Another Look at JIT Manufacturing
Post-World War II for Japan was a very difficult time for the country as they were faced with many obstacles in regard to revitalizing industries. It was during this time of struggle in Japan that just-in-time manufacturing methods were conceived. Just-in-time manufacturing refers to methods used to eliminate waste and processes to keep cost down. The exact reasoning for the implementation of just-in-time methods will never be known but we can look at some of the problems that Japan faced at the time to better understand why. Japan could not afford to finance large-scale production and storage of goods; they did not have access to natural resources and had high unemployment rates. In response to these problems, Japan created smaller factories and housed only necessary materials. They needed to keep production going, trimming away the “fat”. Essentially Japan “leaned out” all of their production methods post World War II out of necessity. One of the most well-known and successful examples of just-in-time methods comes from Toyotas Production System. Eventually, the success of Toyota and just-in-time manufacturing methods reached the western world under many different names and has developed into the general description of the practices that today we call “lean”. The invention of just-in-time practices and leaning out production came out of necessity and has evolved into a phenomenon that is supposedly applicable to all business sectors. Just-in-time methods originated in Japan over forty-five years ago and have proven to be beneficial in many companies over the years, but it is not something every company can or should adopt. Adopting a just-in-time model could, in fact, kill a business.
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Since the proven success of just-in-time methods by Toyota, it has been considered the gold standard for many companies and rightfully so. The benefits of just-in-time methods sound very enticing to any business owner and that is why it is still being implemented today. Some benefits include cost reduction, elimination of waste, and increased capital turnover to just name a few. Just-in-time methods are used to eliminate all aspects of waste to increase efficiency. Company overhead expenses will be decreased by reducing the storage of materials and products to a minimum. Typically, manufacturing plants will make bulk orders and store the goods until needed. Storing inventory can be very expensive and just-in-time can eliminate the need for warehouses altogether. All materials used in the production process will be used the moment they reach the facility or shortly after. In other words, companies are receiving materials only as needed- not too soon and not too late. When a product is finished it is sent directly to the consumer or retailer to avoid storage cost. Without the need to store materials or products, a company will have much more capital freed up to use in other endeavors. Traditionally warehouses full of materials and finished products are considered assets but when using just-in-time methods they are considered a liability. With the reduction of inventory, just-in-time also reduces waste in all other aspects. When reducing waste, one must think in more general terms. Waste can come from leftover materials but can also come from wasted movements by employees. Removing movements that do not add value are a necessity when adopting just-in-time. Clearly, there are many benefits that come with implementing just-in-time methods, but the system is very complex. With any complex system, there are many moving parts that are reliant on each other to work and just-in-time takes it to an extreme. The complexity of just-in-time can turn a short-term problem into a full-scale disaster.
Most companies gravitate to the benefits of just-in-time but do not fully understand the complexity of the model and the risks that come with it. Along with the complex planning involved, there also needs to be an extremely strong work culture. Employees need to be dedicated to the company and take pride in their work; there is no room for error. The just-in-time system is more of a philosophy than a technique. The complexity of just-in-time requires everything to work perfectly or failure will result. Like any complex system, there is a great deal of planning involved to implement and maintain the system and just-in-time is no exception. It is important to understand that when implementing just-in-time methods, you must work from the ground up. To make just-in-time feasible, a management team must completely restructure the workflow of the company. If a facility is not designed to handle the needs of just-in-time methods, then they must be retrofitted to make it work properly. Using a product-oriented manufacturing plant design will decrease the time spent moving materials. Foolproof methods and practices need to be put in place to reduce mistakes made by employees to increase efficiency. It is difficult for a company to implement just-in-time practices because it requires a complete rework of all traditional practices. The infrastructure needs to be there to allow for proper implementation and if that is not the case, just-in-time will not work. Redesigning entire manufacturing plants and retraining employees in new methods is an expensive upfront cost that many companies cannot justify. Along with methods and physical changes to manufacturing plants, the supply chain must be completely reformatted.
