Just in Time Manufactuing

Running Head: JUST IN TIME MANUFACTURING 1

Just In Time Manufacturing:

Explore Toyota’s Manufacturing Control System

Prepared forDr. Susita Asree

California State University, Fullerton

Prepared byBeverly Ong

Daniel MercadoRohan NakraniFemi Okeowo

Date Submitted: May 5, 2014

JUST IN TIME MANUFACTURING 2

Table of Contents

Table of Figures........................................................................................................................................................................... 2

Abstract........................................................................................................................................................................................... 3

History of the JIT Management Strategy..........................................................................................................................4

Concept of JIT............................................................................................................................................................................... 4

JIT Performance Indicators....................................................................................................................................................5

Implementation and Effects of JIT in Toyota..................................................................................................................9

Benefits of JIT manufacturing of Toyota........................................................................................................................15

Problems Of Implementing JIT in Toyota......................................................................................................................18

Implementation................................................................................................................................................................... 18

Product Delivery Logistics..............................................................................................................................................19

Purchasing and Communication...................................................................................................................................20

Unexpected Events............................................................................................................................................................. 21

Demand Forecasting...............................................................................................................................................................22

Total Quality Management...................................................................................................................................................22

Continuous Improvement of the JIT System................................................................................................................23

Conclusion................................................................................................................................................................................... 23

References................................................................................................................................................................................... 24

Table of Figures

Figure 1........................................................................................................................................................................................... 6Figure 2........................................................................................................................................................................................... 7Figure 3........................................................................................................................................................................................... 8Figure 4........................................................................................................................................................................................... 9


Abstract

This paper is divided into four different sections to separate the content of four different

authors. The first section covers the history of the “Just in Time” (JIT) strategy, the concept of

JIT, and lastly JIT’s financial indicators. The second section will cover implementation aspects

of JIT. The third section will cover problems which arose during Toyota’s implementation of

JIT. Just-In-Time was introduced to the business world over 30 years ago and till now; most

companies that have been trying to imitate the system have struggled with the concept. The

implementation problem is very real in JIT, and these problems can be one of the largest cost

drivers for corporations trying to replicate the system.


History of the JIT Management Strategy

Toyota’s JIT manufacturing management strategy has had a large enough effect that it

has been adopted by other manufacturing groups. Dell Inc., Wal-Mart Stores Inc. and NEC

Corporation have acknowledged the benefits of JIT and have implemented JIT methodologies

(Minahan, 2014). Although JIT has made a large impact on inventory management strategy, it

remains as an iteration on previous management techniques. JIT’s impact could not be

recognized without the early manufacturing advancements such as Henry Ford’s assembly line.

The current Toyota JIT strategy was introduced by Taiichi Ohno between the 1940s and

1970s. Taiichi Ohno earned his way to the position of Toyota’s Vice President using his idea of

JIT. JIT is known as the Toyota Production System in Japan. The Toyota Production System

was essential for Japan’s automakers in order to be competitive with American automakers

(International Journal of Applied Engineering Research, 2012).

Concept of JIT

A business is only validated through profits because without profits the company will

eventually bankrupt. One of the driving factors for Toyota’s JIT production system is cost

reduction. Since the customer and not Toyota controls the final price of the automobile Toyota

must keep costs to a minimum in order to maximize profit. This leads to the fundamental goal of

JIT which is the eradication of waste. Toyota identified six key areas in which eliminating waste

would most benefit the company, in other words Toyota targeted the ‘low hanging fruit’ (Taiichi

Ohno, 1978).

The seven targeted areas identified by the Toyota Production System (JIT):

1) waste of overproduction

2) waste of time on hand


3) waste of transportation

4) waste of processing itself

5) waste of stock on hand (inventory)

6) waste of movement

7) waste of making defective products

On the one hand the targeted areas seem trivial but on the other making improvements in

these areas can be a complex task. There are design tradeoffs when attempting to implement JIT

manufacturing. First if not enough labor or inventory is planned for or if the arrangement of

machinery on the assembly line is incorrect, delays can be introduced which affect the entire

supply chain. The Toyota Production System mitigates these delays using the Kanban operations

system. The Kanban system involves a document which accompanies the product through the

manufacturing process. This document gives workers vital manufacturing information such as

product information, assembly information and transfer information. The advantage of the

Kanban system is the work backward mentality. Using the Kanban system manufacturing

theoretically works backward from the final step of the manufacturing process. An example of

working backward is when a technician from the final step of manufacturing moves to the

previous manufacturing step in order to retrieve the parts required at his manufacturing state. In

this method the technician retrieves the exact amount of parts required to complete his/her job

(Taiichi Ohno, 1978).

