PRODUCTION AND OPERATION MANAGEMENT

Just in Time Management

in Automobile Industry

Submitted to:
Dr. Hitesh Parmar

Submitted by:

Ajay Boricha 19004

Bhargav Mandaliya 19011
Jaykishan Raval 19020
Roshni Patel 19038

G.H. Patel Postgraduate Institute of Business Management

 Contents

Part I Prepared By: Jaykishan Raval – 19020

Introduction of JIT ................................................................................................................................... 2
Part II Prepared By: Bhargav Mandaliya – 19011
Kanban System ........................................................................................................................................ 6
Automobile Industry of India ................................................................................................................... 7
Assessment of JIT in Automobile Industry ................................................................................................ 8
Part III Prepared By: Roshni Patel – 19038
Examples of Automobile Companies Practicing Just-In-Time Systems .................................................... 10
Part VI Prepared By: Ajay Boricha – 19004
Problems faced by the Indian Automotive Industry in implementing JIT ................................................ 14
Suggestions for implementation of JIT manufacturing ........................................................................... 15

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Part I Prepared By: Jaykishan Raval – 19020

Introduction of JIT
What is JIT?

Denoting a manufacturing system in which materials or components are delivered immediately

before they are required in order to minimize storage costs.

The just-in-time (JIT) inventory system is a management strategy that aligns raw-material
orders from suppliers directly with production schedules. Companies employ this inventory
strategy to increase efficiency and decrease waste by receiving goods only as they need them
for the production process, which reduces inventory costs. This method requires producers to
forecast demand accurately.

The JIT inventory system contrasts with just-in-case strategies, wherein producers hold
sufficient inventories to have enough products to absorb maximum market demand.

How Just in Time (JIT) works?

One example of a JIT inventory system is a car manufacturer that operates with low inventory
levels but heavily relies on its supply chain to deliver the parts it requires to build cars, on an as-
needed basis. Consequently, the manufacturer orders the parts required to assemble the cars,
only after an order is received.

For JIT manufacturing to succeed, companies must have steady production, high-quality
workmanship, glitch-free plant machinery, and reliable suppliers.

Important: JIT production systems cut inventory costs because manufacturers do not have to
pay storage costs. Manufacturers are also not left with unwanted inventory if an order is
canceled or not fulfilled.

Objectives of Just In Time:

Zero inventory
Zero breakdowns
100% on time delivery service
Elimination of non value added activities
Zero defects

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No inventories are stored: so one of just in time objectives is to reduce or eliminate the storage
of inventories. In the old manufacturing production system, the raw material is purchased,
products or goods are produced, and stores. This concept costs a lot of money to store not only
raw material but also store finish goods. Also, the production process is quite slow as the
company might not seeking a new way to improve the process. Therefore, JIT tries to overcome
this problem. The productions are processed only if there are orders from customers.
No material is purchased: In implementing the JIT, the material is not going to purchase if there
are no productions. Not like the old system, the raw material is purchase as the result of
production forecasting demand and production. The company old the old system normally has
the low networking with suppliers and most of the raw material required during the years are
purchased in advance and spend a lot of money and space on storing the raw material and
taking care of them. Just in Time System is trying to overcome this by making sure that there is
a good relationship with the supplier and the raw materials are purchased only if there is
production. However, this meet this objective, the company that implements Just In time need
to build the perfect relationship with its suppliers or, in order words, suppliers could access to
the company system to understand about the demand. Otherwise, suppliers might not be able to
supplies the raw material on time and as required. This is the warning point for the company that
wishes to implement this system.
Improve the Production System: Another main objective Just in Time Production systems is it is
helping the company to improve the production process in the Company. We will look in detail on
how the Just in Time could help in the following.

The major differences between JIT manufacturing and traditional manufacturing are as follows:

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JIT applies to raw materials inventory as well as to work-in-process inventory. The goals are that

both raw materials and work in process inventory are held to absolute minimums. JIT is used to

complement other materials planning and control tools, such as EOQ and safety stock levels. In
JIT system, production of an item does not commence until the organisation receives an order.

