Globalization has led to an enormous increase in competition in all segments. Manufacturing, Service, Banking etc. nobody is protected by it. So to gain an edge over your competitors companies are highly focused on improving their processes and systems to reduce the throughput time which subsequently leads to cost-savings. As Just-In-Time is a lean management principle, it definitely results in overall cost reduction.
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But even after the underlying benefits of implementing a methodology like JIT, there is still a certain amount of reluctance to adopt this philosophy due to various reasons like lack of understanding of the process, benefits associated with implementation, apprehensions to change from traditional methods of production to modern methods, adopting new technologies, capital expenditure and numerous other factors. Such events hamper the growth of the industries and the growth of the nation as well.
What the firms fail to understand is that this is an adopted practice and may not produce the exact expected results. Moreover, it takes time to implement JIT because it demands an entire process reform. Even Toyota (inventor of JIT), took more than 20 years to get to the lean system, which the looks upto. With not quickly getting the results and incurring of some initial costs, firms often refrain from getting into the trial phase. The study highlights the major issues Supply Chain faces in India which makes the lean practices difficult and desired output are not obtained.
SIGNIFICANCE OF STUDY
The study highlights a certain unfairness of the much idealized JIT philosophy if adopted blindly. Every concept behaves in a certain pattern in different scenarios. The main significance of the study is to find out the methods of the Risk Management in Supply Chain for smooth adoption and working of Lean management thus taking a leap ahead towards the successful implementation of JIT. The recommendations mentioned in the end are in context to the stories of Indian Firms but can be applied globally as India has made a mark on the International Globe. The study also highlights methods to overcome these failures related to implementation of JIT in India.
REVIEW OF LITERATURE
JUST IN TIME
It is a manufacturing system with a goal to optimize processes and procedures by continuously pursuing waste reduction.
The entire process was developed by Taiichi Ohno after the Second World War in competition to the American Automobile Industry. But the demand being less, the Japanese could not afford to order by EOQ & stock an inventory. So to keep the waste and operational cost to a minimum, Taiichi came up with the concept of Just-In-Time (JIT) where any item moves the production system on need.
Systems were non-automated, there was no over-production and the time spent in waiting for parts and processing of order was now minimized. The inventories levels were reduced and so were the waste.
When a car was selling at a particular selling price such that PROFIT = (SELLING PRICE – COST) then cost leveling was the only option to raise profit levels. Also JIT got with itself cellular manufacturing when machines were clustered so that items move smoothly in the process. The workers were now trained to be multi-skilled to be able to work on more than one machine.
Today, JIT is a popular concept and every sector, be it manufacturing/services or administrative, has been affected by it. Though no two JIT are same, the philosophy is still intact – to eliminate the sources that lead to waste, to get rid of non – value adding activities.
SUCCESSFUL JIT IMPLEMENTATIONS
There are certain requirements to be fulfilled for successful implementation of JIT
Stabilize & Level of Master Production Schedule (MPS): efforts to use all work centre’s through constant daily production. Also demand fluctuation should not be fluctuating the production level; it should rather be met by inventory.
Bringing down the setup time: setup time should be brought down to a minimum. Implementing SMED would lead to minimum inventory.
Bringing down the lot size: This ensures production of smaller lots but as this would increase the frequency of delivery, coordination with suppliers is to be maintained.
Bringing down the lead time: Getting workstations closer and relying on cellular manufacturing hence, reducing no of jobs waiting and better synchronization between processes can help reduce lead time. Also suppliers location and timely is necessary.
Preventive Maintenance: to reduce idle time and avoid breakdowns. Any cause of slowdowns and stoppages should be recorded and analyzed in advance.
Flexible Workforce: Workers should now be able to perform multiple tasks and should be flexible while being competent to take on different roles & adopt new responsibilities from time to time.
Ensuring Supplier quality & Zero Defect: There should be no defective items because there are no safety stocks now. Every worker should do his/her work perfectly and ensure complete quality to the next level.
Disciplined Shop Floor Control: The operations should be unclogged. There shuld be precise timings and quantity for production & release of order.
Avoiding Waste: There are 7 wastes that JIT target to minimize as mentioned below:
Waste of Over-Production
Waste of Waiting
Waste of Transportation
Waste of Processing Itself
Waste of Stocks
Waste of Motion
Waste of Making Defective Products
Focusing on Value Addition: Process Delays, longer work-in-progress, raw material transportation delays, inventories, excessive processing time – all add no value to the product. The focus of JIT is to avoid such problems and add value to the production process.
ACHIEVEMENTS OF JIT
Production of Quality Goods: Internal Inspection is carried out at every stage by the worker themselves, ensuring no defects in the product before being passed onto the next level. Every stage takes charge of quality of its end-product.
