Advantages and Disadvantages of Just-In-Time Manufacturing
Introduction
Just in Time, (JIT), represents a management movement, which whilst introduced by the Japanese in the 1980s, has gained wide currency among Anglo-American businesses in the last fifteen years. Integral to the modern day concept of lean manufacturing, JIT focuses primarily on streamlining inventory management; it aims at firms operating with minimal inventory levels and having supplies at the precise moment of their requirement. Working with minimal practically zero levels of inventory helps firms to save on inventory carrying costs and reduces wastage on account of obsolescence, redundancy, deterioration and spoilage.
Such concepts, whilst theoretically appealing, are extremely complex to implement and require excellent organisational skills.
JIT aims to reduce wastage through various means, key among them being reduction of (a) inflated inventory, (b) superfluous stores personnel, (c) paperwork, and (d) other activities that do not add value. It involves the redevelopment of storehouse and plant layout to reduce time for material movement, eliminate physical processes, and slash costs associated with such factors. The relocation of work in progress, for example, to positions of close proximity to manufacturing stations serves to eliminate unnecessary movement of goods in the manufacturing process. Reduction of inventory levels can lead to significant savings in costs and addition of value through reduction of sizes of batches and set-up times, as well as through elimination of buffer and safety stocks.
Achievement of JIT goes practically hand in hand with specific JIT scheduling; a complex task that involves the appropriate scheduling of ordering, delivering, receiving, and checking material in order to dovetail supplies with production, and operate with minimal inventory levels. Such scheduling involves sharp and sophisticated communication to and fro the supply chain, frequent orders for supplies and constant coordination between supply and production staff to prevent from stock pile-ups as well as stock-outs. Kanban, a Kaizen inspired inventory order placement system that works on the basis of visual cards and triggers action has now become practically integral to successful JIT systems.
Cellular manufacturing is, along with Kanban, being implemented in western factories to reinforce the JIT environment. The main idea in cellular manufacturing relates to construction of focussed cells in factories, which deal with particular part or product groups. Such cells are designed to ensure visibility of activity inside the cells to facilitate scheduling, planning of capacity and assignment of work.
Apart from such internal practices that are closely allied to Total Quality Management, (TQM), JIT requires the development of strong partnerships with suppliers and the complete support of all members of the supply chain. It is impossible for firms, however large, to run JIT systems without the complete cooperation of all supply chain participants and the construction of efficient and committed partnerships.
Advantages of JIT Management
The adoption of JIT techniques, though challenging, provides significant operating strength and flexibility to business organisations. It enables manufacturers to increase the efficiency of their production operations, make them more cost effective and increase their responsiveness to customer demands.
JIT allows manufacturing businesses to receive, check and provide components to production centres just before their requirement arises, thus enabling them to save on the various costs and facilities required to house and account for idle inventory. Many companies, especially those which are new look at JIT as a means to achieve excellence in areas of waste (which in JIT terminology stands for all things and processes that do not enhance value addition) elimination and short-term responsiveness to customer demand models. It allows businesses to reduce costs by reducing the money tied up in different sorts of inventory, increasing their responsiveness to customers and improving their logistics functions.
Disadvantages of JIT Systems
Whilst JIT is associated with significant improvement in operating efficiency and reduction of manufacturing costs, it is a complex process and has some inherent weaknesses that need to be addressed suitably.
It is essentially an interdependent process that involves the smooth and cooperative working of a number of parties who comprise the supply chain. With everybody relying on everybody else, the process is exposed to risks of disruption on account of avoidable and unavoidable circumstances at the end of various supply chain members. JIT operations can get frustrated on account of strikes by labour, interruption of lines of supply, variation in market demand, stock outs, reduction in to and fro communication and unanticipated production disruptions.
The involvement of the workforce in the implementation of a JIT system is important and less than enthusiastic endorsement and cooperation of the workforce could lead to problems and disruption in its operation. On the flip side, successful cooperation of the workforce and their participation in required training and orientation programmes required for JIT invariably leads to increase in workforce skills, motivation and empowerment.
The system is particularly vulnerable to transportation delays and port delays, especially in case of material that comes in from distant locations. In such conditions companies with JIT operations face exposure to risks of stock-outs and disruption in production because of their low inventory levels. The low levels of inventory that are integral to JIT systems lead to significant reduction in costs and deployment of funds, yet at the same time open companies to risks of stock-outs and consequent stoppage of manufacturing.
The adoption of JIT systems has also been found to be risky in cases of industries that experience seasonal demand fluctuations. Periods of high demand in such companies may well strain the supply chain and lead to production and sales problems. Such systems are also not suitable for customised production and work best for mass produced items in automated production environments.
Communication plays a key role in JIT environments. Risks are likely to occur in JIT environments that are prone to breakdown of communication and lead to disruptions in JIT supply chains.
Conclusions
JIT systems are integral to modern day manufacturing processes that focus on constant improvement of processes and enhancement of organisational value. Whilst complex in nature and difficult to implement, they provide significant organisational benefits and are being increasingly adopted by progressive companies. Care however needs to be exercised during its introduction and implementation to ensure that associated risks are addressed appropriately and businesses that take up the system do not suffer on account of unanticipated problems.
References
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Cheatham, C. B., & Cheatham, L. R, (1993), Updating Standard Cost Systems, Westport, CT: Quorum Books
Delbridge, R. (1998). Life on the Line in Contemporary Manufacturing: The Workplace Experience of Lean Production and the “Japanese” Model. Oxford: Oxford University Press
Droms, W. G. (1997). Finance and Accounting for Nonfinancial Managers: All the Basics You Need to Know (4th ed.). Cambridge, MA: Perseus Books
Epps, R. W. (1995). Just-in-Time Inventory Management: Implementation of a Successful Program. Review of Business, 17(1), 40+
Haber, J. R. (2004). Accounting Demystified. New York: AMACOM
Kliem, R. L., & Ludin, I. S. (1994), Just-In-Time Systems for Computing Environments, Westport, CT: Quorum Books
Manoochehri, G. (1988). JIT for Small Manufacturers, Journal of Small Business Management, 26(4), 22+
Riahi-Belkaoui, A. (1992). The New Foundations of Management Accounting, New York: Quorum Books
Someya, K. (1996). Japanese Accounting: A Historical Approach. Oxford, England: Oxford University
Vokurka, R. J., Lummus, R. R., & Krumwiede, D. (2007), Improving Manufacturing Flexibility: The Enduring Value of JIT and TQM, SAM Advanced Management Journal, 72(1), 14+
Whitford, J. (2005). The New Old Economy: Networks, Institutions, and the Organizational Transformation of American Manufacturing. New York: Oxford University Press
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