When an order is received for a finished product, productions people give orders for raw

materials. As soon as production is complete to fill the order, production ends. In theory, in JIT,

there is no need for inventories because no production takes place until the organisation knows

that it will sell them. In practice, however, companies using just-in-time inventory generally
have a backlog of orders or stable demand for their products to assure continued production.

Advantages of Just In Time (JIT):

Companies like to use JIT as it is seen as a more cost efficient method of holding stock. Its
purpose is to minimize the amount of goods you hold at any one time, and this has numerous
advantages:

Less space needed: With a faster turnaround of stock, you don’t need as much warehouse or
storage space to store goods. This reduces the amount of storage an organization needs to rent
or buy, freeing up funds for other parts of the business.

Waste reduction: A faster turnaround of stock prevents goods becoming damaged or obsolete
while sitting in storage, reducing waste. This again saves money by preventing investment in
unnecessary stock, and reducing the need to replace old stock.

Smaller investments: JIT inventory management is ideal for smaller companies that don’t have
the funds available to purchase huge amounts of stock at once. Ordering stock as and when it’s
needed helps to maintain a healthy cash flow.

All of these advantages will save the company money.

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Disadvantages of Just In Time:

Risk of running out of stock: By not carrying much stock, it is imperative you have the correct
procedures in place to ensure stock can become readily available, and quickly. To do this, you
need to have a good relationship with your supplier(s). You may need to form an exclusive
agreement with suppliers that specifies supplying goods within a certain time frame, prioritizing
your company. JIT means that you become extremely reliant on the consistency of your supply
chain. What if your supplier struggles with your requirements, or goes out of business? Can you
get the products quickly from somewhere else?

Lack of control over time frame: Having to rely on the timeliness of suppliers for each order
puts you at risk of delaying your customers’ receipt of goods. If you don’t meet your customers’
expectations, they could take their business elsewhere, which would have a huge impact on
your business if this occurs often.

More planning required: With JIT inventory management, it’s imperative that companies
understand their sales trends and variances in close detail. Most companies have seasonal sales
periods, meaning a number of products will need a higher stock level at certain times of the
year due to higher demand. Therefore, you need to factor that into planning for inventory
levels, ensuring suppliers are able to meet different volume requirements at different times.

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Part II Prepared By: Bhargav Mandaliya – 19011

Kanban System

Kanban is a concept related to lean and just-in-time (JIT) production. According to Taiichi Ohno,
the man credited with developing Just-in-time (JIT), kanban is one means through which JIT is
achieved. Kanban is not an inventory control system. Rather, it is a scheduling system that tells
you what to produce, when to produce it, and how much to produce. The need to maintain a
high rate of improvements led Toyota to devise the kanban system. Kanban became an
effective tool to support the running of the production system as a whole. In addition, it proved
to be an excellent way for promoting improvements because reducing the number of kanban in
circulation highlighted problem areas.

The term Kanban is a Japanese word whose English translation means signboard or visual
signal. A well-timed Kanban system works exactly like a traffic signal in managing the flow of
traffic and meeting the real time needs of customers by sending clears signals on when to start,
slow down, and stop production. Each Kanban signal also carries valuable information about
the volume and sequencing of the production. Toyota originally used cards attached to
different supply containers to communicate what materials in the production line were needed,
but today many variations exists, including signboards and electronic systems. The result is an
efficient system where products are only replenished when they are consumed further
downstream in the process.

A kanban is a card attached to the carrier or container of a lot used to match what needs to be
produced in a work station and what needs to be delivered to the next station. As mentioned, a
JIT system is basically a 'pull' system, which means that what needs to be produced in a
particular station depends on what the next station needs. Ultimately the production is
therefore modulated by end customer orders. Kanbans, which contain information about the
lots and quantities involved, are therefore used to facilitate the execution of this 'pull' system.
With this 'pull' system, no parts that cannot be processed in succeeding stations will be
produced.