Zero Set-up time: a reduced set-up time leads to more sophisticated production. To avoid inventory & keep lot sizes appropriate, the set-up time must be reduced. This leads to innovation in design and techniques also.
Zero Inventories: Zero Inventories has reduced the throughput and improved cycle times. Machines no more run full capacity to reduce the hourly costs. Also huge space savings are realized as there are no requirements of warehouses anymore.
Reduction of Manufacturing Costs: This can be best done by establishing a good rapport between employer & employee to develop cost saving solutions.
JIDOHKA: this can be best explained as “First Time Right”. Getting the product manufactured without any defects and of required quality can lead to higher savings. This can be achieved by improving worker skill level and automation of the processes.
JIT IN INDIA: GO OR NO-GO?
Is India prepared for Just-In-Time?? There have been success stories of companies implementing JIT in India. Some of the companies have either initiated steps or have fully implemented JIT. The turnovers have increased, machine downtime, lead time, change-over time have reduced & the awareness of quality has increased manifold. Be it small or big many firms have benefitted with the practices of Lean Production. To name a few :
Tata Motors Ltd, Maruti Suzuki India Ltd., Gold Seal Engineering, TVS Suzuki Ltd. etc. and many more.
JIT is an adopted concept & is well known in Japanese context. However, internalization of these concepts is still lacking in India resulting in less clarity and greater time of implementation. Example, the much rated quality circles & Cellular Manufacturing have been rated very low ever since. As these adopted concepts didn’t produce desired results in India, the organization was skeptical about its adoption. But the firms fail to understand the environment in Japan under which these function. They adopt pull inventory & hence, Indian Subcontinent needs to be reorganized. This also demands greater managerial support & the system level changes. On the contrary, the MNCs in India have stressed on Quality Circles. Hence, the companies who have initiated major JIT programs have different behavior towards those who are still in a process to evolve to the required standards.
Even the Indian firms who have adopted rigorous programs for JIT consider cellular manufacturing, KanBan & Total Production Maintenance as very crucial issues
This reluctance may be due to implementation lead time estimated, supplier development, top- management commitment and employee involvement which are crucial success factors.
Shortcomings of Indian Subcontinent
JIT methods demand a high performance, strictly monitored assembly – line process. The entire production house should be synchronized delivery of suppliers component should be error free to avoid any stoppage of the production. But there are many factors in India – political/climatic geographical that can result in delays of supplies by vendors. Also union issues impact the same to a great extent.
Inaccurate demand forecasting resulting in over/under prediction, changes in production plans, equipment failures, employee absenteeism, confusion, irregular distribution of work would result in failure of JIT.
Organizational culture experiences change while adopting JIT. This is not easy to implement in a short period of time.
In case services are outsourced, it is difficult to change the working and mentality over organization to get them in sync with your organization. May be the vendor does not use JIT. Hence the working style & underneath thinking would vary.
The business condition in Japan & India are widely different.
There is a resistance to change the traditional process because their has to redefinition- reallocation of work & funds. Also there is a rational resistance & emotional resistance. Performance & success anxiety are coming & so are the planning. Workers need to analysed for best fit which requires a good amount of effort.
The organizations have to be flexible to changes whereas Indian firms have a mentality to stay in their comfort zone because they still have never experience the benefits of JIT. To experience the same, there is a huge amount of effort required.
But to get all these factors playing companies had to plan a lot, change the working mechanism. JIT requires special training & altogether reorganized policies & procedures. All this things require expenses, time & efforts which they try & avoid.
How do Indian firms get to where they want??
The firms need to register that the certain system level changes for implementation of JIT are necessary. Measures like KanBan, Cellular Manufacturing & time-Reduction exercises need to be adopted.
Training, task force formation, pilot study & re-layout are some of the start-up steps.
The efforts differ from firm-to-firm according to manufacturer, ownership & the sector.
The JIT efforts are most successful when they are a part of the strategic plans itself. Hence, top management has to be active & committed throughout the process.
Immense clarity & planning is required to avoid confusion & wasteful expenditure.
JIT is applicable to all sectors because it relates to waste elimination. Hence, every organization can adopt the concept though the process of implementation may vary.
Process Industries – TPM, JIT purchasing, Vendor Management
Align Volume Manufacturing – KanBan
Automobile Sector – Cellular Manufacturing, small lot sizing and multi-skilled work force.
This would all result in different mindset & patience levels, work place organization etc.
Existing supplier network and their managerial & technical capabilities need considerable upgradation.
Awareness has to be created to adopt JIT purchasing, TPM & TQM.
SOME JUST- IN-TIME FAILURES
DELL’s Ultimate Supply Chain: A Case Study
“Dell’s Norton L. Topfer Manufacturing Center is located at Austin, Texas producing 700 computers per hour on JIT basis.”
