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Essay Name       : 988.txt
Uploader         : Claudell Washington
Email Address    :
Language         : English
Subject          : Economics
Title            : Just-In-Time Systems
Grade            : 95%
School System    : College
Country          : USA
Author Comments  : Management paper
Teacher Comments :
Date             : Fall 95
Site found at    : Excite search engine
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Just-In-Time Systems

    In today's companies, new catch phrases and ideas are being
developed each and every day.  One of the more popular ideas that is
circulating around these days is the idea of just-in-time manufacturing.
Many magazines and newspapers have documented the efforts of companies
to develop and implement just-in-time processes.  The question can be asked,
though, what does just-in-time mean?  How does a company implement
just-in-time processes, and what are the results of implementation?
    Just-in-time manufacturing is basically the idea that companies should
have manufacturing and purchasing strategies that reduce the time between
the beginning of the manufacturing process and shipment to the customer.
This sounds easier said than done, for the development and implementation
of these strategies are some of the most difficult tasks in just-in-time
manufacturing.
    One key idea that must be understood about just-in-time
manufacturing is throughput time.  This is the time between the start of the
manufacturing process and the end, where the product is ready to be shipped.
Five key elements are involved in throughput time.  The first element is
processing time, or the time actually spent working on the product.  Next is
inspection time and moving time.  Moving time is simply the amount of time
spent moving the product from one production department to another, as well
as back and forth from storage areas.  The last two elements of throughput
time are waiting, or queue, time and storage time.  Queue time is the amount
of time a product is waiting at a production department before being worked
on, while storage time is the amount of time raw materials, finished goods,
and works-in-progress actually stay in storage.  Just-in-time philosophy says
that the first element, processing time, actually adds value to the product,
while the last four key elements do not.1  Thus, there are value-added
activities and nonvalue-added activities.  Just-in-time manufacturing tries to
decrease the amount of time spent on nonvalue-added activities as much as
possible.
    Just-in-time philosophy was first used by Toyota in Japan.  Since that
time, many companies around the world have begun to successfully
implement just-in-time processes, including several companies in the United
States.  The implementation of just-in-time processes have taken on a
familiar pattern in these companies.  Usually it is begun by training everyone
in the company about the just-in-time philosophy.  The basic just-in-time
concepts that employees would be trained in and made to follow as
guidelines are listed in Table I.

Table I
*  Visualize the process in as few steps as possible.
*  View inventory as moving, not static.
*  Emphasis should be placed on the synchronization of each process.
*  Simplify, combine, eliminate
*  Wastes are:  over and under production, unnecessary steps, and excessive
    inventory and motion.2

These basic ideas are not unique to just-in-time, but are crucial in training
employees about the just-in-time philosophy.
    Most companies have realized now that the just-in-time philosophy is
an important component in the idea of total quality management.  Total
quality management has the same goals as just-in-time, but also seeks as few
errors as possible between each stage of production.  Just-in-time philosophy
is a tool that top-level managers use to implement total quality management.
Most companies today seek this implementation, and follow the following
steps.
    The first step to implementing TQM/JIT manufacturing is to train the
top management in the basic concepts of these ideas.  Once this is
accomplished, the next step is to form a top-level team.  This team's
responsibilities include deciding upon an organizational structure and
developing a plan to implement TQM/JIT within the company.  This plan
should include the company's goals concerning production, as well as how to
establish this plan among all employees (i.e. motivation and discipline).
This plan should then be used to establish the overall philosophy of the
company concerning TQM/JIT.3
    Next, the system should be implemented to every aspect of the
company from supplier to distributors.  First, each department should
establish its goals and a specific problem to attack.  Then, a team should be
chosen by each department and team leaders established.  The teams should
focus on the reduction of costs and the elimination of wastes.  Data must
then be collected on the teams' problems.  This data should be plotted in
order to find excess waste or costs.  Once this is done, measurements should
be made as far as average costs, cycle times, and error rates.  Manipulation
of this data should show at least some apparent problems in the current
system.  Further analysis should help in the implementation of TQM/JIT by
showing problem areas.  In addition, the data could be used to show the
effects of implementing TQM/JIT into the company.4
    After the beginning of implementation, it is crucial that every
employee believe in the concepts listed in Table I.  Otherwise, the system
could fail.  Once implemented, though, just-in-time systems must be
continually monitored and preventative actions performed.  For instance, if a
fault in a product is discovered because of a faulty wire, that roll of wire is
removed.  In a complete just-in-time system, however, the process does not
stop there.  The manager would check the warehouse and determine if there
were any more rolls of faulty wire.  If he discovered any, then those would be
thrown out as well.  Then, the manager would contact the supplier which
sold the company the faulty wire and inform him of the situation, hopefully
to prevent any more shipments of faulty wire.  By doing all of this, the
manager prevents any backlogs and waste in the future.  With the
just-in-time system, every aspect of the company is continuously running.
The just-in-time system helps companies spotlight those areas that are falling
behind and need improvement.
    There are methods by which a company can perform preventative
maintenance.  The first is through planning a well-developed, goal-oriented
system and establishing a written policy on quality and waste reduction.
Second, the management of each department should work together to try and
eliminate problems, and not place blame on any one department.  Blame has
never accomplished anything, and therefore is a nonvalue-added item.  Next,
designers should be knowledgeable of manufacturing requirements and
limitations so that there is not a contradiction between designs and actual
products.  This results in waiting time, another nonvalue-added item.  Last,
but most important, is ample training.  Employees that have been trained
thoroughly can handle minor problems on the spot without having to hold up
the entire manufacturing process and call for a manager.  Employees without
such training are problems waiting to happen.5
    Once all of the training, goal setting, and team forming are complete,
the time has finally come to implement the TQM/JIT system.  Once
implemented, a company must find a way to organize all of the teams,
including who is on what team and what their goals are.  In order to do this,
some companies have developed what is called a team tracking and status
report.  An example of this kind of report is shown in Table II.

