Dr. M. Ahsan Akhtar Hasin, IPE, BUET.

Case Study 2
Just In Time (JIT) Just-In-Time
Definition
Just in time (JIT) is a Japanese production planning and control philosophy that strives to
“perform every activity on time”. It additionally suggests for reducing overall inventory, as
well as work-in-process. It is a type of operations management approach which originated in
Japan in the 1950s, right after World War II. It was first fully adopted by Toyota, and added
new ideas too. The famous “Toyota Production System” (TPS) is an outgrowth of JIT. Later
on, observing the benefits, many other Japanese manufacturing firms also adopted, with
excellent results.

Toyota and other companies that adopted the approach ended up raising productivity (through
the elimination of waste) significantly. However, “performing every activity on time” is not
the only aspect of JIT. It addresses many other things, including Kanban process control
technique.

Main Aspects of JIT

Few suppliers: Strategic Partnership between Buyer and Supplier

JIT strongly suggests for as few suppliers a possible, preferably only one supplier for
one material or component. This idea is just the opposite of the western idea that
competitive bidding among multiple suppliers help in reducing price and increasing
quality. Rather, this idea believes that a single supplier gives the buyer many
advantages –

a) Design collaboration with suppliers can be established, which gives plenty of

scopes for competitive product design as well as cost reduction
b) Strategic partnership between a buying firm and a supplying firm is useful in
smooth Supply Chain Management
c) From supplier‟s point of view, this justifies buyer-specific material/component
design and related investment for production, since they get long-term certainty
of business.
d) It is possible to connect the suppliers with buyers planning network and MRP
software.
e) Small lot delivery, several times a day becomes realistic.

Zero Inventory

Input materials are procured on-time, exactly when needed, not in advance, not late.
Products are produced on-time, exactly when needed. Thus, stock becomes zero. This
avoids inventory holding cost. It is to be remembered that inventory is considered as a
major source of waste.

In many cases, their suppliers are located very close to them, for on-time right quantity
delivery.

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Dr. M. Ahsan Akhtar Hasin, IPE, BUET.

Kanban Production control

Kanban, a Japanese word, means “Visual signal” or “Card”, which are used a way to control
movement of materials from one work center to another. It may be simply a paper-based
card, or an electronic computer-based card. The cards help the operators to communicate with
each other and control flow of materials. Cards are attached to the containers, which contain
materials or components

A Kanban system is a “Pull-type” of system in which kanbans are used to pull parts to the
next work centers, as opposed to MRP which is a “Push-type” of system.

Two types of cards, namely Production Kanban and Withdrawal kanban, are used to control
flow of materials and information in the shop floor. A Production kanban authorizes
production, according to the information mentioned in the kanban. On the other hand, a
Withdrawal kanban authorizes withdrawal and subsequent movement of the container from
one work center to the next downstream work center.

Waste elimination using Lean manufacturing system

Lean manufacturing system of Toyota (specifically Toyota Production System: TPS) strongly
suggests for identifying and minimizing all kinds of wastes. Waste means loss of material and
loss of productive time. The Japanese believe that waste is a major source of –

 lower productivity
 lower quality, and
 higher cost

JIT and Lean manufacturing defines wastes in several categories. This case avoids the details
of wastes. Wastes must be reduced, preferably eliminated from not only production system,
but also from all other activities. This definition of JIT leaves no room for surplus stock or
safety stock. Because, according to JIT, storage of unused inventory is a waste of resources.

The simplest way to describe waste is as “Something that adds no Value.” Company‟s
customers would not be happy to pay for any action that we take that does not add value to
what they actually want and nor should we be. The seven wastes of Lean Manufacturing are
what we are aiming to remove from our processes by removing the causes.

The Seven wastes are:

 Transport
 Inventory
 Motion
 Waiting
 Over-Processing
 Overproduction
 Defects

A Case in China

The main objective of this research is to study the issues surrounding an implementation of a
JIT system for Shanghai Engine Corp (SEC), an international automotive company producing
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Dr. M. Ahsan Akhtar Hasin, IPE, BUET.

automatic gears of cars. The factory in question is located in China, one of the many branches
of the aforementioned company. This study will reveal how the JIT system could improve the
case company‟s competitive strength, and how the company tackled various issues
surrounding the implementation.

