Just-in-time manufacturing

Just-in-time (JIT) manufacturing, also known as just-in-time production or the Toyota production system (TPS), is a methodology aimed primarily at reducing flow times within production as well as response times from suppliers and to customers. Following its origin and development in Japan, largely in the 1960s and 1970s and particularly at Toyota, JIT migrated to Western industry in the 1980s, where its features were put into effect in many manufacturing companies—as is attested to in several books and compendia of case studies and articles from the 1980s.

As is often the case with management initiatives, some firms, consultancies, and writers have posed alternate terms for JIT manufacturing. Motorola's choice was short-cycle manufacturing (SCM). IBM's was continuous-flow manufacturing (CFM), a term that may have originated with consultant John Constanza at his Institute of Technology in Colorado. Still another alternate was mentioned by Goddard, who said that "Toyota Production System is often mistakenly referred to as the 'Kanban System,'" and pointed out that kanban is but one element of TPS, as well as JIT production.

But the wide use of the term JIT manufacturing throughout the 1980s faded fast in the 1990s, as the new term lean manufacturing became established as "a more recent name for JIT." As just one testament to the commonality of the two terms, Toyota production system (TPS) has been and is widely used as a synonym for both JIT and lean manufacturing.

Concept

The nature of just-in-time, meaning JIT manufacturing/production or JIT in any other setting (e.g., administration), may be reduced to four somewhat differently stated views.

• Many have said that JIT revolves around wastes: "At its core, JIT is a waste-elimination philosophy . . . ." Among the earliest writings on the matter, Shingo lists, as the "7 wastes," the wastes of: over-production, waiting, transportation, processing itself, stocks [inventories], motion, and making defective products.

• Others have equated JIT production with kanban. For example, one book has both kanban and just-in-time in its main title.

• Still others assert that JIT's main aim is elimination of inventories, although Murray maintains that "JIT is defined as 'NOT an inventory control system--but a way of thinking, working and management to eliminate wastes in the manufacturing process'. Zero Inventories is the title of a 1983 book by Hall, but the book actually does not suggest that JIT is mainly about inventory; rather the book features quick setup, cells (group technology), kanban, and so on, and zero inventory is posed only as an unattainable ideal.

• The fourth view is that JIT is mainly about quick response, relating to the "T"—for "time"—in JIT. As Blackburn put it, "Quick response is one of the major benefits of JIT. Time or speed is the linchpin of this manufacturing philosophy. Inventory, on the other hand, is an ancillary benefit." Quick response refers alternatively to reduction of cycle times, flow times, throughput times, and, all the way to the customer, lead times: "JIT," according to Bicheno, has the "provocative goal," of producing "instantaneously, with perfect quality and minimum waste," and he goes on to qualify "instantaneously" by saying, "The ideal way to produce the end product is literally just in time to meet the market demand for it. Thus, JIT is primarily a lead-time reduction programme."

The four JIT views--referring to wastes, kanban, inventory, and quick response/lead-time reduction--do not suggest opposing views, but rather appear to be complementary points of emphasis, collectively serving to describe the essence of JIT.

Methodology

According to Voss and Clutterbuck, some of the methodologies of JIT production include:

• Flow/layout.
• Smoothed line build rate.
• Mixed modeling [...] to allow the concurrent assembly of different models on the same line.
• Set-up time reduction.
• Work in process (WIP) reduction.
• Kanban [...] a pull system that triggers the movement of materials from one operations through to the next.
• Quality [...] a prerequisite of successful JIT.
• Product simplification, e.g., using fewer and common parts.
• Standardized containers.
• Preventive maintenance [...] removal of the uncertainty of breakdowns., often referred to as total productive maintenance (TPM)
• Flexible workforce, via (e.g.) cross-training.
• Organisation in modules or cells.
• Continuous improvement.
• JIT purchasing.

Two notable elements of JIT purchasing that could be separately listed are single-sourcing and "milk runs."

• Single-sourcing means using just one supplier of a given item or items, thus to reduce complexities and difficulties in developing JIT relationships with the supplier base. Hall states that if the single-source fails to perform, "an alternative source is available." In contrasting terminology, a sole source means there is no other source with suitable capability, possible for technological or quality reasons. Hall goes on to say that in case of a fire at the supplier plant or other emergency, "some reserve capacity in supplier operations dedicated to other networks can be called to cover it. One localized calamity does not destroy everything, and if the supplier has good people involvement, strikes are a minimal risk."

