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A PROJECT ON

JUST IN TIME

IN THE SUBJECT

Advance Cost Accounting

SUBMITTED BY

Soumeet D. Sarkar

A041

M.Com. Part-I

UNDER THE GUIDANCE OF

Prof. Kedar Bhide

TO

UNIVERSITY OF MUMBAI

FOR

MASTER OF COMMERCE PROGRAMME (SEMESTER - II)

In

ADVANCE ACCOUNTANCY

YEAR: 2013-14

SVKM’S

NARSEE MONJEE COLLEGE OF COMMERCE &ECONOMICS

VILE PARLE (W), MUMBAI – 400056.

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EVALUATION CERTIFICATE

This is to certify that the undersigned have assessed and evaluated the

project on “ JUST IN TIME ” submitted by Soumeet D. Sarkar student of

M.Com. – Part - I (Semester – II) in Advance Accountancy for the academic

year 2013-14. This project is original to the best of our knowledge and has

been accepted for Internal Assessment.

Name & Signature of Internal Examiner

Name & Signature of External Examiner

PRINCIPAL

Shri. Sunil B. Mantri

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DECLARATION BY THE STUDENT

I, Soumeet D. Sarkar student of M.Com.(Part – I) in Advance Accountancy, Roll

No.: A041, hereby declare that the project titled “ JUST IN TIME ” for the

subject Advanced Cost Accounting submitted by me for Semester – II of the

academic year 2013-14, is based on actual work carried out by me under the

guidance and supervision of Prof. Kedar Bhide. I further state that this work

is original and not submitted anywhere else for any examination.

Place: Mumbai

Date:

Name & Signature of Student

Name : Soumeet D. Sarkar

Signature : _________________

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ACKNOWLEDGEMENT

This project was a great learning experience and I take this opportunity to

acknowledge all those who gave me their invaluable guidance and inspiration

provided to me during the course of this project by my guide.

I would like to thank Mr. Kedar Bhide - Professor of Advanced Cost

Accounting (MCOM – Narsee Monjee College).

I would also thank the M.Com Department of Narsee Monjee College of

Commerce & Economics who gave me this opportunity to work on this project

which provided me with a lot of insight and knowledge of my current curriculum

and industry as well as practical knowledge.

I would also like to thank the library staff of Narsee Monjee College of

Commerce & Economics for equipping me with the books, journals and

magazines for this project.

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CONTENT

Sr. No. PARTICULARS Page No.

CHAPTER I - INTRODUCTION

1.1 JIT Philosophy 7

1.2 JIT History 8

CHAPTER II - ABOUT JIT

2.1 WHAT to EXPECT? 10

2.2 BENEFITS OF JIT 11

2.3 UNDERSTANDING WASTE 12

2.4 EVILS of INVENTORY 13

2.5 JIT and QUALITY 15

2.6 PREVENTING QUALITY PROBLEMS 16

CHAPTER III - JIT CONCEPTS

3.1 UNIFORM PLANT LOAD 19

3.2 SETUP TIME REDUCTION 23

3.3 PULL SYSTEMS 28

3.4 JIT & PURCHASING 30

CHAPTER IV - CONCLUSIONS

4.1 IMPLEMENTING JIT 33

4.2 MANAGEMENT's RESPONSIBILITY 35

4.3 BIBLOGRAPHY 38

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INTRODUCTION

Just in Time (JIT) means making "only what is needed, when it is needed, and in

the amount needed." For example, to efficiently produce a large number of automobiles,

which can consist of around 30,000 parts, it is necessary to create a detailed production

plan that includes parts procurement. Supplying "what is needed, when it is needed, and

in the amount needed" according to this production plan can eliminate waste,

inconsistencies, and unreasonable requirements, resulting in improved productivity. It is a

production strategy that strives to improve a business return on investment by reducing

in-process inventory and associated carrying costs. To meet JIT objectives, the process

relies on signals or Kanban between different points, which are involved in the process,

which tell production when to make the next part. Kanban are usually 'tickets' but can

be simple visual signals, such as the presence or absence of a part on a shelf.

Implemented correctly, JIT focuses on continuous improvement and can improve a

manufacturing organization's return on investment, quality, and efficiency. To achieve

continuous improvement key areas of focus could be flow, employee involvement and

quality.

JIT relies on other elements in the inventory chain as well. For instance, its effective

application cannot be independent of other key components of a lean manufacturing

system or it can "end up with the opposite of the desired result." In recent years

manufacturers have continued to try to sharpen forecasting methods such as applying a

trailing 13-week average as a better predictor for JIT planning; however, some research

demonstrates that basing JIT on the presumption of stability is inherently flawed.

Just-In-Time (JIT) manufacturing distances itself from the competition because no large

capital outlays are required. Other methods promote complexity, large overheads,

automation, and other "state-of-the-art" technologies, while JIT advocates simplifying and

streamlining the existing manufacturing process.

Since World War II, traditional American companies have developed a way of doing

business that entails top management planning, re-planning, and more planning. Although

some planning is good, it ultimately adds no value to the end product. Customers want

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quality products at competitive prices - they couldn't care less how much planning was

required to get that product to them. By implementing JIT, much of the planning

disappears and a large portion of the remaining planning is entrusted to the shop floor

personnel.

The transition to JIT often is not easy, but it is almost always rewarding. All employees

in the company - from top management to direct labor - must have a clear

understanding of the benefits that JIT offers to them and to their company. JIT is not a

cure-all for every manufacturing problem. But, if implemented properly, JIT is a no-cost

or low-cost method for improving your manufacturing process.

PHILOSOPHY

The philosophy of JIT is simple: the storage of unused inventory is a waste of

resources. JIT inventory systems expose hidden cost of keeping inventory, and are

therefore not a simple solution for a company to adopt it. The company must follow an

array of new methods to manage the consequences of the change. The ideas in this way

of working come from many different disciplines including statistics, industrial

engineering, production management, and behavioral science. The JIT inventory

philosophy defines how inventory is viewed and how it relates to management.

Inventory is seen as incurring costs, or waste, instead of adding and storing value,

contrary to traditional accounting. This does not mean to say JIT is implemented without

an awareness that removing inventory exposes pre-existing manufacturing issues. This

way of working encourages businesses to eliminate inventory that does not compensate

for manufacturing process issues, and to constantly improve those processes to require

less inventory. Secondly, allowing any stock habituates management to stock keeping.