JIT Performance Indicators

Assessing the performance of the JIT manufacturing system with other top automotive

manufacturers required a commonality between all manufacturers in the comparison. The


commonality used in this research was financial performance. Although many financial

indicators exist, only a few would be applicable due to the nature of JIT. Only indicators which

showed relationships with manufacturing and inventory were utilized since JIT is inherently a

manufacturing control system.

The first indicator used was the inventory to current assets ratio. This ratio gives the

percentage of inventory to total current assets. It can also be described as the amount of assets

tied up in inventory. The data shown in Figure 1 tells us that Toyota has the least amount of

assets tied up in inventory. One of JIT’s main goals is to eliminate waste in the inventory

system. The inventory to current assets ratio shows that Toyota, who has implemented JIT,

benefits the most from JIT’s inventory waste elimination (Easton, Wild, Halsey, and McAnally,

2013).

2002 2004 2006 2008 2010 2012 20140.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Inventory / Current Assets

TOYOTAFORDGM

Year End 10-K Data

Per

cen

t of

Tot

al C

urr

ent

Ass

ets

Figure 1

The second indicator utilized in the research was PPE Turnover (Property, Plant and

Equipment). The ratio compares Sales and PPE Assets to assess the efficiency of a company’s


productivity. The ratio quantifies the amount of PPE assets required to earn one dollar of

revenue. Figure 2 illustrates PPE Turnover and shows that over the last ten years Toyota has had

the lowest PPE Turnover ratio. The chart agrees with the JIT principles of efficient

manufacturing through the elimination of unnecessary manufacturing steps, movement and

process time (Easton, Wild, Halsey, and McAnally, 2013).

2002 2004 2006 2008 2010 2012 2014 $-

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

PPE Turnover

TOYOTAFORDGM

Year End 10-K Data

Figure 2

The third indicator, Inventory Turnover, shows how many times a company’s inventory

can be sold and replaced over a period of time. It can be calculated two ways, first by dividing

sales by inventory and second by dividing cost of goods sold by the average inventory. This

indicator was used due to the fact that it is related to inventory turnover. JIT’s goal is to increase

the speed and efficiency at which the products are manufactured. Therefore a high inventory

turnover shows that a company can turnover its inventory quickly in a given period. This

indicator is also highly dependent upon the sales figures for that particular period. Toyota in this


case has been consistent in their inventory turnover which suggests that they have forecasted the

demand of their vehicles accurately (Easton, Wild, Halsey, and McAnally, 2013).

2002 2004 2006 2008 2010 2012 20140.00

5.00

10.00

15.00

20.00

25.00

Inventory Turnover

TOYOTAFORDGM

Year End 10-K Data

# o

f In

ven

tory

Tu

rnov

ers

Figure 3

The fourth and final indicator used was Gross Profit Margin. This indicator is linked

with JIT closely because it takes into account the cost required to manufacture the vehicles. It is

calculated using the following equation: [( Revenue – COGS ) / Revenue ] * 100. JIT’s

primary, if not most important, focus is to eliminate waste which should dramatically reduce the

cost of goods. Reducing the cost of goods allows a company to keep more of the revenue and

recognize larger profits. Gross Profit Margin can be described as the percentage of sales which

go into the cost of goods required for manufacturing. This chart illustrates how Toyota has been

able to use JIT to their advantage in maximizing their profits. In 2006 Toyota had 35% more

gross profit margins than Ford. Throughout the last 10 years Toyota has positioned itself has the


leader in Gross Profit Margins which means Toyota has been more profitable than GM and Ford

(Easton, Wild, Halsey, and McAnally, 2013).

2002 2004 2006 2008 2010 2012 2014

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Gross Profit Margin

TOYOTAFORDGM

Year End 10-K Data

GP

M

Figure 4

Other indicators such as Current Ratio, Quick Ratio, Return on Assets, Return on Equity

and Basic Earning Power were considered during the research. The goal with this research was

to find indicators that were closely tied to manufacturing aspects affected by JIT. The indicators

not used in this paper are general financial indicators. These general financial indicators take

into account more of the company’s overall operations (Easton, Wild, Halsey, and McAnally,

2013).

