Just-in-time production

Before you read

Key terms

Choose the Russian equivalents from the right-hand column for English terms on the left.

1) lean production	a) система синхронизации многоэтапного производства и материально-технического обеспечения, осуществляемая с помощью карточек производственного заказа, передаваемых от одного подразделения предприятия другому
2) assembly line	b) "точно в срок (вовремя)", "точно по графику" (концепция управления, предполагающая поставку ресурса как раз в тот момент, когда его нужно использовать)
3) kanban system	c) снижение издержек/затрат; уменьшение расходов с целью повышения прибыльности (напр., путем сокращения неэффективных расходов) или в целях экономии, когда компания испытывает финансовые трудности
4)just-in-time production	d) экономичное производство; всесторонне рационализированное производство (сочетание лучших специалистов, материалов, оборудования и систем)
5)demand fluctuations	e) процесс обмена информацией между элементами системы, уровнями и членами организации; в процессном менеджменте: один из связующих управленческих процессов
6) lockout	f) сборочный конвейер, сборочная линия
7) communication	g) закрытие предпринимателями одного или нескольких предприятий с тем чтобы заставить рабочих и служащих принять навязываемые им решения
8) cost reduction	h) поточное производство
9) flow production	i) колебание спроса

Think ahead

1. Why do you think the decision on how much inventory to have is of great significance for efficient production?

2. “There is a link between the demand for a product and the method used in its production”. Do you agree? Why?

3. “Flow production is efficient only when a large number of requirements have been met”. What are the important requirements for efficient flow production?

Text 2.4 Read the text and explain the idea of just-in-time production.

Just-In-Time Inventory Management

Overview

Just-in-time is a management philosophy that has gained a wide acceptance in business. Just-in-time production(JIT) is a system in which nothing is bought and produced until it is needed. Each section of the production process makes the necessary units at the necessary time – only when they are required by the next stage of the manufacturing process, or by distributors or customers. So, components are delivered just when they are needed and there is no inventory. In order to accomplish this goal a firm must try to reduce waste, cut costs and increase value.

The system is usually credited to Taiichi Ohno, vise-president for manufacturing with Toyota in Japan in the early 1950s, but he said he got the idea from looking at American supermarkets. The Japanese variation of JIT production is kanban. It is a just-in-time manufacturing process in which the movements of materials through a process are recorded on specially designed cards. American companies have developed versions of JIT, which they call lean production, or stockless production, or continuous flow manufacture.

Strengths of JIT

There is much strength to incorporating JIT manufacturing in a company. JIT allows manufacturers to purchase and receive components just before they are needed on the assembly line, thus relieving manufacturers of keeping and managing idle parts. It helps prevent manufacturers from being stuck with inventory that may become obsolete. JIT was initially developed and justified based on benefits of cost reduction and quality improvement dimensions. JIT manufacturing reduces and minimises inventory costs, and can be a real money-saver for a company. Companies are not only more responsive to their customers, but they also have less capital tied up in raw materials and finished goods inventory that allows them to optimise the transportation and logistics operations. Thus, JIT reduces costs and waste of inventory. There are other advantages apart from reduced inventory costs. There is no risk of overproduction if demand falls or of idle workers waiting for work-in-process to arrive. It shortens lead time, which increases productivity. One more benefit of JIT production is improved product quality. It means that defects or quality problems are noticed more quickly. Thus, JIT makes production operations more efficient, cost effective and customer responsive.

Weaknesses of JIT

JIT has also weak points. In just-in-time, everything is very interdependent. Everyone relies on everybody else. But it can be dangerous if just one supplier doesn’t deliver on time or delivers defective components. Because of this strong interdependence, a weakness in the supply chain can be very costly to all linked in the chain. Labour strikes and port lockouts can quickly disrupt an entire supply chain. Besides, JIT processes can be risky to certain businesses and vulnerable to the supply chain in situations of unforeseen production interruptions. So companies prefer to keep reserve inventories. But the big Japanese manufactures have large networks of subcontractors, and the whole system is based on long-term relationships and mutual trust. Small suppliers often try to situate their facilities close to the location of a larger company with which they work.

Moreover, every year markets experience seasonal demand fluctuations as well as fluctuations due to disasters or other unforeseen events. Because of market demand fluctuations not all products can be produced with JIT systems. Communication is king in a JIT supply chain. Technology also plays a key role in JIT, however, the reliance on technology and lack of communication upstream and downstream in the supply chain can lead to breakdowns in the IT systems

Weaknesses in JIT systems are very important to recognise. Companies must strongly evaluate the pros and cons of implementing JIT systems. The effects and risk to their supply chain must also be heavily considered. Although JIT has its weaknesses, in most cases the benefits outweigh the risks of implementing JIT. Planning and recognising when things may go wrong are vital for the success of JIT implementation across all areas of supply chains.

Concept check