There are two types of kanban assigned to every lot, namely, a production kanban (P-kanban)
and a conveyance kanban (C-kanban). The P-kanban denotes the need to produce more parts

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while the C-kanban denotes the need to deliver more parts to the next station. No parts can be
produced unless authorized by a P-kanban. On the other hand, a C-kanban triggers the 'pulling'
or 'withdrawal' of units from the preceding station. C-kanbans are also known as 'move' or
'withdrawal' kanbans.

Automobile Industry of India

India has a large automotive sector. The country ranks ninth in Asia and the world 4thin global
automotive industry. India has an annual production of approximately 2.3 million units.

Today, India is the world’s largest maker of tractors, the second largest motorcycle
manufacturer and the fifth largest manufacturer of commercial vehicles.

The automobile industry in India has accelerated after deregulation in 1991. The industry
continued to grow steadily and is increasingly relevant in the global market. In the recent past,
India has experienced resurgence in the automotive sector with its relaxed restrictions on
investment policies in the sector. Overall economic growth in India has also played an
important role in attracting foreign investors to invest in India in the automotive sector in the
country.

The automobile sector in India has shown great progress in the use of new technologies and be
flexible in the wake of the changing business situation.

In addition, the growth of India’s middle class and greater purchasing power with the support
of strong macroeconomic fundamentals has helped to attract leading car manufacturers in
India. Several global players, including major automakers Suzuki and Honda have invested
heavily in India and were able to exploit the market in India.

All these factors and initiatives that the government is an indication that the Indian car industry
was becoming a new industry that has unlimited potential for growth and promises to provide
valuable return on investment. The automotive sector was not only satisfying the requirements
of the market, but was deeply into the international market.

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 Assessment of JIT in Automobile Industry

A common workflow assembly layout diagram for automobile manufacturing company,

the inputs is automotive components items & subassemblies and other necessary
departments like CKD component storage, SKD parts, body shop up to finished product
storage.

JIT techniques every employee of the company should know and understand about JIT.
For this assessment some important parameter should be analyzed like waste reduction
,overproduction waste, waiting time waste, lead time, transportation time, inventories, set-
up time and compare all these for the justification of JIT in company. The given table 1
presents the main difference between JIT practices in Japan and the Indian manufacturing
culture.

Japan India

deals with quality of people deals with quality of products

customer-oriented manufacturer-oriented

Upstream Mixing of upstream and down stream

Process-oriented, aimed at improving Product oriented, aimed at detecting and

the total performance eliminating defective parts

In general, the study shows the characteristics of JIT is partially practiced in automotive
industries. As the gained knowledge and after comparisons, founds in order to achieve the

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benefits from JIT or indirectly pull (customer-demand) production necessary to evaluate. The
various reasons found for the analysis of JIT in automotive company are:

(1) Absence of quality control tools.

(2) Lack of advance technology.

(3) Lack of training.

(4) Lack of research and development in each industry are cited as the outstanding problems.

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Part III Prepared By: Roshni Patel – 19038

Examples of Automobile Companies Practicing Just-In-Time Systems

The case studies of the industries that have completely implemented JIT concepts and those
who have used some features of JIT to reduce the overall cost have been presented in this
chapter. A tabular form below represents brief summary of some efforts made by some
industries.

Toyota

Toyota was the first to implement JIT effectively in 1970 and is still one of the most successful
companies practicing JIT systems. Their method, also known as the Toyota production strategy,
sees that raw materials are not brought to the production floor until the order is received from
the customer and the product is ready to be built. During the production process, no parts are
included in the next node or station unless they are required to. This keeps the amount of
inventory to a minimum which as a result, lowers costs. This also allows Toyota to adapt quickly
to customer’s demands, significantly reducing the risk of having excessive inventory at its
disposal.

JIT also emphasizes the importance of work efficiency. According to Toyota’s website, the use
of JIT within the Toyota Production System means that individual cars can be built to order and
that every component has to fit perfectly first time because there are no alternatives available.