Management may be tempted to keep stock to hide production problems. These problems

include backups at work centers, machine reliability, process variability, lack of flexibility

of employees and equipment, and inadequate capacity.

In short, the Just-in-Time inventory system focus is having “the right material, at the

right time, at the right place, and in the exact amount”, without the safety net of

inventory. The JIT system has broad implications for implementers.

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The basis of Just-In-Time (JIT) is the concept of ideal production. It centers on the

elimination of waste in the whole manufacturing environment, from raw materials through

shipping. Just-In-Time is defined as "the production of the minimum number of different

units, in the smallest possible quantities, at the latest possible time, thereby eliminating

the need for inventory. Remember, JIT does not mean to produce on time, but to

produce just in time.

HISTORY

JIT is sometimes said to have been invented by Henry Ford because of his one-at-a-time

assembly line, around 1913. This is an incorrect conclusion since Ford's system could

handle no variety and was designed for large volumes and large batch sizes of the same

parts.

JIT was invented by Taiichi Ohno of Toyota shortly after World War II. Ohno's system

was designed to handle large or small volumes of a variety of parts. Many people are

intimidated by JIT because of its association with Japan. If these people take a broader

look at JIT, they will see that it is nothing more than good, common sense

manufacturing.

Ohno and his associates came to America to study Ford’s manufacturing processes. They

determined that Ford’s system was much like the system that Japanese companies were

using, but Japanese companies could not afford waste in their systems due to the

devastation to their economy caused by World War II. While in America, Ohno learned

much about America's culture. One of his discoveries has transformed the world's

perspective on manufacturing.

Legend has it that Ohno got the idea for his manufacturing system from America's

supermarket system. Ohno learned the Kanban (pull) system from our supermarket system

in which customers pulled items from the shelves to fill their shopping carts, thereby

creating an empty space on the shelf. The empty space is a signal for the stocker to

replace that item. If an item was not bought that day, there was no need to replace it.

When item quantities become low, that is the signal for the stockers to order more

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goods from their suppliers. Customers are content to take just what they need, because

they know that the goods will be there the next time they need them.

To apply this concept to manufacturing, Ohno devised a system whereby the usage of

parts is determined by production rates. Materials are pulled through the plant by usage

or consumption of the parts in final assembly. To obtain maximum results, Ohno decided

to move the machines closer together and form manufacturing cells.

The JIT system continued to evolve, with the central thrust being the elimination of

waste. Ohno's system has become a totally flexible system in which production rates are

determined by the end user rather than the producer.

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WHAT to EXPECT?

While the prevailing view of JIT is that of an inventory control system, it is much

more. JIT is an operational philosophy which incorporates an improved inventory control

system in conjunction with other systems, such as:-

1. A set-up time improvement system.

2. A maintenance improvement system.

3. A quality improvement system.

4. A productivity improvement system.

A properly implemented JIT system should:-

1. Produce products that customers want.

2. Produce products only at the rate that customers want them.

3. Produce with perfect quality.

4. Produce instantly with zero unnecessary lead time.

5. Produce with no waste of labor, material, or equipment. Every move has a

purpose and there is no idle inventory.

An overview of JIT literature suggests that the steps or elements of the implementation

process generally (though not always) include the following:-

1. Reductions in set-up time.

2. Utilization of a formal preventive maintenance program.

3. Utilization of quality circles.

4. Utilization of cellular manufacturing techniques.

5. Cross-training of employees.

6. Quality certification of suppliers.

7. Reductions in vendor lead time.

8. Reductions in lot sizes.

9. Sole sourcing.

10. Presence of one who championed the cause of JIT within the firm.

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Benefits touted as results of JIT implementation include:-

1. Reduced setup time. Cutting setup time allows the company to reduce or

eliminate inventory for "changeover" time. The tool used here is SMED (Single

Minute Exchange of Dies).

2. The flow of goods from warehouse to shelves improves. Small or individual piece

lot sizes reduce lot delay inventories, which simplifies inventory flow and its

management.

3. Employees with multiple skills are used more efficiently. Having employees

trained to work on different parts of the process allows companies to move

workers where they are needed.

4. Production scheduling and work hour consistency synchronized with demand. If

there is no demand for a product at the time, it is not made. This saves the

company money, either by not having to pay workers overtime or by having them

focus on other work or participate in training.

5. Increased emphasis on supplier relationships. A company without inventory does

not want a supply system problem that creates a part shortage. This makes

supplier relationships extremely important.

6. Supplies come in at regular intervals throughout the production day. Supply is

synchronized with production demand and the optimal amount of inventory is on

hand at any time. When parts move directly from the truck to the point of

assembly, the need for storage facilities is reduced.

7. Minimizes storage space needed.

8. Smaller chance of inventory breaking/expiring

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UNDERSTANDING WASTE:-

Ask almost any shop floor employee the definition of inventory and the likely answer

will be “you know all this stuff stacked up around here and all that stuff in the

warehouse”. Many employees (and some supervisors and managers) do not understand

that Work-In-Process (WIP) is also inventory. Pure and simple inventory is waste.

Another way to describe inventory is money loaned out of a company’s pocket that has

yet to be repaid.

JIT is much more than a plan for decreasing inventory, it is a manufacturing philosophy

for eliminating waste. For our purposes, waste can be defined as something other than

the essential resources of people, machines, and material needed to add value to the

product. Anything else, such as inventory, scheduling, meetings, warehousing goods,

management, and moving stock can be considered wasteful because these actions do not

directly add value to the product. All waste cannot be purged from the system, however,

we must strive toward that ideal goal. Above all it must be ever present in the attitudes

of our manufacturing system that cost without value is waste.

A typical company produces excess inventory with the idea that “we can use this stuff

when the next order comes in." Routinely these parts are forgotten when the next order

is placed. Other than initial costs of the products, they are also paying for moving the

product, warehouse space, fork trucks, warehouse personnel, tracking the products, and

moving the products again, etc. One company that we visited was constantly plagued

with the problem of misplaced inventory. They had numerous storage bins, plus

inventory was sometimes “temporarily” placed on the shop floor in different places.