Implementation and Effects of JIT in Toyota

The Just in Time (JIT) concept in production strategy is simple to grasp even though the

actual implementation of JIT can be complex, requiring strong commitment from top

management with high initial cost and without guarantees of success. However, successful


implementation of JIT can yield productivity and efficiency benefits within the manufacturing

process resulting in cost savings and quality improvements. For instance, Japanese car

manufacturer Toyota introduced JIT in the 1970s and many companies strived to imitate and

replicate the same system (Steele, 2001). While Toyota was able to enjoy economic success after

implementation of the new production strategy, not all companies were able to enjoy the full

benefits like Toyota did due to previously unforeseen obstacles and challenges nascent within

JIT. Therefore, there are more factors to consider and changes that need to be made than

previously thought to successfully path the way for JIT implementation.

For one, there are physical changes in the factory that need to be altered when

implementing JIT. The critical difference between a traditional manufacturing plant and a JIT

manufacturing plant is that machinery are product oriented rather than function oriented (AIDT,

2006). At Toyota, the typical linear subassembly line that is used in many manufacturing

companies such as Ford was converted into U-shaped subassembly cells. In order to level the

demand on their supplier, Toyota also had to alter its final assembly line to a mixed model final

assembly system and redesigned the job shop into manufacturing cells (Black, 2007). Basically,

the layout of the plant needs to be changed to best fit JIT implementation. U-shaped assembly

lines allow workers to quickly drop off materials and pick up finished work. Machines would

need to be rearranged in a sequence that best suit the work flow. The U-shaped assembly lines

also demand one worker to be responsible for several work process in a work cell who is able to

perform multi-machine handling (Aghazadeh, 2004). The U-shaped cells take up less floor

space and place operators closer together and allow flexibility in the crew size depending on

demand. Also, defective supplies or deficiency in quality can be identified easily by this process

since operators are working with smaller batch sizes and can oversee the entire process of


creating the products. This leads to quality improvements by being able to identify root causes of

problems.

JIT implementation requires a change from traditional purchasing practices to logistical

coordination between buyers and suppliers (Dion, 1992). Since JIT is a system that runs on “as

needed” supplies, it relies on a supply chain that is in constant coordination with the supplier to

ensure that materials will be delivered at the right time. This results in operational changes from

bulk deliveries to smaller, more frequent deliveries. In other words, there will be higher

inventory turn. Furthermore, suppliers need to ensure that the products they deliver are damage

free since it is being used up at the time of delivery and there will not be any buffer stock

immediately available. The supplier therefore carries more responsibility in quality control

inspections instead of the buyer. It was reported that there was a 40% reduction in damaged

products and 20% reduction in complaints in an interview with managers in 40 firms who

adopted JIT (Dion, 1992).

Inevitably a change in purchasing practices will also have an effect in manufacturer and

supplier relationship. The first noticeable change is that there will be a stronger dependence on

smaller number of suppliers which results in higher dependence on the latter. This means that the

buyer will focus more on investigating and be more selective in choosing suppliers that are more

reliable and consistent. Also, both the buyer and supplier will have a stronger commitment since

coordination of supply deliveries will have to stick tightly to the required schedule. Suppliers for

JIT manufacturing companies must also be a willing party to alter its traditional relationship with

their buyers. They need to make adjustment to current practices to meet the special needs of the

buyers in terms of increasing reliability, quality, flexibility and stability etc. (Golhar, 1993).

Therefore, the efficiency of JIT requires the support and coordination with suppliers. Toyota’s


strategy is to educate its suppliers in JIT because the latter will be a part of Toyota’s customer’s

operations and therefore will take ownership of the responsibility to the customers during its

partnership (Steele, 2001).

Technology can also be adopted to facilitate free flow of information sharing between the

buyer and supplier (Bandyopadhyay, 1995). An example is the use of Kanban cards in Toyota’s

assembly plants in Georgetown, Kentucky which signal to suppliers the next lot of parts are

needed. Kanban is a Japanese word meaning signboard or billboard. It is a signal to replace what

has been used. Toyota’s assembly plants in Georgetown has 80% of its suppliers located within a

200 miles radius which allows it to develop a distribution network known as a milk run. This

allows Toyota to receive parts on a JIT basis (Steele, 2001). However, suppliers do not need to

be within a certain proximity for the success and low cost of JIT implementation. In the study of

130 companies, it was concluded that communication and information links are more reliable

predictors of success than geographical location of suppliers. There was a strong positive

correlation between greater geographical distance and success of JIT. Therefore it was concluded

that there must be a smart investment in communication and informational technology (Wafa,

1996).

Toyota also used Kanban for shop floor control at its manufacturing unit in California.