• Milk runs, in JIT purchasing, are rather like the way that the milk man of old made daily "JIT" deliveries in small quantities to multiple customers: "A typical milk-run truck makes a daily circuit of three to five suppliers and brings a mixed load of material from each back to the customer plant.

One item, missing from the Voss and Clutterbuck list, is visual management: everything orderly, simple, and easily seen and found--formalized as the 5 S's (referring to five ways to make things visible, clean, and orderly).

History

"Exactly how JIT emerged as an approach to manufacturing management is obscured in an inevitable cloud of mythology [though] it is clear that its development was primarily in Japan . . . ." The author of that statement goes on to say that the first to use JIT was not Toyota but was Japan's shipyards, "which wanted to establish firmer control over the deliver of steel plate and fittings . . . .", a point echoed by Goddard.

Why in Japan rather than other countries? Plenert offers four reasons, paraphrased here. During Japan's post-World War II rebuilding of industry: 1. Japan's lack of cash made it difficult for industry to finance the big-batch, large inventory production methods common elsewhere. 2. Japan lacked space to build big factories loaded with inventory. 3. The Japanese islands were (and are) lacking in natural resources with which to build products. 4. Japan had high unemployment, which meant that labor efficiency methods were not an obvious pathway to industrial success. Thus the Japanese "leaned out" their processes. "They built smaller factories . . . in which the only materials housed in the factory were those on which work was currently being done. In this way, inventory levels were kept low, investment in in-process inventories was at a minimum, and the investment in purchased natural resources was quickly turned around so that additional materials were purchased." Plenart goes on to explain Toyota's key role in developing this lean or JIT production methodology.

News about JIT/TPS reached western shores in 1977 in two English-language articles: One referred to the methodology as the "Ohno system," after Taiichi Ohno, who was instrumental in its development within Toyota. The other article, by Toyota authors in an international journal, provided additional details. Finally, those and other publicity were translated into implementations, beginning in 1980 and then quickly multiplying throughout industry in the United States and other developed countries. A seminal 1980 event was a conference in Detroit at Ford World Headquarters co-sponsored by the Repetitive Manufacturing Group (RMG), which had been founded 1979 within the American Production and Inventory Control Society (APICS) to seek advances in manufacturing. The principle speaker, Fujio Cho (later, president of Toyota Motor Corp.), in explaining the Toyota system, stirred up the audience, and led to the RMG's shifting gears from things like automation to JIT/TPS.

JIT/TPS implementations may be found in many case-study articles from the 1980s and beyond. One article in a 1984 issue of Inc. magazine relates how Omark Industries (chain saws, ammunition, log loaders, etc.) emerged as an extensive JIT implementer--under the home-grown name ZIPS (zero inventory production system). After the work force had received 40 hours of ZIPS training, they were "turned loose" and things began to happen. A first step, at Omark's mother plant in Portland, Oregon, was to "arbitrarily eliminate a week's lead time [after which] things ran smoother. 'People asked that we try taking another week's worth out.' After that, ZIPS spread throughout the plant's operations 'like an amoeba.'" The article notes that Omark's 20 other plants were similarly engaged in ZIPS, beginning with pilot projects. For example, at one of Omark's smaller plants making drill bits in Mesabi, Minn., "large-size drill inventory was cut by 92%, productivity increased by 30%, scrap and rework . . . dropped 20%, and lead time . . . from order to finished product was slashed from three weeks to three days." The Inc. article states that companies using JIT the most extensively include "the Big Four, Hewlett-Packard, Motorola, Westinghouse Electric, General Electric, Deere, and Black & Decker."

By 1986 a case-study book on JIT in the U.S. was able to devote a full chapter to ZIPS at Omark, along with two chapters on JIT at several Hewlett-Packard plants, plus single chapters for Harley-Davidson, John Deere, IBM-Raleigh, North Carolina, and California-based Apple Macintosh, a Toyota truck-bed plant, and New United Motor Manufacturing joint venture between Toyota and General Motors.