More often than not, new parts would be made when the internal customer needed the

parts, because nobody knew the parts already existed. Another company we visited

wastes money on rust preventatives and the time consuming task of removing rust from

parts in storage solely for the benefit of excess inventory.

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EVILS of INVENTORY

Although inventory has long been accepted as a necessary evil we must remember that it

is still an evil. Traditional manufacturing processes build in safety stock at every station

throughout the entire system, from extra raw materials to warehouses full of completed

products. This superfluous WIP provides manufacturers with a means to endure the

problems, rather than solving the problems at the root cause. Figure below shows how

some problems can be disguised by excess inventory. The water shown in the graphic is

inventory and the rocks depict manufacturing problems. As the water level drops, more

and more rocks begin to surface.

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Let’s take a hypothetical look at a company that is reducing inventory. ACME

manufacturing produces roller skates for a major toy company. In one process, bearings

are pressed into the skate wheels. Frequently a wheel does not run true because the

bearings are inserted at an angle. This problem can only be detected after the wheel has

been assembled. When such a problem does occur the entire wheel assembly must be

discarded. This problem was undetected for years because the manufacturing line never

slowed down due to these defects. Extra wheels and bearings were always available to

the assembler.

After inventory was reduced, the wheel assembler had difficulty meeting demand. He no

longer had the inventory cushion to hide the quality problems. There was not enough

“extra” WIP to allow him to continually produce bad parts. Now that the quality

problem is evident, a concentrated effort must be made to solve it.

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Do not make the mistake of raising WIP to allow the line to flow smoothly. We need

the problems to surface so that we can solve them. Remember, the WIP is not the

solution to the problems it is only a means to wade through them. Inventory must first

be reduced, then you can solve the problems.

Inventory must be decreased using a systematic approach. A methodical approach is to

cut inventory by one half then solve the problems then cut half of that inventory and

solve the problems.

JIT and QUALITY

One of the great gurus of quality, Phil Crosby, says that companies often have a

misconception of quality. He says that the true definition of quality is meeting

requirements; not an intuition for aesthetics, roundness, or perfection; but something that

can be truly measured. If a Yugo (economy car of the early 1970s) meets its customer's

requirements as well as a Rolls Royce meets its customer's requirements, then it can be

argued that the Yugo is as much a quality car as a Rolls Royce.

The key to obtain quality is to obtain it from the source. The sources for quality are the

manufacturer’s and vendor’s processes, machines, and operators. Contrary to traditional

beliefs, the source of quality is not the inspection bench.

The single most substantial ingredient of JIT is quality. It is impossible for JIT to be

successful until the company has drastically improved its attitude toward quality. In the

language of the Malcolm Baldrige National Quality Award, quality is a “race with no

finish line." The ultimate aspiration is to satisfy all customers (internal and external) all

the time. The Wallace Company, a past winner of the Baldrige Award, installed a

buzzer on the shop floor that sounded anytime a customer called their customer service

hot line. Instantly all workers knew they had a dissatisfied customer.

Analogous to the familiar chicken or the egg question, it is often asked, “Which comes

first, quality or JIT?” Quality is a two way street; JIT is impossible without quality, but

quality is directly enhanced by JIT. Although quality is possible without JIT, it requires

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the use of wasteful procedures such as inspection and rework. JIT proposes the idea of

“do it right the first time” rather than inspecting in quality. In a JIT environment, each

internal customer (the next operator down the line) must be completely satisfied by the

previous operation. Any problems in quality are resolved immediately, rather than

allowing them to contaminate the system further.

To produce quality you must install quality. Quality must evolve from both sides at the

same time. To allow operators to satisfy their internal customers, quality procedures,

materials, machines, and mindset must be present. JIT is not possible without quality, but

JIT is a means by which quality is achieved.

A mathematics riddle known as the Xeno’s paradox asks if a person walks toward a

wall, each step being one half as large as the previous one, when will that person reach

the wall? The answer is "never", but that person is continuously getting closer and

closer to his or her goal. Continuous improvement in quality must be viewed in the

same way. If you set a standard at 95 percent, people figure that they are doing fine as

long as they are at or near that objective. Companies have to be motivated to advance

quality to increasingly higher and higher standards. Ultimately the goal should be

perfection.

PREVENTING QUALITY PROBLEMS

To dismantle the inspection bench mentality, we must take positive steps in prevention

of quality problems. Specific guidelines and rigorous procedures must be established. The

steps toward attaining a quality product are to first define the requirements, get the

process under control, and then keep the process under control.

Many manufacturing companies do an inadequate job of defining quality requirements. If

you are looking at a part or a process, and say “that’s good enough” then you have not

sufficiently defined your requirements. The real definition of quality is meeting both

internal and external customer requirements. Employees and vendors should have strict

guidelines that distinguish good parts (quality) from rework or rejected parts so 100

percent customer satisfaction can be reached.

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Let us look back at our ACME manufacturing example. The assembler had no specific

requirements for pressing the bearings into the wheel. He was told that the wheel must

run true. What is true? How much leeway does he have? Can the bearings be somewhat

angled or must they be exactly straight? The assembler should be supplied with strict

criteria for quality such as “each bearing should be pressed into the wheel at a

perpendicular angle plus or minus one degree”. He now knows what is expected and

what is considered good enough.

To get the process under control, you must first find the root cause of the problem.

This can be accomplished by running the gamut from simple methods such as pareto

and matrix analysis to complicated design experiments. A common problem is to attack

the symptom and not the problem. For example, if a breaker tripped at your house, you

could reset the breaker and hope for the best, replace the breaker box, or you could

check for an overloaded plug. In your manufacturing process, don’t make the mistake of

rewiring the whole house before the actual problem is diagnosed.

Everyone has worked on a problem that magically went away, although you were not

exactly sure why. It could be any one of the solutions you tried or a combination of

any two. In this case, you do not know if you have gotten to the root cause or not.

You must be able to turn the problem on and off to ultimately conclude that the

problem has been solved. If you cannot turn the problem on and off it is likely that

you have solved a symptom rather than a problem. At this point you should ask “why”

and continue to ask “why” until you find the root cause. The following the diagram

gives a proper understanding of finding the root cause of problem:-

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Here, disciplining the waitress will not solve the real problem. The root cause of this

problem is a bad promotion policy. The long-term solution is a change in that policy. If

you ask “why” enough times you will get to the root cause.