The function of the Kanban system is that it provides signal for the next pickup or transport

information and prevents over production and excessive transport. Kanban also provide

production information and serves as a work order attached to goods. Most importantly, it expose

existing problems and maintains inventory control (Ramnath, 2009). The Kanban calculation is

important as it will help prevent overproduction and stock-outs by controlling timing and

quantity.


The ideal number of Kanban cards can be calculated using the formula below,

N = DT (1 + X)/C

where,

N = Total number of containers (1 card per container)

D = Number of demands per day

T = Average waiting time for replenishment of parts plus average production time for a

container of parts

X = Policy variable set by the management that reflects possible inefficiency in the

system

C = Capacity of a standard container

The physical and inter-business relationship factors in the implementation of JIT is an

important contribution to its success, however human factors determine the success or failure of

the implementation. The biggest concern on JIT implementation is the human aspect as it is

something management have less direct control over. The first step is to have strong commitment

from top management who have the ability to lead and guide workers to believe that JIT is the

right direction to go. Eiji Toyoda and Taichi Ohno who pioneered the concept of JIT, were able

to achieve success in their idea because they were both strong leaders who can influence and

shape workers to believe in the system. In a case study done by Gupta in 2000, he identified 4

pillars of JIT “Humanware”, namely education and training, a cooperative environment, rewards

and incentives, and open communication with worker involvement. The case study emphasizes

that “Humanware” is the critical function why an organization can operate as it should assuming

it has the right physical and software aspect of the manufacturing process. The method Toyota


pioneered (The Toyota Way) is now an adopted culture that supports JIT systems which

encourages, supports and demands employee participation.

The human factor is an important driving force behind the successful implementation of

JIT. As mentioned earlier, JIT manufacturing processes contains a cultural aspect that cannot be

ignored. The first step is to educate and train managers on how use JIT correctly so that they will

be in a better position to lead their workers. Training for employees must also be provided so

they understand what JIT entails and what is required of them to ensure success, while at the

same time also seeing the benefits for themselves coming from this transition (Gupta, 2000). Part

of Toyota’s method includes on-the-job training charts as well as classroom studies for their

workers. JIT also provides opportunity for workers for self-improvement by improving problem-

solving skills and also obtain more knowledge in their expertise which can in turn increase their

job security and personal satisfaction. This step proves to be the strategy many companies adopt

to secure their worker’s cooperation and commitment (Im, 1994). The second step is to provide

an environment that supports teamwork and the third is to provide rewards and incentives

programs that cater towards group activities and not individual merit. Lastly, open

communication and worker involvement is an important factor that supports the first three

factors mentioned above.

Since JIT requires the cooperation of people to ensure its success, it can be drawn that

there are behavioral implications to consider in JIT which directly affects human resource

management. A study was performed to observe changes in job classifications and number of

employees after implementing JIT in 43 companies. Results show a reduction of job

classification ranging from 17% to 80% with an average reduction of 47% and work force

reduction ranged from 14% to 30% with an average of 22% decrease (Im, 1994). The main


reason for the reduction is due to cross-training programs where employees get trained on

multiple machines and performing several functions.

In the long run, the success of implementing JIT is a continuous process that relies on top

management commitment to employee involvement and back to top management commitment

(Bandyopadhyay, 1995). A company who wishes to adopt and implement JIT must be willing to

give up traditional concepts and be open minded to new concepts and commit to continuous

improvement of the process. Most importantly, major focus must be placed on employees in

order to tap into JIT’s full potential. It was found in an empirical study that organizations do not

achieve high levels of JIT flow and high levels of JIT quality without obtaining a high level of

employee involvement (McLachlin, 1997). A successfully implemented JIT system should be

one which produces products customers want at their desired time and where products are of

perfect quality. Additionally, the system should produce instantly with zero unnecessary lead

time, with no waste of labor, material, equipment and idle inventory (AIDT, 2006). The success

must also be measured with having highly motivated and multi-skilled workers who live out the

culture of JIT, who are professionally challenged and are committed to the continuous

improvement of the JIT system.

Benefits of JIT manufacturing of Toyota

The benefits of JIT manufacturing are very impressive. Because of this many companies rush to

adopt the JIT without knowing the actual concept of JIT and the potential risk that are involved.

As a result most of the companies do not enjoy its benefits because they lack to implement the

culture necessary for the JIT to succeed. A major aspect of JIT manufacturing is its view of

inventory. JIT manufacturing of Toyota views inventory as a waste that needs to be eliminated.

