The Ultimate Goal Of JIT

JIT is a Japanese concept. Also called the Toyota production system, it aims at producing the necessary parts in quantities needed, at the time they are required. The ultimate goal of JIT is to eliminate inventory, to have minimal work in process inventory monitored by reduction in working capital.

JIT considers 7 types of wastes.

Overproduction

producing more than the customer needs

Transportation

Anywhere where goods are moved within a process

Waiting

where waiting time occurs, traditionally where one process waits for another to finish before it can start.

Inventory

typified by stock or materials that are not being used in the process or current activity.

Motion

Poor planning and organizational layout often cause motion waste

Over processing

where steps occur in the production process that do not add value to the end customer this is termed overproduction

Defects

The process results in an error or requires rework

JIT divides all works into value adding and non-value adding activities and then eliminates all non value adding activities. Kanban is one means through which JIT is achieved. It is a scheduling system that tells you what to produce, when to produce it, and how much to produce

Poka-yoke is a Japanese term that means “fail-safing” or “mistake-proofing”. Its purpose is to eliminate product defects by preventing, correcting, or drawing attention to human errors as they occur.

Autonomation describes a feature of machine design to affect the principle of jidoka. At Toyota this usually means that if an abnormal situation arises the machine stops and the worker will stop the production line.

Kaizen refers to the philosophy or practices that focus upon continuous improvement of processes in manufacturing, engineering, supporting business processes, and management.

Literature review

Weiters (1984) in one of the first literatures on this topic states that

“Financial justification of JIT in service industries is less likely but in service industries JIT offers intangible benefits in terms of improved service quality and customer satisfaction.”(cited by Inman and Mehra 1990)

Benson (1986) was the first to point out

“Service operations are organised systems of production processes with the same potential of improvement through implementation of JIT precepts as manufacturing operations” Cited by Duclos et. al. 1995

Berling and Geppi (1989) studied the supply chain of healthcare sector and offered JIT as an approach to hospitals in order to reduce inventory. They suggested closer relationships between hospitals and distributors.

Billesbach and Schniederjans (1989) present a case study on JIT application in an administration setting. The case was on a big corporation and JIT programme was implemented in the headquarters of this corporation. Their approach was based on examining activities and the ones not contributing to result to be eliminated.

Inman and Mehra (1990) had worked on FedEx. This package delivery company implements JIT to reduce their inventory of quasi-MRO goods (mainly packaging, labelling supplies).aimed at improving their service quality and competitiveness through implementation of JIT and anticipated that inventories would be reduced as a result.

Lee (1990) presents a case study of a small bank. Study is focused on this banks loan approval process. Bank follows a two phase process and first evaluates the applications and makes the decision of lending in second phase. This process usually takes 12 days. Applying JIT approach whole process is redesigned and several tasks are unified. New approval process takes 4-5 days.

Wasco et. al.( 1991) presents a case Kodak’s quality assurance division. This division provides services to worldwide chain of Kodak. An MRP II system is implemented with JIT approach and conclusion of the study is JIT techniques enhance the potential of MRP application.

One of the most radical case studies is presented by Barlow (2002). He investigates the applicability of JIT techniques to hotel industry. Weakness of this study is it concentrates on liquor stocks of these hotels and draws conclusions on if statements and these hotels actually do not adopt any JIT techniques.

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Ruiz (2003 pp.1) JIT focuses on the process, not product. Therefore it can be applied (in theory) to any group of processes, whether manufacturing or service. Ultimate goal of JIT is to produce a good and a service without waste

Literature on the matter quite confidently states that JIT can be applied in services and through reported case studies evidence is provided. JIT applications in service industries are vague in some sense. There are no empirical studies and reported case usually resembles manufacturing setting.

Service operations management – evolution

How to implement JIT in services?

A philosophy of manufacturing excellence based on pursuit of the planned elimination of all waste and consistent improvement of productivity. It encompasses the successful execution of all manufacturing activities required to produce a final product from design engineering to delivery and including all stages from conversion of raw material onward (APICS, 1992).