Two similarly inclined compendia books that emerged in the U.K. are more international in scope. One, published in 1986 includes multiple articles, some conceptual and others case-studies, in a section on JIT practices in Japan (e.g., at Toyota, Mazda, and Tokagawa Electric); another in Europe (jmg Bostrom, Lucas Electric, Cummins Engine, IBM, 3M, Datasolve Ltd., Renault, Massey-Ferguson; and a third in the USA and Australia (Repcon Manufacturing, Xerox Computer, and two on Hewlett-Packard).

More books that include the standout JIT cases followed. The JIT case studies in just these sources come from implementations in the 1980s in Japan, U.S., U.K., Australia, South Africa, Netherlands, Germany, Korea, Italy, Spain, France, Mexico, Canada, and Brazil.

Environmental concerns

During the birth of JIT, multiple daily deliveries were often made by bicycle. Increased scale has required a move to vans and trucks (lorries). Cusumano (1994) highlighted the potential and actual problems this causes with regard to gridlock and burning of fossil fuels. This violates three JIT waste guidelines:

1. Time—wasted in traffic jams
2. Inventory—specifically pipeline (in transport) inventory
3. Scrap—fuel burned while not physically moving

JIT implementation design

Based on a diagram modeled after the one used by Hewlett-Packard’s Boise plant to accomplish its JIT program.

1. F. Design Flow Process
   • F. Redesign/relayout for flow
   • L. Reduce lot sizes
   • O. Link operations
   • W. Balance workstation capacity
   • M. Preventive maintenance
   • S. Reduce setup Times
2. Q. Total Quality Control
   • C. worker compliance
   • I. Automatic inspection
   • M. quality measures
   • M. fail-safe methods
   • W. Worker participation
3. S. Stabilize Schedule
   • S. Level schedule
   • W. Establish freeze windows
   • UC. Underutilize Capacity
4. K. Kanban Pull System
   • D. Demand pull
   • B. Backflush
   • L. Reduce lot sizes
5. V. Work with Vendors
   • L. Reduce lead time
   • D. Frequent deliveries
   • U. Project usage requirements
   • Q. Quality expectations
6. I. Further Reduce Inventory in Other Areas
   • S. Stores
   • T. Transit
   • C. Implement carrousel to reduce motion waste
   • C. Implement conveyor belts to reduce motion waste
7. P. Improve Product Design
   • P. Standard production configuration
   • P. Standardize and reduce the number of parts
   • P. Process design with product design
   • Q. Quality expectations

Effects

A surprising effect of JIT was that car 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. Eventually, Toyota redesigned every part of its vehicles to widen tolerances, while simultaneously implementing careful statistical controls for quality control. Toyota had to test and train parts suppliers to assure quality and delivery. In some cases, the company eliminated multiple suppliers.

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. Many people in Toyota predicted that the initiative would be abandoned for this reason. In the first week, line stops occurred almost hourly. But by the end of the first month, the rate had fallen to a few line stops per day. After six months, line stops had so little economic effect that Toyota installed an overhead pull-line, similar to a bus bell-pull, that let any worker on the line order a line stop for a process or quality problem. Even with this, line stops fell to a few per week.

The result was a factory that has been studied worldwide. It has been widely emulated, but not always with the expected results, as many firms fail to adopt the full system.

The just-in-time philosophy was also applied to other segments of the supply chain in several types of industries. For example, a report from on small and medium enterprise (SEMs)comes from South Africa.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.

Benefits

Main benefits of JIT include:

• Reduced setup time. Cutting setup time allows the company to reduce or eliminate inventory for "changeover" time. The tool used here is SMED (single-minute exchange of dies).
• The flow of goods from warehouse to shelves improves. Small or individual piece lot sizes reduce lot delay inventories, which simplifies inventory flow and its management.
• Employees with multiple skills are used more efficiently. Having employees trained to work on different parts of the process allows companies to move workers where they are needed.
• Production scheduling and work hour consistency synchronized with demand. If there is no demand for a product at the time, it is not made. This saves the company money, either by not having to pay workers overtime or by having them focus on other work or participate in training.
• Increased emphasis on supplier relationships. A company without inventory does not want a supply system problem that creates a part shortage. This makes supplier relationships extremely important.
• Supplies come in at regular intervals throughout the production day. Supply is synchronized with production demand and the optimal amount of inventory is on hand at any time. When parts move directly from the truck to the point of assembly, the need for storage facilities is reduced.
• Minimizes storage space needed.
• Smaller chance of inventory breaking/expiring.
• Waste Elimination Supports Continuous Quality and Productivity Improvement