Inventory is carried to cover up a wide variety of problems like Machine Breakdowns, Poor


Vendors, Poor Design, Poor Quality, Long Setups and Insufficient Layout. Reduction in the

inventory level leads to the identification of all the above mentioned problems (Reid, R. D. &

Sanders, N. R.). Inventory reduction also leads to faster replacement of products in the inventory

and hence the inventory turns are increased. Reduction of waste or scrap is also the important

benefit of the inventory reduction. As there is reduction in inventory there is the overall

reduction in the purchasing lot size and the amount of raw materials required are also reduced to

a certain extent.

Another important benefit of the JIT manufacturing that Toyota enjoys is the improved

quality of the products. Major focus of Toyota is the relation of customers with the company.

The company believes that quality of the products is closely related to customer requirements.

Toyota aims at providing the optimum quality of products in order to satisfy each and every

customer requirements. After the improvement of the quality of products the company

experienced an increased customer relations and has also enjoyed the competitive advantage over

other companies (Reid, R. D. & Sanders, N. R.).

One of the important aspect of JIT manufacturing of Toyota is the optimization of space

requirements. The company designs the assembly line in a way the increases the utilization and

efficiency of the machines. Optimizing space requirements also leads to the flexibility among

different parts of assembly line. Flexibility helps workers to switch places within different places

in assembly line without wasting time (Conrad, B.). An important feature the Toyota

implemented under JIT is the use of Andon Cord. With the Andon cord any worker that finds

any kind of defect in the product can stop the assembly line without going through the chain of

procedure to stop the assembly line. This actually saves a lot of time and cost that the company

would have suffered if it had used standard procedure (Skipsey, C. 2014). Optimizing space


requirements reduces the space required for the establishment factory for the assembly line. This

leads to huge investment savings.

JIT manufacturing also aims at the workforce improvements. Toyota believes that work

environment is very important in improving work force. Simplicity and order are considered

highly important. According to JIT, a simple and orderly environment creates a calm, clear mind

and encourages respect for workplace. Clean and orderly work place makes it easy to identify

anything that is out of order (Dr. Singh, S. & Dr. Garg, D. 2011). This helps in improving the

efficiency or workers. Toyota provides rigorous training to workers in order to minimize delays

and maximize output. Training provided to the workers focuses mainly on increasing the

flexibility of the workers so that they can switch between jobs easily and efficiently. This

prevents workers from mental and physical fatigue and workers gradually start enjoying job

resulting in the improvement of efficiency. Various forms of incentives are also provided to

motivate workers. Toyota, as a part of JIT program has divided its administration in the well

defined categories among different departments in order to increase administrative efficiency and

encourage team work (Nayab, N. 2013).

The most important benefit that JIT provides is the overall reduction in the production

cost. Toyota enjoys 16% gross profit margin because of reducing the cost price of the product

(Stock Analysis On Net 2014). JIT also reduces production lead time. As a result customers are

highly satisfied because they have to wait for reasonably less amount of time to receive their

product. All the improvements that the company incorporated as the part of JIT manufacturing

satisfies the ultimate aim of increasing the productivity.

Toyota manufacturing unit in California reported reduction in Raw Materials (RM)

inventory (21%), Work In Process (WIP) (45%), reduction in warehousing cost (30%), reduction


in forklift trucks (30%), reduction in presses (30%), reduction in labor (20%) and increase in

production volume (40%) (Ramnath, 2009).

Problems Of Implementing JIT in Toyota

As mentioned earlier in the previous chapters, a company that wishes to incorporate this

system must redesign its total settings for it to work, it is not possible to just inject certain

aspects of JIT into the current setting and expect it to flourish. In a scenario where there is a

successful implementation, the companies must go beyond its own setting and inspect its supply

chain to ensure continuous improvement (Minahan, 1998).

For managers, that can be a daunting task, but it may be where the true cost drivers in JIT

reside. Managers must tackle issues such as product delivery logistics, purchasing

communications, and any other unforeseen problems that might arise, but not even the most

thorough managers can plan for disastrous failures in the system, such as destruction of a

contractor's manufacturing facility by fire or unforeseen strike action by union workers.

Implementation

Administrative costs to implement these changes can be high. One article reported that all

suppliers in its study said the administrative burden had increased. However, some firms

managed to use existing resources to meet the challenge so that no extra charges were incurred;

others reported having extra costs.

