IntroductionJust-in-Time (JIT) philosophy is about operating a simple and efficient manufacturing

system capable of optimizing the usage of manufacturing resources such as capital,

equipment, and labor (Richard T. L, 1988). As a result, this contributes to the pursuit

of production systems competency to meet customer requirements in quality and

delivery with the lowest manufacturing cost. In today’s fierce global market, it is

undoubtedly that having a competitive edge implies being more efficient than the

competitors. Many companies of all types and sizes are eagerly adopting and

transitioning to JIT manufacturing, however, implementing or integrating it is not a

hasty decision-making. It must be thought deliberately as well as planned thoroughly.

The Main Elements of the JIT Philosophy

According to Ramarapu (1995) that successful JIT implementations commonly

require following elements to be considered:

Waste reduction

Value-adding production oriented

Employee improvement

Reduce lead times

Vendor/supplier integration

Customer participation in quality improvement

From the JIT manufacturing perspective, we can understand this as follows:

Waste reduction is aimed at eliminating non-value-added tasks (Bowen, 1998). The

traditional production method is concern about producing in large numbers and then

storing the outputs in warehouse before selling them. However, in the current intense

international competition, focusing only on “quantity production” is no longer a

competitive approach to be performed. The JIT philosophy was introduced in 1980s

by Japanese firms which emphasizes on responsiveness to customers. So the

production of a product will not start till the customer orders come in and it will only

produce the exactly amount that customer required. According to Bowen (1998), the

element of Value-adding production oriented brings the terminology of “pull-

system” which allows customer order to trigger the production process. Pull system

requires timely respond in meeting customer requirements, therefore avoiding the

consequence of overproduction.

Traditionally, firms tended to buy in large so the price of input material can be low.

There are normally a considerable amount of inventories that are purchased and stored

in warehouse first before the starting of production. And inventory is also been seen

as assets of the company. However, the JIT approach considers both inventory and

warehousing as waste that are not necessary to be in the place. It suggests that the

inputs of production can be delivered by suppliers just before the production about to

start. In doing so, firms are able to save a great amount of money and solve the

common problem of cash flow simultaneously.

Employee improvement will enhance productivity and quality of the manufacturing

process by dividing problem solving and decision-making responsibilities from

management level to individual related with the task (Bowen, 1998). This involves the

decision making process being encouraged at much lower level of management

structure than traditional view. It also encourages improving the skill of employees.

For example, cross-function training that will enable workers from department A

being capable of doing the jobs of department B or C.

Production lead times can be reduced through cooperation seamlessly with suppliers,

and by moving work location closer together to the factory.

As pointed out by Ramarapu (1995), Vendor/supplier integration will enable

specialized suppliers produce better products, because they can concentrate in a

particular thing. Through outsourcing providers, the company can get all the time and

resources in its core function which in turn will improve the quality of the finished

product.

The pursuit of customer satisfaction is the ultimate goal in every business. Bowen

(1998) argued that the element of Customer participation in quality improvement

puts the emphasis on the necessary of customer involvement in product development

and delivery. Moreover, customer can also be used to guide development team to the

right manufacturing plan.

The Application of A JIT Approach Be Used to Improve

Operational Effectiveness of a Company

“In the end 1970s, the Japanese established the world standardization for operational

effectiveness in improving quality and lowering cost. How can Japan’s apparent

competitive success on the one hand be reconciled with its low profitability, limited

array of competitive industries, and inability to sustain competitiveness on the other

(Furstenburg, 1974)?” Japanese companies taught the world a dramatic approach of

JIT being used to improve productivity of a company.

JIT has important strategic role in the optimization of business processes. The core of

JIT approach is elimination of all non-value adding activity to the production.

Removal of all wastes from the production process includes waste that relates to time,

materials, parts, and equipment within the industrial cycle. Among these, inventory is

the primary wastes (Swamidass, 2000).

Inventory management is a time-consuming and costly process. By carrying out a JIT

approach, the company’s inventory level will be as low as possible. In doing so,

company’s labor expense and working time can be dramatically reduced, cash

resources will be freed up as well as the waste can be reduced that comes from

obsolescence. The JIT approach enable managers and employees to have more time

focusing on production process and no need to worry about the storage and

warehousing and transportation. There are fewer employees required and easier to

manage, so workers can be more productive. The money saved by not purchasing and

storing high level of inventory can be used somewhere else to improve company's

operational effectiveness. For example, better production equipments, IT system, new

technology and worker’s skill training.

Company’s inventory is not only expensive; it also has potential to create problems.

According to Mahapatra (2010) when the level of inventory is low, problems will

become more visible and can be solved relatively easier. There is a common analogy

used for the inventory reduction that results from JIT implementation uses a stream of

water in a channel strewn with rocks. “Water represents the inventory level and rocks

are problems. This means that as inventory is reduced, problems will be uncovered

and must be solved before smooth operations can resume (Swamidass, 2000 p329).”