Table II6
            Status Phase                Meeting    Main
Name of Team    A   B   C   D        Leader      Time        Goal
Top-Level        Non-Applicable        R. Wilson    Mon 1pm    System Implem.
                                        & Management

Corrective Action

Supplier Mgmt        X       X      X           R. Klimo    Mon 10:30    Improve Vendor
                                        Performance
Excess Inventory        X       X      X       X    BG        Thur 7am    Reduce Excess
                                        Inventory
Glass Stains        X            RC        Wed 8:30    Reduce Stains
                                        from Curr. Level

Functional Improvement

Secretary        X       X            D. Boggs    Tues 9am    Improve Copier
                                        Effic. & Qual
Engineering        X       X      X       X    PW        Tues 10am    Reduce Doc.
                                        Errors
Cust. Service        X            B. Murray    Thur 8am    Reduce Sales
                                        Order Cycle
                                        Time & Defects
Purchasing        X       X      X       X    R. Klimo    Fri 7:30        Improve Qual of
                                        Requisitions
Qual Engineering    X       X      X       X    J. Fish        Wed 10am    Reduce Planning
                                        Defects
JIT Line A        X       X      X        B. Yong        Tues 1pm    Reduce Lint in
                                        Coil Defects
JIT Line C        X            P. Tipa        Tues 2pm    Reduce Chip
                                        Defects