Once you have found the solution, keeping the process under control is an easier task.

Statistical Process Control (SPC) is a method of managing a process by gathering

information about it and using that information to adjust the process to prevent problems

from occurring. Using SPC is one way to keep your process under control. Poka-yoke, a

Japanese word for fail-safing, should also be applied. In the Poka-yoke theory, parts and

processes are designed so that doing the job right is easier than doing it wrong. An

example of this is to design a part that is asymmetrical so that it fits only one way,

thus eliminating mis-installation. Machines can be fitted with limit switches that will not

allow it to cycle if all processes are not completed in the correct order. These methods

should not only be used by buyer company but by selling company as well.

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JIT CONCEPTS

1. Uniform Plant Load:- The diversion between traditional manufacturing philosophy

and JIT becomes apparent when discussing the concept of Uniform Plant Load.

Everyone will agree that we need to eliminate waste and strive for quality to

receive the most benefit from our manufacturing systems, but there are two views

on how to go about this. The traditional system calls for production at the

“machine rate” while JIT advocates production at the “customer requirement rate.”

The JIT concept of Uniform Plant Load states that balance between operations is

more important than speed, and ideally we should never produce faster than the

customer requirement rate.

The concept of Uniform Plant Load incorporates two radically different facets of

production. They are rate of production (cycle time) and frequency of production

(level loading). It must be remembered that neither of these concepts will achieve

maximum results until the process is under control and quality has been improved

to world-class or near world-class standards.

a) Cycle Time:- Traditional definitions of cycle time include the time it takes

a machine to cycle through its process or the time from start to

completion of a product (throughput time). Under JIT, cycle time is the

total time required for a worker to complete one cycle of operations,

including walking, load/unload, inspect, etc. Cycle time should equal the

customer requirement rate, or better stated the sales rate. We should view

the last step in the manufacturing process as when the product gets sold,

not when the product is completed. This rate is also expressed in terms of

takt time. Takt time is the total daily operating time divided by the total

daily requirement. Takt time tells you how many hours, minutes, or

seconds are required for each part.

Takt is a German word for baton. In comparing a manufacturing process

to an orchestra, the rate at which the orchestra leader moves the baton is

the rate at which the orchestra plays, just as the rate of customer

requirement is the rate of company production.

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Companies that have produced as fast as possible (machine rate) for many

years often struggle with the concept of slowing down individual machines

so as to achieve perfect balance between operations. If your customer

requirement rate is 20 parts per month, then why would you want to

produce 30 parts per month? This would lead to the evils of inventory –

the consumption of space, waste in motion, and materials that hide

problems. Conceptually, each machine should run as if a rheostat were

attached. The rheostat could be dialed up or down as needed to produce at

the exact rate required. If the requirement rate changed from month to

month then the production rate could be altered to meet these requirements.

If you set the last operation to the sales rate then each preceding operation

should feed the last operation at that rate. This system can then be

exploded backwards throughout the plant until the first operation (usually

raw materials) is reached.

If ten people are producing 20 parts per month in August, but only ten

parts are needed in September, five people should then be capable of

producing the needed ten parts so that labor costs remain constant. This

reduction can only be accomplished with a good physical plant layout and

a well-trained, flexible workforce. The logical questions at this point are:-

“Where do the five people go?”, and “Where do they come from when

production goes back to 20?” It must be made abundantly clear that the

purpose of implementing JIT is not to reduce the workforce. You can now

use this idle time to cross-train employees for even more flexibility. When

not on the production line employees can perform other tasks, attend team

meetings, do preventative maintenance, make plans to further improve the

process and so forth. Rather than producing extra parts and dealing with

inventory, you are now optimizing employee time. That leads us to the

golden rule of JIT:- Machines can be idle but people cannot.

We should not make the mistake of trying to find the perfect balance

between parts produced and manpower required. There is no perfect

balance. We must decide how many parts the line should produce that

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month, week, or day and balance to that number. Remember, the answer is

not to run the line as fast as possible, but to produce to the customer

requirement rate by deciding how fast the line must run to meet the

particular deadline and how many people are needed for this rate.

b) Level Loading:- The second facet of Uniform Plant Load is level loading.

Level loading suggests that if you sell a product every month, then make

the product every month. Ideally, if you sell a product every day, then

make the product every day. You must make your products as frequently

as your customers require them.

Let us assume that your company produces three products – alphas, betas,

and deltas from the same line. Cycle time has been implemented, therefore,

your equipment is running at the right speed. For example, we will say

that in the month of March we will need 25 percent alphas, 50 percent

betas, and 25 percent deltas. In a traditional manufacturing environment

alphas would be produced for 25 percent of the month. We would then

change over and run betas for 50 percent of the month; change over again

and run deltas for the remaining 25 percent of the month. Do your

customers buy alphas the first week, betas the next two weeks, and deltas

the last week?

The next logical step may be to produce a week’s worth every week. You

have instantly gone from setting up 3 times a month to 12 times a month.

Traditional manufacturing will be quick to note that valuable time will be

spent setting up with no time to produce. Increased number of changeovers

can be accomplished only after setup time has been reduced to allow this.

We will address the subject of setup time in the next chapter. In a

nutshell, if we are to change over four times more often, then we must

reduce setup time to 25 percent of its original time. To meet these goals

you must take a structured step-by-step approach. A lofty goal may be to

produce a day’s worth every day. It is true this is a very high standard

but Toyota is currently producing two hours’ worth every two hours.

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Setup reduction has a direct correlation to batch size. If setups are reduced

by 50 percent then batch sizes can be reduced by 50 percent. Additional

direct benefits of level loading are learning curve improvements, increased

mix flexibility, reduced inventory, shorter lead times, and quality

improvements.

Let us look at our original process of producing alphas for one week,

betas for two weeks and deltas for the remaining week. If a customer calls

in a change order for more alphas the third week of the month; a three-

week delay occurs before alphas are being produced again. If you are on a

daily or even weekly production schedule, reaction to changes in mix can

be almost immediate. Production of alphas can begin the next day or you

could change over the same day if requirement rate of betas and deltas

would allow.