Total visibility – of equipment, people, material and processes;

Synchronization and balance – of production to sales and supply to production;

Respect for people – Line operators is responsible for production, problem solving and improvement;

Flexibility – adapt production to customer needs;

Continuous improvement – never satisfied with the process;

Responsibility for the operation’s environment – those who design, manage and operate the processes are responsible for the outcome;

Holistic approach – companywide philosophy of elimination of waste;

Each of these JIT themes may be applicable to service organizations;

Synchronization and balance of information and work flow

matching output with customer demand – one of the important aspects of service operations often cannot inventory the output of their processes making balance even more vital

Semantodontics, a direct marketing company selling nationwide by catalogue to dentists, also found JIT an appropriate approach for reducing the time to process paperwork (Conant, 1988) and, hence, the time required for a dentist to receive an order. The idea of making lot sizes as small as possible was implemented by decreasing the batch size in which telephone orders were aggregated. As a result, telephone orders were moved to the second stage of the process three times daily rather than once a day, as was the previous norm. Set-up time for entering new customer records was reduced by moving the process to the original telephone operation where the data were first gathered. The decrease in order batch size had a behavioural impact on employees as well.

From the sense of satisfaction gained on completion of multiple small batches, employees tended to work faster and more efficiently.

Atlantic Envelope Company uses kanban trays at its Atlanta facility to move documents within the order entry department. Order entry time fell to under a day from a previous uncertain number of days.

Total visibility of all components of the process

Northern Telecom Inc.’s (NTI) Customer Service Centre borders the traditional manufacturing environment (Savage-Moore, 1988) and the implementation is a good example of providing visibility through the use of work cells. This unit of NTI has the labour-intensive responsibility of repairing printed circuit packs (PCPs). For an individual PCP, it is difficult to predefine the specific repair process required, not unlike a job shop environment. The work cell concept was applied to keep all work on a PCP performed within a single cell and by one team of employees. This provided all employees repairing a PCP with visibility as to the repair needs and processes used to repair the product. Additionally, employees were cross-trained to staff the cells and jobs were redefined to recognize employee training efforts. Over a two-year period, NTI saw customer service levels increase from 85 per cent to 100 per cent and quality levels significantly improved. Work-in-progress inventory was reduced by 75 per cent and repair cycle times reduced from one week to less than 48 hours.

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Continuous improvement of the process

The Manufacturing Quality Assurance Organization at Kodak in Rochester, New York provides specialized services in the form of sample testing of photographic film, chemical and environmental testing, equipment development and calibration control. JIT precepts were introduced to provide a framework for involving the entire organization in continuous improvement (Wasco et al., 1991).

Fifty JIT cells were established to start the JIT delivery of products or services based on functional precepts. JIT activities were used to reduce work-handling steps and run times. Improvements through JIT techniques saved an average of $33,000 per month in 1990.

Holistic approach to elimination of waste

suppliers

Few suppliers;

Nearby suppliers;

Repeat business with same suppliers;

Active use of analysis to enable desirable suppliers to become/stay price-competitive;

Clusters of remote suppliers, competitive bidding mostly limited to new part numbers;

Buyer plant resists vertical integration and subsequent wipe-out of supplier business;

Suppliers are encouraged to extend JIT buying to their suppliers;

Quantities:

Steady output rate (a desirable prerequisite);

Frequent delivery in small quantities;

Long-term contract agreements;

Minimal release paperwork;

Delivery quantities variable from release to release, but fixed for whole contract term;

Little or no permissible overage or underage of receipts;

Suppliers encouraged to package in exact quantities;

Suppliers encouraged reducing their production lot sizes (or store unreleased material);

Quality:

Minimal product specifications imposed on supplier;

Help suppliers to meet quality requirements;

Close relationships between buyers’ and suppliers’ quality assurance people;

Suppliers encouraged to use process control charts instead of lot sampling inspection;

shipping:

Scheduling of inbound freight;

Gain control by use of company-owned or contract shipping, contract warehousing, and trailers for freight consolidation/storage where possible – instead of using common carriers.

Flexibility in the use of resources

Bookbinder and Locke (1986) present a model to determine if JIT distribution methodology is a feasible alternative to traditional distribution methods. They investigated the behaviour of two different distribution models for JIT organizations. In the first, a factory-warehouse-retailer distribution system, the warehouse holds stock. In the second, stock moves from factory directly to retailers.

The models were compared using statistical tests, and the second model was determined to be the superior distribution system because it furnished essentially the same service level to retailers while carrying one less echelon of stock.

Another mathematical model is offered by Ramasesh (1990) for the implementation of JIT techniques in purchasing systems that have not yet advanced to the ultimate level of JIT purchasing (lot size of one).