The basis of just-in-time is to reduce storage of materials to a minimum and that requires a great deal of planning. Supply chain relationships will need to be renegotiated to allow for smaller orders. A company adopting just-in-time will need to find suppliers that can deliver goods daily to weekly with short notice. Inconsistent and fast-changing orders are difficult to handle by suppliers and adds more risk. Smaller orders may require that you use multiple vendors that are located in the area to ensure quick delivery. It is necessary to have reliable suppliers that are willing to work with your implementation of just-in-time. Suppliers need to understand that orders will change based on estimated forecasts. Computer programs are necessary to track market shifts and trends to forecast production needs. A computer program will use past production numbers to attempt to accurately predict future production needs. Management teams must properly align material orders with forecasted production needs. When a company receives new forecast updates, they work with suppliers to adjust the number of materials needed to handle the lack of demand or demand for a product. Suppliers need to understand the needs of a company adopting just-in-time and ensure they can accurately and timely fill orders. One of the most important aspects of using just-in-time methods is forecasting future production accurately. Any miscalculations could have a major negative impact on business. One small mistake made in the predictions or mistake made by suppliers could cause missed opportunities. Using just-in-time methods makes a business extremely dependent on suppliers. Having to rely so heavily on suppliers may cause delays that are out of your control. Suppliers have their own opportunities to optimize and will do what nets them the most income. To become a top priority for a supplier will come at a cost and it still does not negate all risks. Defected products could be a result of placing pressure on suppliers and that could turn into huge losses when it shuts down production. Lack of complete control over supply chains could cause catastrophic disruptions in production and ultimately kill a business.
The just-in-time model seems to eliminate any safety nets that could revive a company from mistakes. When trimming away the “fat” of a company, room for error goes with it. In fact, the just-in-time complexity could turn into a self-destructive business model. Whether a large company or a Ma and Pa shop, mitigating risks play a huge role in the success of any company. Implementing just-in-time methods does have its advantages but at what cost? On paper, just-in-time methods sound like the golden standard for anyone in the supply chain industry and it is almost too good to be true. The complexity of just-in-time methods will increase the impact of Murphy’s Law. Murphy’s Law states that “whatever can go wrong, will go wrong”. When running a business, risk is already prevalent and just-in-time methods turn it into a gamble. Planning for the worst and hoping for the best will allow room for error. The complexity and ideology surrounding just-in-time methods create more risk that some would see as unnecessary. Just-in-time increases risk and reward but is it worth it? Many companies that have implemented just-in-time have experienced the enhanced effects of Murphy’s Law, yes even the gold standard Toyota.
In March 2011, an earthquake shortly followed by a tsunami crippled northeastern Japan. If that was not enough, the tsunami caused a nuclear meltdown. These disasters crippled Toyotas car production and profits fell by nearly seventy-five percent in a matter of hours. A single disruption from suppliers can bring an operation to a standstill causing millions in losses. Toyota was scrambling to find over five hundred different parts after the disaster. The effects of this disaster were felt globally by Toyota as production was cut by fifty percent. Six months after the disasters Toyota was still in recovery mode but making plans to “disaster-proof” production for the future. Toyota is based in one of the most geologically active areas in the world and eliminating risk from natural disaster again seems like an impossible task. Toyota added redundancy to their lean principles and that was thought to eliminate potential risk. Plans were put into place to allow for back up suppliers to handle shipments when main suppliers were decommissioned. In 2016, Toyota was given the chance to prove their emergency redundancy plan when an earthquake hit southern Japan. After the quakes, twenty-six out of the thirty production lines were halted for more than two weeks and Toyota lost 277 million USD. Even with redundancy in place, Toyota failed to prove the resilience of their practices that were coveted by so many. Toyota has proved that just-in-time methods are very profitable yet tenuous. Toyota was the number one car producer at the time of the disasters and was able to bounce back after falling to third place. A large company like Toyota has the capital and resources to handle substantial losses without shutting its doors. Following in the footsteps of Toyota may be detrimental for smaller companies when Murphy’s Law strikes.