One fundamental thing about JIT is that when suppliers implement it, they actually are

becoming a part of their customer's operations. Toyota feels the key to using JIT successfully is

educating its vendors. The company believes that when it creates the partnership with its

vendors, the vendors take ownership of the responsibility to Toyota's customers. David Hannah,

president and CEO of the Reliance Steel and Aluminum metal service center, feels it is vital to


the success of a JIT supply chain that all participants learn more about the entire industry supply

chain. He says that distributors in all industries need to learn more about the customer's

customer, how they need to change their operations to meet those needs, and how

vendors/suppliers are going to help them do that. JIT cannot be viewed as an isolated supplier-

customer relationship. The link must cover the entire industry supply chain (Stundza, 1999).

Product Delivery Logistics

Product delivery logistics is another factor critical to the success of JIT manufacturing.

The timing of shipments and supplies can make or break a company using the Just-In-Time

system. Close attention must be paid to this issue to avoid production delays and ensure it do not

lead to obsolete products and lost sales, both can be very expensive for the organization. There

appear to be two separate schools of thought regarding the proximity of vendors to

manufacturers, each carrying its own drawbacks and advantages.

Toyota believes it is vital for a company using JIT to pull as much material and

subassemblies from suppliers as close to its assembly plants as possible. For example, North

American suppliers provide 80% of the parts, materials, and assemblies used by Toyota's

Georgetown, Kentucky plant. Most suppliers are located within 200 miles of the plant. This

localized supply base makes it easy for Toyota to develop a closed-loop distribution network

known as a milk run. The milk runs allow Toyota to receive parts on a JIT basis.

Johnson Controls Inc. (JCI) is a producer of seat assemblies, headliners, and instrument

panels for the automobile industry. It was a supplier to New United Motor Manufacturing Inc.

(NUMMI), a joint venture between Toyota and General Motors. JCI subscribes to the proximity

theory of suppliers to customers. JCI maintains that its costs and, more important, its response

times, can be trimmed because it is located only 35 miles from NUMMI. Its lead times could be


even shorter if it did not build in buffers for unseen delays, specifically California traffic

(Minahan, 1998).

Although some customers prefer to have their suppliers near them, it does not appear to

be highly linked with low costs or success with JIT. Analysts examined 130 companies and

found that supplier certification programs and the existence of communication/information links

are much more reliable predictors of success with JIT than the geographical location of suppliers.

The study actually found that longer distances between supplier and customer were positively

correlated with increased success with JIT. It was concluded that an increased level of

communication was required to compensate for the long distances between supplier and

customer. The recommendation was made that companies interested in implementing or

improving JIT systems performance should invest in communication and information

technologies rather than pull suppliers closer to them.

For those companies engaged in an international supplier-customer relationship, border crossings

and customs clearance can be an added challenge. They can create delays in transportation and

increase uncertainty in the JIT supply chain (Yasin and Wafa, 1996).

Purchasing and Communication

Purchasing and communication between the supplier and customer in a JIT environment

require a large investment. The supplier must not only make the investment in information

technology but must take the time to truly learn about the client's business.

To aid in this, a new technique called JIT II was introduced. JIT II empowers the supplier within

the customer's organization (Henricks, 1997). JIT II is an arrangement that allows a supplier, at

its own expense, to place representatives in the customer's organization. Generally, the

representative is placed at the customer's site full time and the responsibility is to monitor the


buyer's inventory and keeping it replaced. This results in bottom line enhancement for both

parties. Also, electronic data interchange (EDI) systems, which is used by most manufacturers,

can eliminate the need for a supplier representative at the customer's site. A system of

information exchange for orders can be created and monitored by the customer's own employees

or by the supplier's representative (Ninneman, 1997).

Unexpected Events

Some of the purchasing strategies explored in the previous section were less than ideal

for a supplier in the JIT supply chain. Suppliers warehousing steel for an automotive customer at

its own expense leads many to say that inventory is not eliminated or reduced but simply pushed

up the supply chain. Many of the supply chain customers want these buffers to protect against

unforeseen problems. Two situations in recent memory have reinforced the behavior.

The JIT method that includes larger than normal inventory buffers is sometimes called JIC, or

just in case production. JIC is identical to JIT, but subscribes to the belief that bad things

sometimes happen to good companies. It is thought that at some point lean inventory levels will

be erased because of an unforeseen catastrophe.

An example of such incident was the earthquake that occurred in Japan in 2012. Toyota

produces more than 50% of its vehicles in Japan. In fiscal year 2009, ended March 31 2010,

Toyota produced more than 60% of its vehicles in Japan, as Japan accounted for a little over 25%

of its global vehicle sales. Almost two thirds of Toyota’s suppliers from northeastern Japan have

not yet recovered from the disaster, and this will put pressure on Toyota’s manufacturing

capacity. The damage to Japanese sea ports could hurt, in the short-term, Toyota’s vehicle

exports as well as the supply of Japanese automotive parts to Toyota’s other international

automobile manufacturing facilities (Trefis, 2011).


