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JIT presentations often employ the analogy of a stream when describing proper inventory management. Well-managed systems achieve a flow of inventory from raw material to the customer like a smooth river, unimpeded by shoals of scrap or machine breakdown or other problems. This concept did not originate with the Japanese. Henry Ford's River Rouge plant regularly converted iron ore into a Model T in four days. However, in recent years, especially the 1970s, American business has not improved its manufacturing capability quickly enough to maintain a competitive position in cost or quality or market responsiveness or flexibility.

In 1983 APICS began a zero inventory crusade---strongly advocating JIT. Firms such as CM, Ford, Chrysler, Bendix, Harley-Davidson, IBM, Hewlett-Packard, AT&T, and others began the journey even earlier. There has been much progress on regaining competitiveness in recent years. This progress has been achieved by emphasizing continuous improvement, reduced inventories, expanded roles for hourly workers, fewer levels of management, longer term relationships with customers and suppliers, and an emphasis on providing value to the customer, Many American firms are once again at or near world class status. We should remember, however, that complacency is the principle barrier to maintaining world class status. We must adopt the philosophy of Kaizen, continuous improvement. The Japanese underscore the urgency of maintaining competitiveness with a phrase taught to every schoolchild, "Export or Die!" In yesterday's world, export or die was a truism for any island economy. In today's global village, export or die is a truism for all economies.

What is Just-In-Time? / Why is JIT Important?

To prosper---and often even to survive---manufacturing companies must provide value at least equal to that of competitors. Today, manufacturing competition includes plants located in many different parts of the world. For example, some refrigerators sold at major department stores in Canada are assembled in Wroclaw, Poland, using a condenser manufactured in Sao Paulo, Brazil. Much of the world is one big market, with goods crossing many different types of boundaries.

Although international trade always has existed, it has exploded in the last few decades. Improved communication and transportation have been contributing factors, but the primary cause has been dramatically improved manufacturing productivity---with emphasis on both quality and cost. Although Japan has been in the forefront of this advance, South Korea, Taiwan, Malaysia, Singapore, and Thailand have made remarkable strides. Progress is also taking place in Mexico and Brazil, and most Western European countries have continued to improve their industrial capability. In addition, it is not unreasonable to expect that Eastern European countries will improve their competitive position as they revise their economic policies.

These developments and a benign neglect of manufacturing by top management in many North American firms caused foreign trade balance deficits and a lower productivity growth in the United States during the 1960s and 1970s than in many other countries. Some U.S. companies lost market share and others lost markets. The MIT commission on industrial productivity reported a large and increasing balance of trade deficit in automobiles, consumer electronics, machine tools, semiconductors, and textiles (Dertouzos et al. 1989). Continuation of such a pattern can have dire consequences for the quality of life in any country. Foreign debt, currency devaluation, and loss of markets and profits eventually not only affect the ability of consumers to purchase material goods such as toasters and automobiles but also limit a nation’s ability to support health care, the arts, education, and recreation activities. In brief, the standard of living can decrease dramatically. For example, Argentina was a relatively prosperous country at the turn of the century, but today its economy is in shambles. Nearly all citizens suffer when such a change occurs.

The MIT commission observed:

A large continental economy like the United States will not be able to function primarily as a producer of services in the foreseeable future. One reason is that it would have to rely on exports of services to pay for its imports, and this does not seem realistic. In 1987 gross U.S. exports of services, excluding income from overseas investments and overseas sales of government services, were worth $57 billion, whereas the total value of goods and ser­vices imported into the United States was about $55 billion. - - , The United States thus has no choice but to continue competing in the world market for manufactures. The ultimate scale of American manufacturing is not known, but it will not be trivial. The important question is not whether the United States will have a manufacturing industry but whether it will com­pete as a low-wage manufacturer or as a high-productivity manufacturer. (Dertouzos et al. 1989, 39-40)

Clearly it is preferable to compete as a high-productivity manufacturer.

These considerations led many organizations in the United States, Canada, and other countries to examine successful manufacturing organizations in North America and throughout the world to identify the operating characteristics and practices of companies capable of competing in the present worldwide market. The essential characteristics of a such a company are that it produces high quality products at low cost and that it responds quickly to customer requests for delivery, changes in design, and changes in volume, When a company has achieved these goals, it can compete with anybody, anywhere. It is important to understand that both high quality and low cost are relative terms; continuous improvement is needed to maintain high relative quality and low relative cost. Referring to the degree of change needed to achieve world class status in Thriving on Chaos (1987), Tom Peters notes:

Radical changes in organizational structure and procedures are called for, Layers of management must be reduced in most big firms by 75 percent. Product development time and order lead time must be slashed by 90 per­cent. Electronic/telecommunication linkups to customers and suppliers must be developed posthaste. Just listening to customers and dealers needs to become the norm-and as yet it is not.

Different terms are used to identify the process of improving manufacturing productivity with emphasis on high quality and low cost: the Just-in-Time (JIT) approach, zero inventory, total quality management, world class manufacturing, and the search for excellence. We are using JIT because it seems to have been the first, and all of the essential concepts are inherent to it. The title of the process is not important; adopting the philosophy and pursuing its operating objectives are. This section includes concepts, approaches, and practices that may have originated under the aegis of programs with each of the different labels and titles given to various productivity improvement programs...


JIT is a philosophy embodying various concepts that result in a different way of doing business for most organizations. The basic tenets of this philosophy include:

A. All waste, anything that does not add value to the product or service, should be eliminated Value is anything that increases the usefulness of the product or service to the customer or reduces the cost to the customer.

