Quality guru Shigeo Shingo is credited with developing the concept of Just-in-Time Manufacturing (JIT) which involves the coordination of:
All stakeholders in the project work to ensure just the right material, in the right amounts, arrives at the right time. Everything must flow as planned.
Applying JIT adds a new risk to most companies compared to their traditional operating methodology. A minor error or interruption in the flow of materials or information can be very costly and outweigh the intended benefits. JIT should not be forced or implemented with significant investment if forethought and enterprise-wide engagement.
Companies apply JIT to receive goods only as they are needed in the production process which normally has the effect of reducing inventory costs. A reduction in inventory enhances cash flow but doesn't always flow to the bottom line.
That is the first step. Then the willingness to properly plan within their own four walls and the entire supply chain.
A small error in planning a JIT program can lead to significant downtime in a workcell or assembly line resulting in a sizable (and unplanned) impact to cash flow and bottom line.
To achieve the best results and take the maximum risk in reducing inventory levels, JIT requires the following prerequisites BEFORE implementation:
The goal again is to minimize inventory, prevent over-production, and optimize the use of floor space. Of course, all of this without sacrificing customer satisfaction, quality, and delivery (or the overall Voice of the Customer, VOC).
Just-in-Time Manufacturing emphasizes smaller quantities of supplies and more frequent deliveries. This often equates to tension with suppliers as they need to absorb the burden of freight, labor, and lower economies of scale. Companies and suppliers must work on relationship marketing to get the best solution that strengthens both companies.
Materials must be defect free, information should be visual, real-time, and people should have their work loaded distributed to meet the takt time and balanced, and suppliers shall be sequenced to deliver and pull at the right time.
The effectiveness of JIT is compromised when there is waste or out of control conditions (outliers or special cause). This includes inconsistent material performance, delivery schedules, absenteeism, interruptions, unreliable systems, lack of poka-yokes, improperly established Kanban levels or EOQ's, poorly timed replenishment routes, and more.
Buying materials with long delivery times present another company cost-benefit analysis. Often large purchases allow for significant unit price discounts but at the expense of additional supply chain risk if there is a quality problem.
Other issues could be storage space for bulk orders and depending on the freight terms could lower working capital unless consignment or other delayed payment arrangement is worked out.
Toyota City in Japan resembles a campus with manufacturing and assembly in the hub and most suppliers and employees nestled in a tight radius allowing for JIT and predictable, low cost, output.
This has the advantage of supplier partnering, quick cash conversion cycles, reduced risk of late delivery, low inventory, stable inventory, and economies of scale.
Automation is not always a viable solution. While programmable and consistent when they work, these systems can be costly to implement, maintain, cause excessive downtime, and lack flexibility. Machines, conveyors, forklifts are not as flexible as people.
Often times the Takt Time for a product line can change quickly and having affordable and responsive operators can be a better solution.
People can adapt to variation easier and quicker than robots and machines. People also want to have a more satisfying role in their job, many seek fulfillment and interest in their work and want to feel like their making a contribution.
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