Dell has a super-lean business model. There are many plants outside USA (6 of 9) & then Dell was likely to setup a manufacturing shop for Indian Market. This Investment would have open new doors for FDI in manufacturing sector of consumer-electronics. India is an emerging economy & can search to the position of world’s largest economy in next few decades.
But the country’s poor infrastructure, evolving but not so matured logistics services, politicized investment scenario & underdeveloped Retail Sector. It is easy to correlate these factors to the 8% GDP of the country.
There are so many features that make Dell’s Supply Chain robust:
According to a survey by World Economic Forum, a big reason for low contribution of manufacturing sector to GDP is infrastructure, transport, communication, power. That is one of large barriers to do business in India.
There are just 2000 miles of expressways, the roads are rough, the handling with (road-rail) transport is doubtful.
There are approximately 17% power outages even companies rely on private sector power supply.
Government rules & regulations also affect the supply of consignment. There are numerous ‘entry firms’ each shipment entrance requires to be addressed with when sent from one state to other.
These were out of the few problems ends faced by Dell while investing into a full fleshed manufacturing house in India.
JIT Risk & Failures – Sony Ericcson: A Case Study
In March 2000, Philips Electronics semi-conductor plant, Albuquerque, N.m suffered being out of function for several months due to lightning bolt striking the building, trigerring fire in a chip processing machine.
Ericsson was unable to find an alternate supplier for the chips. Ericsson suffered a $2 Billion loss due to unfulfilment of demand & hence Ericsson had to enter a Joint Venture with Sony.
James H. Costner, Senior Vice President of property practice @ Willis Solution actually believes at the redundancies which provide margin for mistakes are eradicated, and hence they become more vulnerable while adopting JIT.
Maintaining relations with suppliers actually lends to firms relying on them which means any unrest at their end, even in a different country is bound to send ripple effect to the producer. Hence, larger is the inter-dependence, higher is the uncertainty.
JUST IN TIME SUCCESS STORIES
Even after so many risks & uncertainities there are business houses that have beaten all challenges and excelled in all this situation.
Maruti Suzuki has adopted JIT resulting in efficiency, low inventory costs, greater ROI. They encourage local suppliers located in vicinity & helo the far-off suppliers to setup nearer to the assembly plants. 246 suppliers (75%) of the suppliers are located within a 120kms radius.
Its been almost 25years that company has evolved from quarterly planning to hourly based scheduling i.e. the e-nagare system (system less than two hours of inventory)
e-nagare system has successfully resulted in reducing the Inventory Carrying Cost (ICC) getting rid of safety margins.
Ashok Leyland, a part of Hinduja Group is one of the largest automobile & auto component manufacturers in India. The produced trucks, buses, engines are supplied in 40 countries around the world. They initiated project ‘Oscars Inbound’ to strengthen supplier relations, logistics management, global sourcing, vendor base management etc. They gained a lot through the exercise. They now have JIT supplies, all-time availability of raw material & top-notch technology and improved performance.
They have adopted Vendor-tierization & Vendor improvement program for continuous technological improvements & up gradation increasing value engineering while reducing costs. Some highlights are:
Inventory levels have reduced from 23days to 18days.
Total Operating costs came down by 4%
Company started saving more that Rs. 1.25 Crore per annum by rationalizing transportation, load, routes, truck rounds and using KanBan pull from satellite Warehouses.
JIT is a revolutionary concept to remain competitive. The immense amount of cost & time savings generated by successful implementation of JIT along with the effort reduction results in an ultimately smooth working of supply chain.
But every concept has a flip-side to it. In case of JIT, it’s that the JIT practice of any two organizations can’t be same. Hence, firms need to identify areas of change according to their local constraints and make necessary amendments to their processes to match up with the international standards and enjoy 100% benefits of the effort that are put into implementation of JIT in their systems.
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The last few years there has been emphasis on increasing productivity and following lean management. Along with structuring a lean supply chain, a majot requirement is the risk management of supply chain to effectively implement JIT. The firms need to find out failure points of their supply chain because these points of failures ultimately result in Cost of Failure – Cost of dissatisfied customers & the subsequent Cost of making up for any failure.
They need to identify some of the basic risks involved in the implementation of JIT to Supply Chain:
Risk of Network : they are the Supply Chain Network related issues/
Risk of Pricing : the product has a price associated with itself while passing through Supply Chain and need to be matched through hedging.
Volumetric Risk : This is the risk of matching the pace of production with the strength of demand without over-estimating or understanding the same.
Companies cannot afford any slowdown in the Supply Chain neither at Vendor end nor in the technology of production. A good example of this is suppliers in the Gulf Coast region. Every supply has atleast two rail lines inside their plants & two electrical transmission lines. Single Source suppliers are avoided to remove vulnerabilities.
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