B. JIT is a never ending journey, but with rewarding steps and milestones.

C. Inventory is a waste. It covers up problems that should be solved rather than concealed. Waste can gradually be eliminated by removing small amounts of inventory from the system, correcting the problems that ensue, and then removing more inventory.

D. The customers' definitions of quality, their criteria for evaluating the product, should drive product design and the manufacturing system. This implies a trend toward increasingly customized products.

E. Manufacturing flexibility, including quick response to delivery requests, design changes, and quantity changes, is essential to maintain high quality and low cost with an increasingly differentiated product line.

F. Mutual respect and support based on openness and trust should exist among an organization, its employees, its suppliers, and its customers.

G. A team effort is required to achieve world class manufacturing capability. Management, staff, and labor must participate. This implies increasing the flexibility, responsibility, and authority provided to the hourly worker.

H. The employee who performs a task often is the best source of suggested improvements in the operation. It is important to employ the workers' brains, not merely their hands.

JIT is a very eclectic approach. It includes many old ideas and some new ones and relies on basic concepts from many disciplines, including statistics, industrial engineering, production management, and the behavioral sciences. But first and foremost, it is pragmatic and, thus, empirical. Discovering "what works" and why it works requires that plant operations be studied thoroughly. This requires the collection and analysis of relevant data concerning the plant's operation and its performance. This pragmatism causes the manufacturing pro­cess and its environment to be viewed as a research laboratory, similar to a university hospital, in that the primary task may be to produce quality output but another important goal is to learn how to do it better the next time.

Traditionally, inventory has been viewed as an asset, one that can be converted to cash. The Just-in-Time view is that inventory does not add value but instead incurs costs, and thus is a waste. Holding inventory is analogous to not receiving any interest for a deposit in a bank and, furthermore, paying to keep it there. Traditionally, holding inventory was seen as being less costly than correcting the production and distribution efficiencies that inventory overcame. For example, large lot sizes spread the cost of expensive setups across many parts. JIT takes a different view.

JIT views inventory as a symptom of inadequate management, a method of hiding inefficiencies and problems, see Figure 1. Inefficiencies that cause inventory include: long and costly setups, scrap, lengthy and widely varying manufacturing lead times, long queues at work centers, inadequate capacity, machine failure, lack of worker and equipment flexibility, variations in employee output rate, long supplier lead times, and erratic supplier quality. JIT emphasizes that solving each of these problems will reduce the need for inventory and improve productivity. It strives to have the right material, at the right time, at the right place, and in the exact amount. Thus, the name "Just-in-Time" is used by many to designate an organized and continuing program to improve operations productivity.

In Kaizen (1986), Masaaki Imai argues that the most important aspect of JIT is a philosophy of continuous improvement. He explains that although Westerners and Japanese both ascribe to improvement, he has discovered that the two cultures have 'different concepts of what this term means. Westerners think of improvement as a step function---a change represents a marked increase in performance. That level of performance is held until the next performance leap is introduced. The Japanese view continuous improvement as an upward sloping line-driven by numerous incremental improvements, Each improvement is in itself imperceptible, but collectively the changes made in a few months wilt represent a great deal of progress.

This difference in culture can be seen in the management of suggestions, Western companies offer large rewards for suggestions that substantially reduce company costs. In a typical year a few hundred suggestions may be received, a small percentage of which actually are implemented. Toyota, by contrast, offers a small, fixed fee---less than $1---per suggestion. They receive hundreds of thousands of suggestions each year and implement more than 90 percent of them. Imai contends that the total improvement achieved by emphasizing incremental improvement is greater than that achieved by emphasizing dramatic improvement. Certainly the performance of Toyota in recent years represents a strong ease for Imai's point of view.

The Japanese do not neglect dramatic improvement, either. The books of Shigeo Shingo (1985, 1986,1988) explore from an engineer's perspective the process of analyzing operations for opportunities for dramatic improvement, One story illustrates his approach. A client of Shingo's, a manufacturer of engraved brass plates, was seeking a way to efficiently remove the lubricating fluid used to cool the engraving pen, because cleaning the engraved plate represented the largest single process cost. Shingo, on reflecting on the purpose of the fluid-cooling plus debris removal, suggested the use of a focused stream of compressed air rather than fluid. The company's management felt that air would not properly protect the pen and would shorten the pen's life. On Shingo's insistence, the company tried it and found that the method not only eliminated the need to clean the plate after engraving but also actually extended the pen life by 30 percent. This story illustrates two aspects of continuous improvement---careful analysis combined with a willingness to try new approaches, even when they seem unpromising... (there's much more!)

eBook: Just-In-Time — $3.00 Buy Now

eBook Topics: An Integrated Set of Useful Articles
How to Test and Fine-Tune Strategic and Tactical Plans so that Resources are Only Expended on Achievable Results.
Making and Keeping Promises that are Realistic and Achievable is a Vital Skill Needed at Every Organizational Level.
Available-To-Promise Inventory can be Strategically Projected Using the Tools of Master Scheduling by Aligning Production Plans and Sales Plans.
Projected Resource Constraints are used to Modify Production Schedules to Assure that Available-To-Promise Inventory will Meet Customer Demands.
Detailed Capacity and Material Plans become Actionable, Unanticipated Constraints are Communicated Immediately to the Scheduler.
When the Goal is Zero Inventory, the Method is JIT. Only Buy or Build to Match Real Orders. Inventory Backlog must be Zero as well!
TOC can be seen as Similar to JIT but has a much Wider Application. Once Identified, Constraints are Exploited until it is Aleviated.
Developing Effective Work Relationships is Essential when Communication is central to the Success of Management Metrics.




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