Important factors to Toyota’s success:

Small quantities of raw material are kept at each station of production, assuring that
there is always enough inventory stock to start production of any product. This is also
replenished once used.
Accurate forecasting to stock raw materials at the correct levels

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Maruti Suzuki

The Company has adopted the Japanese system, JIT to achieve greater operational efficiency
and reduce inventory carrying costs. JIT improves return on investment in a business by
reducing in-process inventory and transportation costs.

To ensure the supply of raw JIT, the company gives preference to local vendors and suppliers to
promote the function of the distance to establish the base near Maruti Suzuki `s facilities. Over
76% of 246 company suppliers are within 100 km radius. Providers are strategically located in
major components such as instrument panels, fuel tanks, bumpers, seats adjacent to the
manufacturing facilities of the company’s supplier park.

JIT has evolved over the past 25 years, the company’s monthly time of daily programs of parts
orders and, finally, in 2003, and system-Nagare, which means the delivery systems for planning
time, a practice that helps maintain a list of less than two hours in some parts of society.

The e-Nagare successfully run the business today and helps to maintain the population of the
right material at the right time, right place and the exact amount, without the safety net of
excess inventory, reducing inventory levels, and cost of ownership.

Maruti Suzuki driven by manufacturing excellence principles to reduce waste, inconvenience

and inconsistency drank parent SMC, Japan.

The company is actually connected via resellers Dealer Management System (DMS), the
interaction dealer and annual reviews that will help retailers to cost savings and customer
convenience.

Storage levels are maintained to reduce the burden of holding inventory. Higher inventory
levels are adjusted as necessary for financial viability. The result is a multiplicity of efficiency in
the value chain.

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Bajaj Auto Ltd.
Here is the case study of Bajaj Auto Ltd. who has fully implemented JIT by using the concept of
ABC Analysis.

Bajaj Auto slotted its suppliers into three categories and applied different purchasing strategies
to each one of them. This enabled the company to retain its average lead of between 10 and 15
percent over its competitors in the manufacture of its 2 wheelers. The company had divided its
3,000 - and-odd components that go into scooters into three categories - A’, ‘B’ and ‘C. The first
consisted of high value (Rs.1000 and above) items; the second, medium value (between Rs.500
and Rs.1000); and the third, low value (below Rs.500). This classification helped the managers
to build inventories in inverse proportion to the average cost of each genre. Thus inventories
for ‘A‘-class items are never more than for one shift. Even then the company did not run out of
stock. This was only because of JIT. The orders were placed every week and the daily deliveries
were made. In order to ensure that the inventory-level is kept at minimum, Bajaj Auto got rid of
quality inspection of these products. Instead it became mandatory for vendors to conform to its
self-certification programme under which they guarantee the quality of their output and feed
their supplies directly the production line. 174 out of 1000 of its vendors fell in this category.
Bajaj saved on inventory pile-ups and quality based rejection. For ‘B’-class items, the ordering
frequency was once a fortnight, and the inventory-ceiling, one week. For ‘C’-class items, the
ordering cycle was monthly, but the actual delivery was controlled by the Kanban process.
Under the Kanban system, the requirements for the production line for a particular component
are indicated visually through cards which the suppliers use to deliver exactly as much as is
required.

This was not enough just to cut down the costs. This would result in forcing the suppliers to
hold more inventories. Thus the vendors push away from the company. Bajaj Auto hence
communicates its tentative production-plan 3-months ahead of schedule, the semi-final is
relayed to them 45-days ahead, and the final production schedule is frozen to 30 days in

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advance. The overall impact of these strategies was that the average inventories had fallen
from 30 days in 1994 to 12 days today.

Ashok Leyland

Ashok Leyland, another leading automobile industry in India, implemented JIT and reached the
targets of reduced inventory control and high level of productivity.

Ashok Leyland focused on a JIT approach for high value/high volume items and low cost
logistics for low value high volume items. Project OSCARS (Optimizing Supply Chain and
Rationalizing Sourcing) brought about a few fundamental changes. The push system which
resulted in up to 45 days of inventories of components compared to between 3 and 5 days
globally had given way to the pull system ("make what the customer needs, when he needs it").
Each stage produced only as much as the next stage needed. Thus, only when a new chassis
was loaded did the request go out for the supply of an engine assembly, and so on, for the front
and rear axle assembly lines, and for the components that went into them. This resulted in a
savings of Rs 8.50 crore a year and a lean supply chain.