Problems

Within a JIT system

Just-in-time operation leaves suppliers and downstream consumers open to supply shocks and large supply or demand changes. For internal reasons, Ohno saw this as an intended feature rather than a problem. He used an analogy of lowering the water level in a river to expose the rocks to explain how removing inventory showed where production flow was interrupted. Once barriers were exposed, they could be removed. Since one of the main barriers was rework, lowering inventory forced each shop to improve its own quality or cause a holdup downstream. A key tool to manage this weakness is production levelling to remove these variations. Just-in-time is a means to improving performance of the system, not an end.

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, there was an exception to this rule that put the entire company at risk because of the 1997 Aisin fire. However, since Toyota also makes a point of maintaining high quality relations with its entire supplier network, several other suppliers immediately took up production of the Aisin-built parts by using existing capability and documentation.

Within a raw material stream

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.

According to Liker and Womack and Jones, it ultimately would be desirable to introduce synchronised 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. With present technology, for example, an ear of corn cannot be grown and delivered to order. The same is true of most raw materials, which must be discovered and/or grown through natural processes that require time and must account for natural variability in weather and discovery. The part of this currently viewed as impossible is the synchronised part of flow and the linked part of JIT. It is for the reasons stated raw materials companies decouple their supply chain from their clients' demand by carrying large 'finished goods' stocks. Both flow and JIT can be implemented in isolated process islands within the raw materials stream. The challenge becomes to achieve that isolation by some means other than carrying huge stocks, as most do today.

Because of this, almost all value chains are split into a part made-to-forecast and a part that could, by using JIT, become make-to-order. Historically, the make-to-order part has often been within the retailer portion of the value chain. Toyota took Piggly Wiggly's supermarket replenishment system and drove it at least halfway through their automobile factories. Their challenge today is to drive it all the way back to their goods-inwards dock. Of course, the mining of iron and making of steel is still not connected to an order for a particular car. Recognising JIT could be driven back up the supply chain has reaped Toyota huge benefits and a dominant position in the auto industry.

Note that the advent of the mini mill steelmaking facility is starting to challenge how far back JIT can be implemented, as the electric arc furnaces at the heart of many mini-mills can be started and stopped quickly, and steel grades changed rapidly.

Oil

It has been frequently charged that the oil industry has been influenced by JIT.

The argument is presented as follows:

The number of refineries in the United States has fallen from 279 in 1975 to 205 in 1990 and further to 149 in 2004. As a result, the industry is susceptible to supply shocks, which cause spikes in prices and subsequently reduction in domestic manufacturing output. The effects of hurricanes Katrina and Rita are given as an example: in 2005, Katrina caused the shutdown of 9 refineries in Louisiana and 6 more in Mississippi, and a large number of oil production and transfer facilities, resulting in the loss of 20% of the US domestic refinery output. Rita subsequently shut down refineries in Texas, further reducing output. The GDP figures for the third and fourth quarters showed a slowdown from 3.5% to 1.2% growth. Similar arguments were made in earlier crises.

Beside the obvious point that prices went up because of the reduction in supply and not for anything to do with the practice of JIT, JIT students and even oil and gas industry analysts question whether JIT as it has been developed by Ohno, Goldratt, and others is used by the petroleum industry. Companies routinely shut down facilities for reasons other than the application of JIT. One of those reasons may be economic rationalization: when the benefits of operating no longer outweigh the costs, including opportunity costs, the plant may be economically inefficient. JIT has never subscribed to such considerations directly; following Waddel and Bodek (2005), this ROI-based thinking conforms more to Brown-style accounting and Sloan management. Further, and more significantly, JIT calls for a reduction in inventory capacity, not production capacity. From 1975 to 1990 to 2005, the annual average stocks of gasoline have fallen by only 8.5% from 228,331 to 222,903 bbls to 208,986 (Energy Information Administration data). Stocks fluctuate seasonally by as much as 20,000 bbls. During the 2005 hurricane season, stocks never fell below 194,000,000 bbl (30,800,000 m³), while the low for the period 1990 to 2006 was 187,017,000 bbl (29,733,300 m³) in 1997. This shows that while industry storage capacity has decreased in the last 30 years, it hasn't been drastically reduced as JIT practitioners would prefer.