Demand Forecasting

In the purest form of JIT production, a demand forecast is not required. However, many

hybrid production systems exist, and some suppliers feel it is wise to use forecasts from

customers to pace their system in order not to incur massive losses. In this case suppliers depend

on the customer to provide them with accurate and timely demand forecasts. Uneven and

unpredictable demand means that suppliers must resort to holding more inventories of raw

materials and finished goods. That is the case for suppliers who use a build-to-order system

(Porter, 1997). The accurate information is vital to the success of JIT in some manufacturing

companies.

Total Quality Management

No discussion of JIT production would be complete without considering TQM. It is the

only component of JIT that can stand alone as its own concept. One of the main fundamental

concepts of TQM is empowerment of the employee. Many people point out that this can be a

major problem. It is emphasized that TQM will work only if employees truly care about their

jobs. Because quality control must be delegated to the lowest possible position, shop floor

workers and office workers are responsible for their own quality control. In theory, final

inspections are not needed nor are inspectors. If a problem occurs or a trend is identified that

may lead to quality problems, employees have the right to stop the process and correct the

problem. Quality can be guaranteed only if everyone is fully committed and trusted.

In TQM, self-direction needs to be shown by the employees without the managers being

present. This requires a degree of trust. In other words, this ownership cannot be imposed from


above. If it is, then what you have is employees being "forced to be free". Lack of employee

commitment, therefore, ensures that the system will fail miserably.

Overall, TQM is a vital part of a JIT production system. It ensures that quality parts will

be produced in the JIT supply chain. JIT production methods attribute the improved quality of

incoming materials to the implementation of TQM and statistical quality control on the supplier's

side.

Continuous Improvement of the JIT System

This is a concept closely tied to TQM. As discussed in earlier chapters, JIT production

system to improve, employees must be responsible for the change. More often than not, the

“most obvious and easiest to correct” problems give organizations the largest return on their

investment. These problems are mostly on costs related to the factory layout and supply

delivery/purchase.

After the first step of continuous improvement is carried out, the companies identify more

problems in the system. Instead of fixing it this time around, the companies consider the

financial justification for the change they are planning on making. Improving the process or the

product is no longer the issue; the issue becomes whether or not it is sensible from a return on

investment perspective to develop the current system. This mentality may keep companies from

improving the JIT production system.

Conclusion

A business is only validated through profits because without profits the company will eventually

bankrupt. Toyota has taken Henry Ford's assembly line idea to the next level by drastically

improving efficiency. Toyota's financial performance is proof that the JIT system is a viable

manufacturing control system.


References

Aghazadeh, M.S. (2004). Does manufacturing need to make JIT delivery work?. Management

Research News, 27.

AIDT (September, 2006). Just-In-Time manufacturing. Retrieved from

http://www.aidt.edu/course_documents/Manufacturing_Skills/Just-In-Time

%20Manufacturing/Just-In-Time.pdf

Bandyopadhyay, K.J. (2004) Implementing Just-In-Time production and procurement strategies.

International Journal of Management, 12(1).

Black, J.T. (August, 2007). Design rules for implementing the Toyota Production System.

International Journal Production Research, 45(16), 3639-3664. Doi:

10.1080/00207540701223469

Conrad, B. The Advantages of Just-in-Time Inventory Systems. Retrieved from

http://smallbusiness.chron.com/advantages-justintime-inventory-systems-20997.html

Dion, A.P., Banting, M.P., Picard, P., Blenkhorn, L.D. (1992). JIT implementation: a growth

opportunity for purchasing. International Journal of Purchasing and Materials

Management, 28(4).

Easton, P, J. Wild, R. Halsey, and M. McAnally. 2013. Financial Accounting for MBAs. Fifth

Edition. Cambridge Business Publishers.

Gupta, M., Holladay, H., Mahoney, J.M. (2000). The human factor in JIT implementation a case

study of Ambrake Corporation. Production and Inventory Management Journal.

Henricks, M. "On the Spot. - Entrepreneur (May 1997): 80-82.

http://smallbusiness.chron.com/advantages-justintime-inventory-systems-20997.html


Im, H.J., Hartman, S., Bondi, J.P. (1994). How do JIT system affect human resource

management?. Production and Inventory Journal, 35(1).