Special Teams

KANBAN                     H. Wong    Tues 8am    Rebalance JIT
                                        Line A
Setup                         G. Knodel    Fri 8am        Reduce Tester
                                        Setup Times
SPC                        K. Gangkai    Mon 4pm    Move SPC In-
                                        Line for JIT
                                        Line F
As indicated in Table II, many teams are required to successfully run a
TQM/JIT operation.
    Now that we have discussed how just-in-time philosophies can be
implemented along with the entire total quality management scheme, it can
be questioned whether or not large United States companies can completely
implement just-in-time systems.  The answer is yes.
    Before the idea of just-in-time was widely accepted, economic
recessions and recoveries played havoc with American businesses.  During a
period of economic well-being, for example, a company would anticipate
further economic growth and stockpile both labor and products.  This was a
fine idea, until the economy hit a recession.  Companies were stuck with
enormously large inventories and low customer demand.  The only way
companies could respond was to cutback on labor, resulting in large layoffs.
Then, once the economy took an upswing, companies were eventually faced
with labor shortages, and large scale hiring began.  This cycle continued
each time the economy fluctuated.  That is, except for companies who
decided to implement just-in-time manufacturing, which broke the cycle.  As
more and more companies bought into the just-in-time philosophy, "the
result was smaller inventories of both parts and final products."7  With
smaller inventories, billions of dollars were freed up for investment purposes.
This protects companies during the lean years when demand may exceed
production.
    This also means that with such little room for inventory error, one
mistake could mean thousands in lost revenues.  For example, in 1993, one
General Motors engine plant in New York had repeated production
problems.  This resulted in the underproduction of 90,000 cars.  Still,
General Motors is completely dedicated to the just-in-time philosophy.  This
strong belief held in TQM/JIT by General Motors, as well as thousands of
United States companies, may improve the nation's economy over the long
haul.8
    Some companies have found ways to place the burdens of estimating
sales and keeping the exact amount of inventory upon someone else.  These
companies have paid "middleman" companies a specific amount to be in
charge of their inventories.  One such "middleman" company is Owens &
Minor, a hospital supplies distributor.  For example, UCLA Medical Center
allowed Owens & Minor to buy their inventory.  Owens & Minor workers
take daily inventory and report to the home office what each individual
hospital needs for the next day.  The items are delivered, and all UCLA
Medical Center has to do is pay for the items it uses, thereby saving millions
on inventory costs.  In addition, Owens & Minor works with the hospital to
find unnecessary items and help eliminate waste, keeping costs to a
minimum.9  This coincides with the principles of the just-in-time philosophy.
    According to recent studies, just-in-time systems have helped keep
inventories of American companies down.  Ratios of inventory-to-sales have
been declining for the past four years.  However, due to the economy growing
very slowly, finished goods inventories have increased over the past year.10
    To combat this growth, companies have turned to improving their
relations with their suppliers.  By sharing sales forecasts as well as
production forecasts with their suppliers, materials are shipped according to
the demand from the company.  For example, say an automobile production
company produces one hundred cars in a day.  They will need two hundred
bucket seats.  They will place an order to their suppliers for two hundred
seats within a certain, predetermined time period.  This time period allows
for the seats to arrive the day that they are needed, therefore, no seats will be
placed in inventory.  This sounds wonderful, but companies still must make
estimates many months before hand using an unstable economy.  This means
that some companies may end up with sales estimates that are over or under
real sales.
    This brings us back to the overall concept of just-in-time being a tool
used in total quality management.  Take, for instance, American Standard,
Inc.  American Standard manufactures bathroom fixtures, air conditioning
units, and braking systems for cars.  They believe that this type of
manufacturing is demand-driven by their customers.  This demand-flow type
of production fits right in with the concept of total quality management.
American Standard also believes in allowing their workers to manage their
own production process.  This was not always the case, however.  American
Standard began to implement just-in-time systems as early as 1979.  It met
with moderate success, but when the recession of 1990-91 hit, they had debt
in excess of three billion dollars.  That is when they decided to implement
total quality management, and use just-in-time as a major tool.  Through
demand-flow manufacturing, efficiency improved and cycle time decreased.
In addition, inventory and waste also declined.  American Standard believes
in the philosophy of improving relations with suppliers, but it also believes
in demanding total quality control from its suppliers.11  With American
Standard, as well as other companies, insisting on TQC from their suppliers,
the total quality management idea is being spread nationwide.
    Just-in-time systems are being implemented in most companies,
though some more than others.  Those companies that acknowledge
just-in-time philosophies and implement them fully as part of a complete
total quality management system are quickly becoming players in the world
market.  Those companies that do not implement total quality management
with an emphasis on just-in-time systems may be left behind as we go into
the twenty-first century.




Bibliography

1.  Polimeni, Ralph S., et. al., Cost Accounting, Third Edition  (New York:
      McGraw-Hill, Inc., 1991) 446.

2.  Ryan, John M., The Quality Team Concept in Total Quality Control
      (Milwaukee:  ASQC Quality Press, 1992) 17.

3.  Ryan, 11.

4.  Ryan, 11.

5.  Ryan, 29-30.

6.  Ryan, 54-55.

7.  Howard Gleckman, "A Tonic for the Business Cycle,"  Business Week
      April 4, 1994: 57.

8.  Gleckman, 57.

9.  Suzanne Oliver, "Cut Costs, Add a Middleman,"  Forbes  April 25, 1994:
      135.

10.  David Fischer, "Sitting on Excess Supplies,"  U.S. News & World
       Report  September 18, 1995: 88.

11.  Michael Barrier, "When 'Just In Time' Just Isn't Enough,"  Nation's
       Business  November 1992: 30-31.
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