JIT can also be combined with companies’ overall quality control strategy like Total

Quality Management (TQM). Because there is low level of inventory, so there is less

risk of storage damage and the items are moved through the JIT system will be new

and in small batches, so100% inspection will be feasible. Mahapatra (2010) suggests

that ‘the core of the JIT philosophy is to eliminate all kinds of waste including waste

resulting from defective parts, machine changeovers, machine breakdowns, etc...’

One of the best known JIT success application story is Harley-Davidson, the US

motorcycle manufacturing. In the early 1980s Harley was the last remaining company

of its kind in the US, and from all indications its days were numbered as Japanese-

made motorcycles with higher quality and a lower price tag were swiftly stealing

Harley’s market share. Harley-Davidson management decided to fight back, it would

have to learn its competitors’ secret weapon, which turned out to be JIT. Over several

years Harley successfully implemented JIT and was able to drastically reduce its

inventory levels and production costs by less raw material, work-in-process, and

finished goods inventory while significantly increasing operational effectiveness.

Harley today is a strong proponent of JIT as demand for its motorcycles outstrips

production capability and the product sells throughout the world, even in Japan

(Swamidass, 2000).

Dell is another successful company that effectively applies JIT. They utilize a direct-

business model whose basic tenet is that taking customer orders directly from

customers, thereby reducing inventory with the smallest amount of inventory of any

company within this industry. This unique strategy has provided them a great

competitive edge to become the market leader (Broyles et al, 2005). Dell’s case

indicates that they can switch product easily, without worrying about writing off a

large stock of obsolete finished goods. This means that they can meet changing

customer needs more quickly, thereby improving operational effectiveness.

As I mentioned earlier, Japanese companies taught the world a great lesson in

implementing JIT approach to become more efficient in today’s fierce global market.

But in the meantime, they need to confront more powerful rivals who benefited from

application of JIT from all over the world.

The Practical Issues in Implementing Such an Approach

JIT inventory is a systems approach whereby a company greatly reduces inventory

from its production process in order to utilization of production inputs and delivery of

finished products is accomplished without encountering holding costs. Charles (2005)

indicated that while JIT inventory approach is quite attractive and can be seen as a

double-edged sword, its merits are realized merely when some significant practical

issues are taken into account.

Just as a famous English proverb goes “Every coin has two sides.” In JIT, everything

is very interdependent and everyone relies on everybody else (Greenberg, 2002). Due

to this kind of seamless interdependent relationship, some practical issues will be

raised such as interrupted supply lines, strikes, economic fluctuations and etc.

One of the key practical issues is the extent to which companies are highly dependent

upon a particular supplier under an inventory systems approach. For instance, “if a

company were to arrange an important mission such as proprietary product to a single

supplier1, a JIT inventory system would put such a company at even higher risk of rip-

off on behalf of the supplier because the company would have no immediate

inventory to buffer an interruption of supply (Charles, 2005).” Such supply

interruption might be a practical issue that very costly or even exceed the savings that

a JIT inventory approach applied in a company in the first place.

The other practical issue is the customer service. Arthur, L (2010) pointed out that as

JIT inventory approach needs a company to highly relies on its supplier to deliver

product to them immediately, they inevitably have to deal with shipping delays at

some point. When this has to happen, companies can anger their customers because

their products are not available when they need them. Or we can understand this in

this way that I have a bakery and my customer comes to buy bread. If the company I

get my flour off cannot get it to my on time, then I cannot make the bread and my

customer will not be happy

If wanting JIT inventory work successfully, an attention on reliability issue is also

necessary. Labor strikes and breakdowns can swiftly disrupt an entire supply chain.

They must be avoided or eliminated by taking care of human resources and machines.

In addition, Broyles et al (2005) argued that “every year markets experience seasonal

demand fluctuations due to demand from disasters or other unforeseen events. JIT

delivery leaves manufacturers with little inventory as the holiday season approaches.

Relying merely on JIT systems would leave supply chains in shock due to the

seasonal market demand at different times of the year for seasonal products.”

Some practical issues in JIT inventory approach are very important to recognize.

Every company should carefully evaluate the advantages and disadvantages in

implementing JIT inventory approach. The practical issues should also be heavily

taken into consideration. All in all, recognizing when practical issues may occur with

1 single suppliers being common in JIT

the JIT is important for the success of JIT inventory implementation across all areas

of supply chains.

Conclusion

In the development of any new approaches there are always a number of successes

and failures; developing JIT system is not an exception. It appears to be very simple

and quick. But in reality it is very complicated approach with no guarantee of success.

If implemented it successful, it would sweep waste and inefficiency and make a

company more productive. In spite of it works well in many companies, some

companies are not. As a whole, it is not easy for a company to select any one area that

JIT can be incorporated without thoughtful consideration for the manufacturing

process.

Reference

Swamidass, P, M (2000) Encyclopedia of production and manufacturing management, Kluwer Academic Publishers, USA.

Mahapatra, P, B (2010) Operations Management: A Quantitative Approach, PHI Learning Private Limited.

Richard T, L (1988) Just-In-Time Manufacturing, McGraw-Hill, Inc. America.