As the system begins to produce at the customer requirement rate and

reduced setup times are translated into smaller batch sizes, lead times are

also reduced. When a product is being manufactured monthly, lead times

are expressed in months. Weekly manufactured parts require lead time in

terms of weeks and daily parts in terms of days. There is now no need

for extravagant scheduling and tracking systems. If the requirement rate

changes, parts can be put into the queue at the next changeover period.

As stated earlier there is a direct correlation between setup reduction and

batch sizes. The same can be said for batch sizes and potential cost of

failure. If a batch size is cut in half, the potential cost of rework or scrap

is cut in half. A streamlined manufacturing process dictates that quality

problems will be less likely and if they occur will be much easier to

detect and correct. Smoother production runs need fewer adjustments,

therefore quality becomes more predictable.

c) Learning Curve Improvements:- Learning curve improvements are achieved

when virtually every day is the same. If you are producing all of your

products at the customer requirement rate each day then the days become

more complex but each day is the same as the day before. Setups occur

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every day, therefore there is not time to forget the setup procedure as was

the case with infrequent setups. There is no time to fall into a pattern for

weeks only to have abrupt changes that require relearning the setup and

production process for the next product. Once the employee gets into the

rhythm of daily production, the day-to-day learning curve virtually

disappears.

Uniform Plant Load allows us to produce at the exact rate and frequency

that the customer requires. Other aspects of JIT – setup reduction, machine

cells, pull systems, JIT purchasing, and scheduling - are methods used in

achieving plant balance.

2. Setup Time Reduction:- Setup time is the interval between the production of one

good part and the production of another good but dissimilar part. Setup reduction

is a prerequisite to implementing many aspects of JIT by directly or indirectly

influencing cycle time, level loading, work cells, pull systems, cost, WIP,

purchasing, floor space, quality, operator numbers, and batch sizes. Everyone will

agree that a two hour setup reduced to two minutes is a great productivity

improvement, but this saved time should not be applied to longer production runs

that increase batch sizes. An hour saved that is transferred to the production of

parts simply puts those parts in inventory, which is the exact opposite of what

we are striving for. Our objective is to apply this hour to more frequent setups,

thus giving us more flexibility to better implement JIT.

a) Getting Started:- Our mission is to reduce setup time by 75 percent on a

low-cost or no-cost basis. Some machines will require a little more setup

time and some a little less, but 75 percent reduction is our initial goal.

This may not be accomplished in a week or a month, but can be achieved

through continuous improvement.

You must first decide which setup to work on. A good rule of thumb is

to select your most complex setup. Typically this is the setup that causes

the largest bottleneck (takes the most time), and therefore offers the

opportunity for the largest time savings. After a particular setup has been

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chosen, a Setup Reduction Team must be formed. The next problem that

arises is who should be on the Setup Reduction Team.

b) Setup Reduction Teams:- Traditional management behavior seems to

indicate a belief that the managers and the engineering staff have all the

solutions. In recent years new management approaches, specifically TQM

(Total Quality Management), have disproved the myth that management

best knows how to solve all manufacturing problems. The new Setup

Reduction Team should consist of the real experts - the operators and setup

people. Contrary to traditional management’s beliefs, these people have

superior knowledge of their machines and the process. The typical Setup

Reduction Team should have three to five shop floor personnel - a

combination of operators and setup people, one to two engineers and

possibly a manager.

You will notice that the single largest component on the Setup Reduction

Team is the shop floor personnel. They probably have all the answers to

reduce setup time but until now had no avenue to impart their wisdom.

The reason more engineers are not involved with the group is that most

setup problems are not engineering problems. Engineers tend to emphasize

the mechanics of the setup, but the real reasons time is lost are lack of

preparation, lack of organization, and operator error. Such problems may

include not knowing what the next job is, setting up for the wrong job,

inability to find a fork truck driver or the fork truck is in use, inability to

find or not having the right tools, broken tools, not remembering the exact

setup procedure, not having the right bolts, or having no nuts for those

bolts. The mechanics of the setup may or may not need to be modified or,

if so, only after other improvements have been enacted.

After the team has been selected, proper training in team concepts must

take place. The team should know its mission and act on its findings, not

just study and make recommendations. Team training is a separate subject

in itself and space does not allow us to pursue the topic here. There are

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many good texts and seminars offered in this area that will allow you to

learn team training concepts.

c) Videotaping:- If a picture is worth a thousand words, a videotape is worth

at least a million. The single best way to document and analyze a setup is

with videotape. A verbal description or written account of a setup will not

give you the detail of a video. Many non-value added steps can be

uncovered that would otherwise remain camouflaged by other means of

documentation.

Obtaining a credible videotape is often not easy. One major dilemma that

occurs is a phenomenon known as the Heisenberg principle. Simply stated

this idea is the belief that something that is being observed is changed

merely by the fact that it is being observed. If workers know that they are

being taped they will perform the setup with a much greater sense of

urgency. Outside preparations may occur that are not normally done. These

actions lead to a misrepresentation of the true time and steps involved in a

setup, thus defeating the purpose for videotaping.

Another problem that may occur is apprehension about being videotaped.

Operators may fear that management will use the tape to place blame for

productivity problems, or to teach others how to do their job, or that other

team members will ridicule their performance. The number of rumors that

can surface when a video camera appears is infinite. The best deterrent to

these problems is prevention. Operators should be briefed on the reasons

for documentation prior to any videotaping with all questions being

answered then. It should be abundantly clear that no additional actions

should be taken in the documented setup and that safety will never be

neglected to gain speed. At no time will any guards be removed, parts

fastened less securely, work be done on moving equipment, etc.

One method to obtain more “true” documentation is to do videotaping

without announcement. Place the video camera in position just prior to the

setup, thus allowing no time for special preparations. The documentation

should include the last part from the previous job coming off the machine.

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The timer should then be set and everything should be taped from that

point on. Tape continuously even if no work is being done on the

machine. When the first good part from the new job is finished, the

documentation is complete.