International Journal of Applied Engineering Research. 2012. Just in Time- A Concept for

Efficient Manufacturing, 7, 1-3. Retrieved April 21, 2014, from

http://gimt.edu.in/clientFiles/FILE_REPO/2012/NOV/24/1353741219933/204.pdf

Jedd, M. (1999). More things to more people. World Trade, 12(3), 60.

Just-In-Time Manufacturing (JIT). Retrieved from

http://www.tutorialspoint.com/management_concepts/just_in_time_manufacturing.htm

Klingenberg, B., Timberlake, R., & Geurts, T. ANAYLYZING THE IMPACT OF

OPERATIONS MANAGEMENT ON FINANCIAL PERFORMANCE – A CRITICAL

REVIEW. , 1-5. Retrieved April 19, 2014, from

http://www.nedsi.org/proc/2010/proc/p091101003.pdf

McLachlin, R. (1997). Management initiatives and Just-In-Time manufacturing. Journal of

Operation Management, 15.

Minahan, T. Dell Computer sees suppliers as key to JIT. , 123, 43-48. Retrieved April 19, 2014,

from the ABI/INFORM Complete database.

Minahan, T. JIT Moves Up the Supply Chain. Purchasing (Sept. 1, 1998): 46-47, 51-52, 54.

Motivation in Indian Industries (vol 1, issue 1).

Nayab, N. ( June 2013). Why Should You Use JIT?. Retrieved from

http://www.brighthubpm.com/monitoring-projects/72083-why-should-you-use-jit/

Ninneman, P "Just-in-Time Warehouses." (Steel Forum) New Steel 13, no. 7 (1997): 100

Ohno, T. 1978. Toyota Production System: Beyond Large-Scale Production. , 1-2. Retrieved

April 21, 2014, from

http://www.brighthubpm.com/monitoring-projects/72083-why-should-you-use-jit/

http://www.tutorialspoint.com/management_concepts/just_in_time_manufacturing.htm

http://gimt.edu.in/clientFiles/FILE_REPO/2012/NOV/24/1353741219933/204.pdf


http://www.kellogg.northwestern.edu/course/opns430/modules/lean_operations/ohno-

tps.pdf

Porter, A. "The Problem with JIT." Purchasing 123, no. 4 (1997): 18-19.

Ramnath, B.V., Elanchezian, C., Kesavan, R. (2009). Inventory optimization using Kanban

system: A case study. The ICFAI University Journal of Business Strategy, 6(2).

Reid, R. D. & Sanders, N. R. Operations Management An Integrated Approach (ed. 4)

Singh, S. & Garg, D. (March 2011). JIT System: Concepts, Benefits and Golhar, Y.D., Stamm,

L.C. (1993). JIT purchasing practices in manufacturing firms. Production and Inventory

Management Journal, 34(3).

Skipsey, C. (January 3, 2014). Enterprise Social- A Virtual Andon Cord. Retrieved from

http://craigskipsey.com/2014/01/03/enterprise-social-a-virtual-andon-cord/

Stank, T., and M. Crum. "Just-in-Time Management and Transportation Service Performance in

a Cross-Border Setting." Transportation Journal (spring 1997): 31-41

Steele, L.A. (2001). Cost drivers and other management issues in the JIT supply chain

environment. Production and Inventory Management Journal, 42(2), 61-67.

Stock Analysis On Net. (May 4 2014). Retrieved form

http://www.stock-analysis-on.net/NYSE/Company/Toyota-Motor-Corp/Ratios/

Profitability

Stundza, T. "Buyers Ask Service Centers: What Happened to JIT?...and a Few Other Things."

Purchasing 126, no. 7 (1999): 1-4.

Trefis, T. (2011, August 4). Japan Quake, Tsunami Take Heavy Toll On Toyota. Forbes.com.

Retrieved , from http://www.forbes.com/sites/greatspeculations/2011/04/08/japan-quake-

tsunami-take-heavy-toll-on-toyota/#

http://www.stock-analysis-on.net/NYSE/Company/Toyota-Motor-Corp/Ratios/Profitability

http://www.stock-analysis-on.net/NYSE/Company/Toyota-Motor-Corp/Ratios/Profitability

http://craigskipsey.com/2014/01/03/enterprise-social-a-virtual-andon-cord/


Wafa, M., Yasin, M., Swinehart, K. (1996). The impact of supplier proximity on JIT success: an

informational perspective. International Journal of Physical Distribution, 26(4), 23-34.

Yasin, M., and M. Wafa. "An Empirical Examination of Factors Influencing JIT Success."

International Journal of Operations and Production Management 16, no. 1 (1996): 19-26.

Documents

Just in Time Manufactuing