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The cell phone manufacturing company Ericsson is a prime example of a just-in-time failure killing a company. In 2000, a lightning bolt hit a Phillips Electronics plant in New Mexico that destroyed the chip processing machine that halted production for months. Unfortunately for Ericsson, that plant was the sole supplier of the chips used in their mobile phones. Unable to secure a secondary supplier and with no backup inventory thanks to just-in-time, the Swedish company lost more than 2 billion dollars. Less than two years after the fire at the Phillips Electronics plant, the Ericsson mobile division entered a joint venture with Sony. Ericsson, at the time of failure was the third largest cell phone manufacturing company behind Nokia and Motorola and had been in the business for decades. By 2012, Sony acquired Ericsson’s stake in the company for 1.47 billion dollars and was officially wholly owned by Sony. The headquarters was moved from Lund, Sweden to Tokyo, Japan to be integrated with the Sony. Going by the name Sony Mobile, Ericsson was officially removed from the mobile phone industry. Ericsson failed to apply Murphy’s Law to their just-in-time methods and left their future in the hands of their suppliers. The enticing advantages of just-in-time caused Ericsson to make a detrimental mistake that removed them from an industry they helped build. Ericsson was no small company, yet they made a simple mistake that could have been easily avoided. With the pressures to increase company profitability, it is wise to think twice about implementing just-in-time.
Global competitiveness is one of the main reasons that just-in-time methods are being implemented across the globe. Adopting just-in-time methods allows businesses to be more competitive and may even seem necessary to keep up. With the pressures of increasing profits and decreasing cost, just-in-time can be seen as a solution to fix all problems. When debating on implementing just-in-time, it is necessary to take a closer look at the Japanese culture because that plays a role in the success of Toyota. There are many studies done by American and European scholars that encourage just-in-time methods to be implemented using Toyota as an example. Although these studies are thorough and informational, they lack behind the scenes information about how the manufacturing process runs behind closed doors.
Darius Mehri, an American computer simulation engineer was given an opportunity to be a participant observer of the Toyota Production System. Between the years of 1996-1999, Mehri worked in Japan and was able to covertly document an insider perspective of just-in-time methods. During this time of working in Japan, Mehri noted the vast inaccuracies from scholarly reviews of the just-in-time methods. The Machine that Changed the World, was a book written promoting the benefits of just-in-time methods yet contained no insight on working conditions in its 278 pages. The book was influential in the implementation of just-in-time methods but has been criticized as a misrepresentation of the work systems in Japan. Mehri noted that just-in-time manufacturing is more efficient but not because of superior production systems. Mehri was surprised to see machinery wedged into every space available on the production floor causing major safety issues. Interviews conducted by Mehri showed that employees were at serious risk of being injured on a daily basis and deaths in the facilities were not uncommon. Mehri discovered first-hand the darker truth about just-in-time methods. Mehri predicted that little would change concerning the working conditions at Toyota and he was correct. Almost fifteen years after Mehri published his findings, Toyota is still encouraging unsafe working conditions that are a direct factor of just-in-time methods. Toyotas’ drive to be the number one car producer and the implementation of the Toyota Production System came with a cost, a human cost.
In conclusion, it is important to understand that just-in-time methods come with indisputable and quantifiable flaws. Yes, implementing just-in-time methods successfully will make your business more profitable but create unnecessary risks. When just-in-time collides with Murphy’s Law, chaos will ensue as we saw multiple times from Toyota. Ericsson lost their advantageous position as a mobile phone manufacturing powerhouse with one strike of lightning. Just-in-time methods could cause the highest risk, highest overhead cost, and slowest response time which is the opposite of the original plan. We live in a world of ambiguity and what can go wrong often does go wrong. Unnecessarily gambling with the future of a company by implementing just-in-time is a self-destructive business decision. Just-in-time is not a one size fits all method that can be implemented into any industry. Every system needs to have redundancies and fail-safes to ensure success when real-world scenarios play out. On paper, just-in-time looks like a great alternative to traditional manufacturing methods but is more of an idea than a real-world solution. When looking at the real problems of just-in-time methods one will notice the delicateness of the system. Improving the system is essential for negating underlying risk factors that can wipe out a business. With the combination of fail-safes and backups, just-in-time methods can still be used and make a positive and safe impact on business. Blindly following original just-in-time methods will do nothing but create a fragile and susceptible environment. Quoting famous American Engineer W. Edwards Deming “Management’s job is to improve the system”.
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