Once the videotape is complete, the Setup Reduction Team begins a

detailed analysis of the setup procedure. The primary focus of the analysis

is to reduce machine downtime. Team members generate a list of problems

to solve and possible solutions for the problems

d) The SMED System:- One proven technique for optimizing setup time is

the Single Minute Exchange of Die(SMED) system. The SMED system

was founded by Shigeo Shingo while consulting with Toyota in 1969. No

man has revolutionized setup reduction philosophy as much as Shingo. He

has won numerous productivity improvement awards in Japan, the United

States, and the world over. The basis of SMED is the performance of

setup operations in under ten minutes, i.e., in a number of minutes

expressed in a single digit. The four conceptual stages of SMED:-

Internal setup and external setup are not distinguished.

Internal setup and external setup are distinguished.

Internal setup is converted to external setup.

Streamline all aspects of the setup.

The concept behind the SMED system is distinguishing internal setup

(performed while the machine is off) from external setup (performed while

the machine is producing) and converting internal to external setup. This is

accomplished by examining the true functions of setups. Once this step has

been successfully applied, only internal activities are left. An example of

this would be to locate and organize all the bolts needed for the next

setup while the previous job is running instead of rushing around looking

for bolts after the machine is off.

After the activities of the setup have been corrected, the mechanics of the

setup need to be addressed or as Shingo states, “all aspects must be

streamlined". Two major categories in this area are clamping and adjusting.

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Numerous texts have been written concerning quick die change, Poka-yoke

(fail-safing), fixtures, setup reduction, and similar topics. Although we will

deal with setup mechanics in general terms, further study in this area is

recommended.

e) Clamping:- Video documentation will often reveal that substantial time is

spent loosening and tightening nuts and bolts. Threads are a very

inefficient method for speed in a setup, because only the last half turn of

a bolt or nut gets the job done. The first fifteen, twenty or twenty-five

turns are a useless waste. Another problem with threads is the use of

tools. Picking up a wrench - if you can find it - is also a waste; therefore

we must look for alternative methods for clamping. Do not make the

mistake of trying to buy the solution. While it is true that hydraulic or

pneumatic clamps save much time and wasted motion, they violate our no

cost or low cost policy. Look for methods that require only one or two

motions such as cams, levers, or pins. You can explore purchasing “high-

tech” clamping systems after all other avenues have been exhausted or

continuous improvement has stagnated.

f) Adjusting:- The videotape may also show large amounts of time is being

spent to get the job to run right. Traditional thoughts have been that

adjustments are necessary, therefore no energy has been expended to

eradicate the problem. Our aim is to have quality parts produced the first

time, every time. Bad parts should never be produced due to setup. The

problem with adjustments arises because most machines are infinitely

adjustable. For example, something on a machine is measured, or tightened

down, then a part is run. Then the machine is adjusted, tightened down,

then another part is run. This continues until a good part is produced.

After analyzing the videotape you may conclude that the machine needs to

be adjusted to a few set positions. At this point the machine should be

converted to positive stops for those positions rather than endlessly

measured positions or better yet the machine can be designed to be self-

positioning.

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Reducing setup is a crucial step toward accomplishing JIT manufacturing

goals. Setup reduction is considered a high priority because it affects so

many facets of JIT. Setup reduction is much easier than most people think

after traditional methods have been purged. It is extremely important to

adopt new perspectives that are not bound by old habits.

3. Pull Systems:- We are now ready to address pull systems, sometimes known as

kanban systems or supermarket systems. The United States is in the process of

phasing out the use of the word kanban due to its association with Japan. Kanban

is not even a universally accepted Japanese term since some plants in Japan that

compete with Toyota view it as a Toyota-coined word. For our purposes, we will

use the term pull system.

As mentioned earlier, Toyota sent representatives to the United States shortly after

World War II to analyze their production techniques. They concluded that

Americans ran their factories much the same way the Japanese ran their factories.

Every operation in the factory works independently, then forces its parts onto the

next operation. The Japanese termed this process a push system.

a) The Push System:- A push system originates with a forecast schedule.

This forecast is forced upon the previous step (assembly) in the

manufacturing process, all the while adjusting for lead times to predict

which sub-assemblies are needed and by when. The sub-assembly forecasts

are then forced upon the various component levels still maintaining lead

time, thus completing the cycle through the total manufacturing system

down to raw materials. Paperwork accompanies this system informing

operators what is needed and by when.

Each operation then begins to manufacture parts and push them on to the

next operator. That operator receives the parts, does his work and pushes

them along the line. The expectation is that all this inventory will be

pushed along and will reach the predetermined places at the right time so

as to be shipped on schedule. Schedules are then analyzed to see what

was not on time and future schedules are adjusted accordingly.

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b) From Supermarket to Factory Floor - The Pull System:- While in

America assessing our manufacturing processes, the Japanese visited some

of our supermarkets in their spare time. What they learned and took back

to Japan has revolutionized manufacturing. A supermarket is managed very

differently from a factory. Shoppers come to a supermarket knowing that

there will always be a small stock of needed inventory. Customers feel no

pressure to buy large quantities because they know that the goods will be

available when they need them. Every night a “stocker” replenishes the

inventory that has been removed. Empty spaces on the shelves are the

stocker’s signal to produce more goods (restock). Exactly what has been

taken is what is replaced. The customers have directly told the store what

to replace by what has been purchased.

The Japanese converted this supermarket system for use in their factories.

No operation can produce goods until it has received a signal from its

customers. When the operator gets a signal from the customer, he then has

authorization to produce a certain number of parts in a specific time

period. The most effective pull signals are visual indicators such as empty

containers or empty floor space. If you have an empty container, fill it up;

if you have no container then do not produce that part. Other types of

signals are limited only by the imagination. They may include such things

as color-coded golf balls, washers, different shaped cards, flashing lights, or

kanban cards. The kanban card tells what type of part to build, what to

put the parts in, how many parts to build, where to send the parts and

how many cards of these parts are required to maintain a smooth flow.

Paper work is limited in a pull system.

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4. JIT & Purchasing:- Purchasing cost is a critical factor for a JIT manufacturing system,

but it lags behind quality and delivery lead time in importance. Vendors must deliver

quality products on time (just in time) before a JIT system can work, regardless of cost.

