventory Hides Problems - Lower Levels Of Inventory To Expose Problems

Quick Setup•Preset Desired Settings•Use Quick Fasteners•Use Locator Pins•Prevent Misalignments•Eliminate Tools•Make Movements Easier

Uniform Production•Results From Smoothing Production Requirements•Kanban Systems Can Handle +/- 10% Demand Changes•Smooths Demand Across Planning Horizon•Mixed-model Assembly Steadies Component Production

SUPPLIERS NETWORK:

• Locate near to the customer.• Use small, side loaded trucks and ship mixed loads.• Consider establishing small warehouses near to the customer or consolidating warehouses with other suppliers.• Use standardized containers and make deliveries according to a precise delivery schedule.•Become a certified supplier and accept payment at regular intervals rather than upon delivery.

•The philosophy of JIT is simple: the storage of unused inventory is a waste of resources. JIT inventory systems expose hidden cost of keeping inventory, and are therefore not a simple solution for a company to adopt it. The company must follow an array of new methods to manage the consequences of the change. The ideas in this way of working come from many different disciplines including statistics, industrial engineering, production management, and behavioral science. The JIT inventory philosophy defines how inventory is viewed and how it relates to management.•In short, the Just-in-Time inventory system focus is having the right material, at the right time, at the right place, and in the exact amount without the safety net of inventory. The JIT system has broad implications for implementers.

TRANSACTION COST APPROACH

•JIT helps in keeping inventory to minimum in a firm. However, a firm may simply be outsourcing their input inventory to suppliers, even if those suppliers don't use Just-in-Time (Naj 1993). Newman (1994) investigated this effect and found that suppliers in Japan charged JIT customers, on average, a 5% price premium.

• Worker Compliance• Automatic

Inspection• Quality Measures• Fail-Safe Methods• Worker Participation

• Reduce Lead Time• Frequent Deliveries• Project Usage

Requirements• Quality Expectations

• Level Schedule• Establish Freeze

Windows• Underutilized Capacity

• Demand pull• Backflush • Reduce lot sizes

• Stores• Transit• Implement Carousel To

Reduce Motion Waste• Implement Conveyor

Belt To Lower Motion Waste

• Standard Production Configuration

• Standardize And Reduce The Number Of Parts

• Process Design With Product Design

• Quality Expectations

The service industry has recognized that the JIT system can be adapted successfully in their processes and add value to the end product. JIT lays emphasis on the process and not on the end product.

Guidelines ;Synchronization And Balance Of Work FlowFlexibility In The Use Of ResourcesRespect For PeopleContinuous Improvement Of The Process

Who doesn’t recognize the Big Yellow ‘M’?

McDonald’s is the best example of JIT in Services !

What used to be the case was McDonald's would pre-cook a batch of hamburgers and let them sit under heat lamps. They would keep them for as long as possible and eventually discard what couldn't be sold. The only way to get a fresh hamburger under the old system was to make a special order.

McDonald's now doesn't begin to cook until a customer has placed a specific order.

The major benefits are better food at a lower cost.

Wastage is reduced along with an improvised taste that makes you want to scream out I’m Lovin’ It !

Is It Time For Just In Time ?

Just-in-time manufacturing involves the sophisticated coordination of suppliers, delivering component parts at just the moment they’re needed in the manufacturing process ; dynamic manufacturing.For Marketing with JIT, inventory is essentially the content. The marketing campaign process is step-wise assembly of content that’s delivered to the buyer through any number of channels to a prospect database. Traditionally, marketing would build an inventory of marketing messages to deliver in batches to prospective buyers and customers.This Inventory is virtual, there aren’t holding costs, but it comes with an opportunity cost. There may be some branding and awareness benefits, but there’s probably as much risk that your email is viewed as junk to-be-deleted.

With India it’s most essentially Not Time For Just In Time.

CHENNAI: The earthquake and tsunami that flattened Japan's north eastern industrial hubs in March this year could have a more long-term impact on the way Japanese companies do business across the world. Honda and Toyota suffered huge production losses worldwide as parts supplies from Japan were held up due to the twin disaster.Now the two Japanese biggies may be taking a relook not only at their famed management mantra—just-in-time (JIT)—but also at the concept of sourcing critical components only from Japan. JIT—a production philosophy born on the factory floors of Japanese car companies—is now a global management practice and has saved companies billions of dollars. The idea behind JIT, or lean manufacturing , is to have the supplies a firm needs at the exact moment that they are needed. But even Toyota, which put in place the Toyota Production System based on just-in-time inventory management, understands keeping minimum inventory has its risks.

• JIT eliminates organizational barriers and improves communication.

• Accounting changes or relies on activity-based costing.

• Marketing by interfacing with the customers.• Finance approves and evaluates financial

investments• Information systems create the network of

information necessary for JIT to function

• A surprising effect was that factory response time fell to about a day. This improved customer satisfaction by providing vehicles within a day or two of the minimum economic shipping delay.