To begin with, Project Oscars classified the main components used by the company into
Categories 'A' (amounting to 75 per cent of the total cost of components), 'B' (18 per cent), and
'C' (7 per cent), with their suppliers also being classified accordingly. Then, AL devised different
delivery systems for each category, aimed at cutting inventory-holdings.

The plant sent a JIT card, specifying the part number, quantity and the unloading location to the
supplier who promptly dispatched the required consignment directly to the assembly line. But
how did it guess Ashok Leyland's requirement? For that, Project OSCARS devised a funnel-
planning system, covering 12 weeks of requirements. The immediate two weeks' plan was
frozen and the next two weeks' semi frozen, the balance eight weeks' plan was tentative. Thus,
the vendor already knew roughly when to expect the JIT card. The ultimate result of adopting
JIT was high productivity and a lean supply chain. The company thus saved Rs.8.50 crores a
year.

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Part IV Prepared By: Ajay Boricha – 19004

Problems faced by the Indian Automotive Industry in implementing JIT

Several Indian firms have either initiated steps towards JIT implementation or claim to have
already implemented many aspects of JIT. However, the Indian Automotive Industry faced a
few problems in implementing the JIT manufacturing systems, they are:

• The Size of the Industry in India is either medium or small compared to multi-national
corporations. Hence the type of concerns and nature of efforts could be different.

• The Indian economy is characterized by Government controls and intervention, and there is a
lack of long term stability in Government policies.

• Conceptual details of JIT and other such approaches to manufacturing are well known to
Indian firms. However there is a lack of internalization of these concepts, leading to lack of
clarity at the time of implementation.

• To evolve to a pull inventory system, manufacturing needs to be organized through cells. The
introduction of such systems would involve substantial rearrangement of facilities and demand
greater managerial effort.

• Indian Automotive Manufacturers have not made significant progress towards supplier
development.

• The quality circles concept was introduced in India during the early 80’s. Though it started
with much fanfare, it did not produce the expected results as reported in Japan. Hence, the
Indian automobile manufacturers were skeptical of adopting them.

• The Indian automotive companies have overlooked the importance of viewing the supply
chain as a whole. They need to have their supply chains streamlined for effective
implementation of JIT.

• It is not easy to implement JIT in a situation where there is a need to manage inventory in a
short duration with a lot of uncertainty in the system.

• The supply unreliability and the uncooperative attitude of transporters have affected the
successful implementation of JIT.

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• Indian automotive manufacturers tend to have a management style that is highlycentralized.
Decentralized and professionally managed companies would stand a betterchance of
implementing JIT.

• There is lack of efficient transport services, unavailability of suppliers, severe bottlenecks in

transport and communication infrastructure.

Suggestions for implementation of JIT manufacturing

Keeping in mind the above issues, a 3 step approach is recommended; which can be used to
implement JIT manufacturing systems. The first step involves changing attitudes towards
purchasing and achieving improvements which would help prepare for the drastic changes that
would take place. The second step involves initiating a pilot programme with a handful of
suppliers and parts. This step aims to identify the problems and eliminate them. The third and
final step involves modifying the organizational set-up so that there are distinct departments
handling logistics, materials handling and control and supplier up gradation.

• The first and foremost step is to obtain top management support and the support and
involvement of all the employees in the programme.

• The Indian Automotive Industry has to take steps to increase the supply chain efficiency.

• The Indian Automotive Industry needs to understand that certain system level changes are
inevitable; which may include introduction of Kanban, Set-up time reduction exercises.

• Managing continuous supply-demand matching and optimization.

• Achieving efficient use of materials and other resources.

• Managing demand and customer expectations.

• Technology and Infrastructure up gradations.

• Investment in training and human resource development.

• Maintain good relations with suppliers

• Encourage automation

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