JIT purchasing offers a framework for a true partnership between vendors and companies

that helps to solve the problems of cost, quality and lead time.

a. Partnerships:- Traditional relationships between companies and vendors do

not allow for partnerships to be formed. Companies send out bids for

purchased materials with the contract going to the lowest bidder. Six

months down the road another bid is let with the lowest bidder getting

that contract. If the current vendor is not the lowest bidder that vendor

may lose six months of business. Companies want vendors to cut their

profits, but vendors need to be assured of a good profit now because they

may not be here six months from now.

The new JIT partnership that we are striving for is a long term, mutually

beneficial relationship with fewer but better vendors. Mutual trust must be

developed between companies and vendors. This cannot be accomplished if

vendors change every time new bids are sent out. For this reason a

company should have few suppliers (preferably one) for each purchased

material or component. This idea of single sourcing is as troublesome to

traditional purchasing people as slower run speeds and smaller batch sizes

are to traditional manufacturing people.

Traditional purchasing people question whether the company is getting the

best price possible by using only one supplier. As a company is reducing

its vendors, it is obtaining the best price due to traditional competition.

Vendors embrace the idea of a long term relationship because it allows

their sales to remain more constant. Strict criteria concerning dependability

(quality and lead time) should be placed upon vendors by companies.

When this criteria is satisfactorily met, the vendor will become “certified”.

Ideally certified vendors deliver products just in time, every time, with 100

percent quality. A partnership is then formed between the company and the

vendor so that they can actively work together to continually lower the

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cost of purchased material. It would be impossible to form such

relationships with several, ever changing vendors.

b. Eliminating Procurement Wastes:- Three areas of waste need to be

recognized before a company can successfully implement JIT. First is the

waste in a company’s own manufacturing process:- the moving, counting,

rework, storing, scheduling, setup times, and inspection. Secondly, waste

within the purchasing process itself should be eliminated. A third area that

is often overlooked is the manufacturing philosophy of a company’s

vendors. Since an average of 70 percent of a company’s costs come from

purchased materials, every company should aid its vendors in eliminating

waste in the vendor’s manufacturing process. However, it should be

stressed that a company must first get its own house in order (eliminate

waste) before the company can help its vendors to improve their processes.

Let’s look at a few non-value added steps (waste) in a typical component

before a value adding process happens. A purchase order does not add

value, an amendment to a purchase order does not add value, reports and

invoices do not add value, taking something off a truck and putting it in a

holding area does not add value, inspecting it does not add value, moving

it to a stockroom does not add value, taking it from a large container and

placing it in a small container does not add value, and moving it to where

it is going to be used does not add value. The way to eliminate waste is

to eliminate all steps that do not add value to the product.

The initial phase should be to delete inspection of all incoming raw

materials, parts, and components. This can be accomplished by working

with vendors to make sure they understand the process and how to solve

problems in the process. They should have a thorough understanding of the

standards that you require and have competent inspection procedures so

they can deliver 100 percent quality materials and components. The

eventual goal is for vendors to monitor rather than inspect, with all

operations done right the first time.

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c. A Day’s Worth Every Day:- In a repetitive manufacturing environment,

the same amounts of inventory should be used up every day. Ideally

materials and components will be delivered in the afternoon, used the next

production day, and shipped the day after in the form of finished products.

Packaging in this process does not add value, therefore reusable containers

should be used to ship goods if possible. The vendor delivers goods to the

production line and picks up empty containers for the next day’s shipment.

These containers are the pull signal that tells the vendor to produce more,

thus eliminating the need for purchase orders. Eliminating packaging cuts

cost for the vendor and the company, causing the partnership between the

two to be strengthened.

Since these vendors are certified, there is no need for incoming inspection.

A central holding dock or receiving area is not needed. There is no need

for a stockroom or an inventory tracking system. There is no need for

picking up and transporting. Purchase orders have been deleted. There are

no corrugated boxes or excess paper to be ripped open and thrown away.

And finally, no incoming invoices to be processed. Although a partnership

must be built on trust, there is often no trust pertaining to money matters.

The main proof of goods received is the shipping records. If two vendor

components are needed for each product manufactured, you must deduce

that if you shipped 100 products, you owe the vendor for 200 components.

If the product was shipped, the components must have been in it.

Of course, eliminating incoming invoices only works for a repetitive

manufacturing facility, but all companies should question the way business

is being conducted now. Every process in the purchasing department should

be optimized through the use of JIT/TQM principles (teams, value-adding

analysis, cross-training, etc.). Companies must strive to form a long-term,

mutually beneficial partnership with vendors that is built on trust.

Traditional methods of purchasing will no longer apply in the new JIT

environment.

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CONCLUSION:-

IMPLEMENTING JIT

JIT implementation must start by creating a suitable environment for JIT to flourish. A

structure must be established whereby responsibility for problem solving is appropriated

to all levels of the organization. Shop floor personnel will be asked to find solutions for

shop floor problems and so on throughout the organization. This reversal from traditional

management style to a Total Quality Management (TQM) style can only be accomplished

through Total Employee Involvement (TEI) and employee teams. TQM is a prerequisite

to JIT.

I. Forming Teams:- The first team that should be established is the quality team

sometimes called the Executive Council or Quality Steering Committee. No matter

what you call it, the objectives of the top team will be the same. The Steering

Committee will address the issues with TQM implementation (you are not ready

for JIT yet) while attending to everyday organizational issues as well. If possible,

Steering Committee members should be removed from the interruptions of

everyday organizational decisions. It is a proven fact that companies that allow

their Steering Committees to dedicate all their time to solving TQM/JIT

implementation problems have higher success rates and shorter implementation

times.

The Steering Committee will be made up of high ranking officials within the

organization. They will assign teams from the workforce to solve various

implementation problems. The employees that constitute these teams now have the

power to make decisions that directly affect productivity at their level. Team

logistics will not be discussed in this manual.

II. Developing a JIT Strategy:- Now that you understand the basics of JIT, a

specific implementation strategy must be developed. There are no cookbook

solutions for JIT implementation. Each Steering Committee has a different vision

and each company goes about implementation differently. Below are examples of

how JIT has been successfully applied in various types of organizations:-

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Company 1 concentrated on finding the bottleneck in its manufacturing

process and worked to eliminate it through reducing setup times, forming

machine cells, removing non-value added steps, or whatever means

required. After each bottleneck had been eliminated, the company found the

next largest bottleneck and eliminated it, and so on, throughout the entire

organization. Employees are still finding bottlenecks (albeit much smaller

ones), and will continue to do so through the process of continuous

improvement.