• Also, the factory began building many vehicles to order, eliminating the risk they would not be sold. This improved the company's return on equity

• Since assemblers no longer had a choice of which part to use, every part had to fit perfectly. This caused a quality assurance crisis, which led to a dramatic improvement in product quality.

• When a process or parts quality problem surfaced on the production line, the entire production line had to be slowed or even stopped. No inventory meant a line could not operate from in-process inventory while a production problem was fixed.

• The just-in-time philosophy was also applied to other segments of the supply chain in several types of industries. In the commercial sector, it meant eliminating one or all of the warehouses in the link between a factory and a retail establishment. Examples in sales, marketing, and customer service involve applying information systems and mobile hardware to deliver customer information as needed, and reducing waste by video conferencing to cut travel time.

• Like all other production strategies , Just In Time systems have their own benefits and drawbacks.

• Maintaining sub-normal inventories can be beneficial or harmful to an organization , depending on how efficiently it is applied.

• Reduced Setup time , also known as ‘Changeover’ time.

• Funds tied up in inventories can be used elsewhere.

• Storage area used up can be utilized.

• Throughput Time is reduced resulting in greater output

• Production scheduling and work hour consistency is synchronized with demand.

• Supplies come in regular intervals throughout the production day

• The risk of inventory breaking/expiring is reduced largely.

• Inventory flow becomes simpler and easier to manage due to smaller lot sizes.

• Cuts the risk of supply system problems.

• JIT operation leaves suppliers and downstream consumers open to Supply Shocks.

• The organization will not be able to cater to large orders on time.

• Just-in-time operation leaves suppliers and downstream consumers open to supply shocks and large supply or demand changes.

• Very low stock levels means shipments of the same part can come in several times per day. This means Toyota is especially susceptible to flow interruption. For that reason, Toyota uses two suppliers for most assemblies.

• As noted by Liker (2003) and Womack and Jones (2003), it ultimately would be desirable to introduce synchronized flow and link JIT through the entire supply stream. However, none followed this in detail all the way back through the processes to the raw materials.

• . It is for the reasons stated raw materials companies decouple their supply chain from their clients' demand by carrying large 'finished goods' stocks.

• The JIT delivery is critical for success

• When the material does not arrive on time, the station will starve and fail

• When the material arrives ahead of time Inventory takes space and creates problem.

• Flow in time is the name of the game in JIT.

Toyota is considered by many to be the poster child for JIT success. The Toyota Production Strategy is highlighted by the fact that raw materials are not brought to the production floor until an order is received and this product is ready to be built. No parts are allowed at a node unless they are required for the next node, or they are part of an assembly for the next node. This philosophy has allowed Toyota to keep a minimum amount of inventory which means lower costs

– Small amounts of raw material inventory must be kept at each node in production, so that production can take place for any product. These parts are then replenished when they are used.

– Accuracy of forecasting is important so the correct amount of raw materials can be stocked.

• The history of Harley-Davidson started way back in 1903 in Milwaukee when William S. Harley and Arthur Davidson developed a one cylinder motorcycle in a shed bearing the name board ‘Harley-Davidson Motor Company...

• Faced with tough competition from Japanese companies, Harley-Davidson decided it would make more sense to join the competition rather than beat it

• Harley-Davidson successfully adopted Japanese manufacturing principles which many considered were impossible for US manufacturers to achieve because of cultural and political reasons.

• After implementing these Japanese techniques, Harley-Davidson succeeded in manufacturing high quality motorcycles at lower cost.It witnessed the success of JIT in the late 1980s.

• Achieved inventory turnover from 5 to 20, reduced the inventory by 75%

• Dell has also leveraged JIT principles to make its manufacturing process a success.

• Dell’s approach to JIT is different in that they leverage their suppliers to achieve the JIT goal.

• They are also unique in that Dell is able to provide exceptionally short lead times to their customers, by forcing their suppliers to carry inventory instead of carrying it themselves and then demanding (and receiving) short lead times on components so that products can be simply assembled by Dell quickly and then shipped to the customer.

• Dependable suppliers with the ability to meet Dell’s demanding lead time requirements.

• A seamless system that allows Dell to transmit its component requirements so that they will arrive at Dell in time to fulfill its lead times.

• A willingness of suppliers to keep inventory on hand allowing Dell to be free of this responsibility.

• Top Management Commitment.

• Development Of A JIT Policy Manual.

• Development Of A JIT Procedure Manual.

• Develop And Implement A Continuous JIT Training Program For Employees At All Level.

• (5) Develop and maintain a JIT circle involving key employee group representatives,

• (6) Redesign the organization to make it flexible and dynamic for allowing JIT permeate through the system

• (7) Develop and maintaining an effective communication and control system in order to provide feed backs and control at all levels of the organization.