Finally, as shown in a pair of articles in the "Oil & Gas Journal", JIT does not seem to have been a goal of the industry. In Waguespack and Cantor (1996), the authors point out that JIT would require a significant change in the supplier/refiner relationship, but the changes in inventories in the oil industry exhibit none of those tendencies. Specifically, the relationships remain cost-driven among many competing suppliers rather than quality-based among a select few long-term relationships. They find that a large part of the shift came about because of the availability of short-haul crudes from Latin America. In the follow-up editorial, the Oil & Gas Journal claimed that "casually adopting popular business terminology that doesn't apply" had provided a "rhetorical bogey" to industry critics. Confessing that they had been as guilty as other media sources, they confirmed that "It also happens not to be accurate."

Business models following similar approach

Vendor-managed inventory

Vendor-managed inventory (VMI) employs the same principles as those of JIT inventory, however, the responsibilities of managing inventory is placed with the vendor in a vendor/customer relationship. Whether it’s a manufacturer managing inventory for a distributor, or a distributor managing inventory for their customers, the management role goes to the vendor.

An advantage of this business model is that the vendor may have industry experience and expertise that lets them better anticipate demand and inventory needs. The inventory planning and controlling is facilitated by applications that allow vendors access to their customer's inventory data.

Another advantage to the customer is that inventory cost usually remains on the vendor's books until used by the customer, even if parts or materials are on the customer's site.

Customer-managed inventory

With customer-managed inventory (CMI), the customer, as opposed to the vendor in a VMI model, has responsibility for all inventory decisions. This is similar to JIT inventory concepts. With a clear picture of their inventory and that of their supplier’s, the customer can anticipate fluctuations in demand and make inventory replenishment decisions accordingly.

Early use of a JIT system

A type of JIT was used successfully in the UK by Perkins to supply F3 engines to Ford from 1957 until 1964.

See also

• Backflush accounting
• Cellular manufacturing
• CONWIP
• Demand flow technology
• Industrial engineering
• Inventory proportionality
• Just in case manufacturing
• Just in Sequence
• Lean consumption
• Lean manufacturing
• Liquid logistics
• Organizational capital
• Real-time enterprise
• Theory of constraints
• Total quality management

Further reading

• Schonberger, Richard J. (1982), Japanese Manufacturing Techniques: Nine Hidden Lessons in Simplicity, Free Press, ISBN 0-02-929100-3
• Editorial, "The Inventory Land Mine", Oil & Gas Journal, Vol 94, Number 29, 15 July 1996.
• Flinchbaugh, Jamie and Carlino, Andy (2006), The Hitchhiker's Guide to Lean: Lessons from the Road, SME, ISBN 0-87263-831-6
• Goldratt, Eliyahu M. and Fox, Robert E. (1986), The Race, North River Press, ISBN 0-88427-062-9
• Hirano, Hiroyuki and Makota, Furuya (2006), "JIT Is Flow: Practice and Principles of Lean Manufacturing", PCS Press, Inc., ISBN 0-9712436-1-1
• Management Coaching and Training Services, (2006). The Just-In-Time (JIT) Approach. Retrieved June 19, 2006 from the World Wide Web: [1]
• Ohno, Taiichi (1988), Toyota Production System: Beyond Large-Scale Production, Productivity Press, ISBN 0-915299-14-3
• Ohno, Taiichi (1988), Just-In-Time for Today and Tomorrow, Productivity Press, ISBN 0-915299-20-8
• Wadell, William, and Bodek, Norman (2005), The Rebirth of American Industry, PCS Press, ISBN 0-9712436-3-8
• Waguespack, Kevin, and Cantor, Bryan (1996), "Oil inventories should be based on margins, supply reliability", Oil & Gas Journal, Vol 94, Number 28, 8 July 1996.
• Womack, James P., Jones, Daniel T., and Roos, Daniel (1991), The Machine That Changed the World: The Story of Lean Production, HarperBusiness, 2003, ISBN 0-06-097417-6.
• Condie, Allan T. "Fordson Dexta 957E's 1957-1964" ISBN 0-907742-71-8