Company 2 implemented JIT at its final operation and progressed in

reverse order throughout the plant until reaching incoming raw materials.

The idea behind this strategy is that as you implement JIT, you eliminate

the need for excess inventory for the succeeding process or processes down

the line. Suppose a plant has nine operations to perform before a part is

shipped. If you optimize step nine first, parts can be pulled from step

eight to step nine after eight has been optimized. When you reach step

five, parts will flow from five to nine in a true JIT fashion.

Company 3 started by removing as many non-value adding steps from the

manufacturing process as possible without moving any machines. Employee

teams solved as many problems as they could while leaving machines in

the traditional configuration. Machines were then relocated into cells and

the teams went back to work to eliminate waste in the new configuration.

The teams will now continually move machines and optimize the process.

Opposite to Company 3, Company 4’s Steering Committee moved

machines into cells to improve product flow. Employee teams were then

tasked with removing as much waste from the process in the current

configuration. When teams recommended, machines were moved again.

Company 4 moved machines frequently while company 3 rarely moved

machines.

Company 5 used what we will call the shotgun approach. Teams were

tasked with implementing JIT as fast as possible with no visible structured

approach. Machines were moved and inventory reduced and then it was up

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to the teams to implement JIT. Problems were solved on a priority basis

as determined by the Steering Committee. A word of warning:- this

approach cannot happen if quality will not allow smaller inventories. On

the positive side, employees were assured of management’s commitment

because the conversion to JIT happened fast.

Similar to Company 2, Company 6 initiated JIT one cell at a time, but

not at the last operation. Pilot projects were selected by the Steering

Committee on the basis of success probability. Since the pilot project set

the tone for the entire JIT effort, a project was chosen that would get the

best results. Company 6 continued to add projects until the entire

organization was converted to JIT.

These six companies used six comparable but different approaches to achieve the same

results. You may choose a method similar to one of these, a combination of these, or a

completely different method to implement JIT. How you accomplish JIT is not as

important as when you do it.

MANAGEMENT's RESPONSIBILITY

The pre-dominant reason for JIT failure is lack of commitment by top management. JIT

must be launched where there is absolutely no skepticism about management’s long term

commitment to JIT success. Employees recall management’s past track record on “flavor

of the month plans” that died quietly with little or no fanfare. The first time

management compromises quality in favor of quantity it will devastate the morale of the

shop floor personnel. They sense that management’s main emphasis is money for

products shipped, not customer satisfaction, thus relegating JIT to a quiet death.

JIT must have a champion for its cause within every organization. Ideally, this advocate

would be the highest ranking person who applies to your situation, i.e., the CEO at the

corporate level, the division manager at the division level or the plant manager at the

plant level. Typically, the consciousness of JIT penetrates the organization somewhere

below this top level of management. For the greatest chance of success, JIT should be

presented to the top manager as soon as possible. By initially teaming up with the top

manager, he or she will perceive ownership of the JIT concept, thus he or she will have

36

a stronger commitment to JIT. If the top management does not embrace the concept of

JIT, but rather it develops at the middle management level, the chance for failure

increases.

There are two key elements that are management's responsibility:- motivation and

education. Management must use these elements to overcome the reluctance to change by

the employees and the natural fear that accompanies change. Each level of the

organization has different fears about JIT so each level requires a different motivational

approach. Management must understand the apprehensions of people at every level and

what actions can be taken to gain their trust and commitment to join the JIT venture.

I. Motivation:- Top managers should already be motivated by what they see as

JIT’s ability to produce more efficiently. Upper and middle managers often feel

they are caught between a rock and a hard place. Top management is angry

because JIT is not progressing fast enough and the shop floor employees are mad

because they cannot perform the JIT miracles that middle management expects of

them. Middle managers have worked hard to gain the status that they now have

and feel threatened by the new JIT style. The means to conquer these fears is

trust. Middle management can be motivated by knowing that top management is

100 percent dedicated to JIT, and that top management is aware of the problems

and will help solve these problems. Finding these solutions often is not easy, but

can be accomplished by a motivated management staff working closely with top

management.

Until now shop floor personnel have made no decisions, therefore have taken no

risk of making the wrong decision. Management must motivate these people by

assuring them that making a wrong decision is permissible as long as they learn

from it. Shop floor personnel also have major concerns about job security. Top

management should calm these fears through a no-layoff guarantee. Management

should also form a partnership with all employees to earn their trust and motivate

them by communicating to them that the whole organization must change, not just

the shop floor personnel.

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II. Training:- Management must convey to all employees why the organization is

being restructured. If the company is in trouble, management should be honest

with the employees. All employees should be trained in the reasons for and

methods of JIT. Employees are more receptive to JIT if they understand how pull

systems, setup reduction, reduced inventory, plant loading, shorter lead times,

better quality, etc., can lead to a larger market share, higher sales, and increased

customer satisfaction. Management should devise a structured approach for training

all employees in the principles of JIT. An employee in purchasing may not need

to know how to reduce setup time on a particular machine but must know why

this time must be reduced.

Management must also participate in training. Other than a complete understanding

of JIT principles, managers will need training in “modern” management

techniques, such as Total Quality Management (TQM). Managers must develop the

total quality mindset that will allow them to lead the organization into JIT.

III. Leadership:- Management must realize that actions speak louder than words. Any

conflict between management’s words and management’s actions will be noticed

by employees. If management feels that training is important but misses a training

session in favor of a “higher priority,” it has sent a negative message to the

employees. Top management must demonstrate its commitment to JIT through

long hours and hard work. Management’s actions should build employee trust, and

trust is the most important element of any plan.

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BIBLOGRAPHY:-

1. www.wikipidea.org

2. www.toyota.com

3. www.icai.org

4. The Just-In-Time Breakthrough by E.J.Hay.

5. A Revolution In Manufacturing: The SMED System by Shigeo

Shingo.

6. JIT Factory Revolution by Hiroyuki Hirano.