He treated the fixed costs associated with the adoption of JIT as investment, and justified it based on the savings generated using any of the techniques of investment analysis. He modified the traditional economic order quantity model to include explicitly the costs of small-lot shipments. He also provided guidelines and formulae for determining the order quantity and the optimal number of shipments.

Case studies

DHL- impact of JIT

The founders began to personally ship papers by airline from San Francisco to Honolulu, beginning customs clearance of the ship’s cargo before the actual arrival of the ship and dramatically reducing waiting time in the harbour. With this concept, a new industry was born: international air express, the rapid delivery of documents and shipments by airplane. DHL network continued to grow at an incredible pace. The company expanded westward from Hawaii into the Far East and Pacific Rim, then the Middle East, Africa and Europe. By 1988, DHL was already present in 170 countries and had 16,000 employees.

The different business units of the company are

DHL Express

DHL Freight

DHL Global Forwarding

DHL Exel Supply

DHL Global Mail

The process above mentioned was improved using JIT with following ways

Inventory Management Concerning Services

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For instance, in the case of DHL, vehicles, bicycles and other assets that facilitate service delivery must be accounted for, serviced, ready and available to be used for work purpose.

Quality Management Concerning Services

Tangibles

Reliability

Responsiveness

Competence

Courtesy

Access

Supplier Relations Concerning Services

Human Resource Management Concerning Services

JIT in retail

The key principles of JIT in any system are:

No wastage,

Total visibility, and

Flexibility in the use of human and material resources

In any environment these principles translate into three simple rules:

don’t start any work unless the demand signal indicates a need for more material;

if the demand signal indicates a need, work to fill that need;

and, never exceed the queue-size limit

Automatic Replenishment Systems (ARS) is also an example of application of JIT in retail.

JIT in Indian service industry

A survey was done on the Indian service industry. The data was collected from the selected service industries and analyzed. The results of degree of importance are given in the table

The most important element recognized by the Service industries was waste reduction (mean=0.8929). The least important element was JIDOKA (mean=0.5625).

The elements of the study are mentioned in appendix table 1

JIT in hospitals

Most research in the health care industry has been directed toward process and information system improvements.

Generally, service environments such as health care are likely candidates for JIT if their operations are repetitive, have reasonably high volume, and deal with tangible items such as mail, checks, bills or letters.

In hospitals, there is a vital department named CSSD (Centre for Sterilization Service department), the functions of which include materials management, instruments reception, washing, packing and sterilization, sterile store, instruments distribution

As an illustration a previous supplier model can be analysed

And compared with an improved model, which centralises and streamlines the supply chain

JIT in administrative setting

JIT practices and their effect on quality can be analysed

Human elements of JIT

Steps in implementation of JIT in service industry

Eliminate disruptions in work of the employees and make the service system flexible and train the workers to handle more variety. reduce set-up time and eliminate waste including errors and duplicate work and minimise work-in process e.g. Packages waiting to be delivered, calls waiting to be answered, pending orders to be processed, trucks waiting to be loaded/unloaded

Generally, service environment may benefit from jit system if the operations are repetitive, have high volume, and deal with tangible items e.g. Sandwiches, mail or bills services must involve manufacturing like operation

Consistently high quality

service employees can be taught the value of providing defect free services

uniform facility loading

reservation systems and differential pricing are ways to level the load on the facilities

standardised work methods

high efficiencies achieved by analysing work methods and standardising

Close supplier ties

volume services such as fast-food joints and mass merchandisers require close supplier contacts to ensure frequent short lead time and high quality shipment of supplies

Flexible work force

greater the customisation in the service, greater is the need for a multi-skilled workforce e.g. Electronic repair shops needing wider experienced workforce to diagnose the problems and repair the defects

Line flow strategy

mangers can recognise their employees and equipment to provide uniform flows through the system, and eliminate wasted employee time e.g. Banks use this system in their cheque processing operations

Process improvement and problem solving can contribute to streamlining a system, resulting in increased customer satisfaction, and – higher productivity – e.g. Self service system including retail operations, ATM, vending machines, service stations etc which is the ability to provide services when required

simplify the process, especially when customers are part of the system jit services , if achieved , can be a major competitive advantage for companies

A Framework

Appendix

Table 1:

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