The top management has realized the need to build advanced production systems like JIT in
order to maintain, and even upgrade, their operational effectiveness and quality. SEC was set
up in 1998 and had implemented several aspects of JIT. One year after the company‟s
establishment, they sold 50,000 car gears to achieve top ten gear manufacturers in the world
in terms of its sales worldwide. The company had a plan to extend the product line by
producing main engine also in the next two years.

Since competition in automotive market is fierce, it is essential that advanced operations

management techniques, such JIT, Lean system, and Total Quality Management (TQM), are
implemented. This case study addresses an overview of JIT implementation.

For that, they decided to address five elements in the first phase, as below:

1. Integrated information system

2. Demand management
3. Production control
4. Quality management
5. Supplier relationship management

1. Integrated information system

They pointed out that information system is a technological foundation and its application to
JIT is an elevated method for implementing JIT production system. Because, coordination
must be established for on-time procurement, production, warehousing and distribution.
Otherwise, lack of coordination will create distance among these stages of business. The case
company established a close dynamic corporation alliance via the Internet from upstream to
downstream of the whole supply chain in order to realize the interaction among the company,
suppliers and customers. In addition, information technology could assist the case company
for building seamless connection between order information of upstream and resource
information of downstream in order to reduce inventory by sharing information between both
sides. Thus, the case company could enhance quicker response of the supply chain to ensure
materials could be supplied smoothly. More specially, the company employs electronic
Kanban system to facilitate the flow of information. This helped them establish
synchronization among some key functions – purchasing, production and delivery. This
synchronization helped them to reduce lead time (i.e. faster response to market) and reduce
inventory across the supply chain by on-time dispatching (early dispatch increases
unnecessary stock; late dispatch creates stock-out; both are not expected).

2. Demand management: Inventory

As per standard theory of JIT, stock level should be zero through appropriate demand
management. But this requires high level of coordination among all parties. Toyota in Japan
has achieved that goal. But reports from companies in other countries reveal that zero stock is
“Not Possible”, rather absolute minimization of stock is realistic. There are several social,

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Dr. M. Ahsan Akhtar Hasin, IPE, BUET.

cultural and business issues behind this realization, and probably this is correct. Most
companies, outside Japan, believed that „zero inventory‟ is just a kind of ideal condition
subject to the existing logistics and supply chain paradigm. In majority of the cases, inventory
level for most of the components or parts is minimized by the implementation of JIT. In the
mean time, some safety inventory cannot be eliminated completely from the system.
According to the company, there was a concern about safety inventory in the warehouse, and
this was minimized through JIT. They pointed out that only a few spare parts could achieve
„zero inventory‟ after the implementation of JIT. That means most of the interviewees do not
believe that „zero inventory‟ can be achieved realistically for all kinds of raw materials and
components, in the case company and country.

3. Production control

Material movement in the production floor was smoothed and level of WIP inventory was
minimized by using Lean manufacturing system. Electronic Kanbans are used across the
production floor. In just two years of practice, WIP inventory has been reduced to nearly 1/3
of the previous level.

4. Quality management

Although, some people may consider quality to be altogether a different issue, Toyota felt
otherwise. This Chinese company also considered that quality is a very important factor to
assure successful JIT implementation. The concept of quality management is extended to all
workers and all departments. In addition, to ensure the JIT systems can be implemented
effectively, supplier quality management is of vital importance. Performance indicators have
been employed to examine the achievement of suppliers in quality, on-time delivery etc., in
order to encourage suppliers to participate in the JIT program. The complete quality issue has
been addressed through the implementation and practice of Total Quality management
(TQM).

5. Supplier relationship management

Top management of SEC explained that choosing and evaluating the case company‟s
suppliers objectively in JIT production system is crucial for the development. There are about
60 major suppliers in the case company. Long-term assurance of single-supplier philosophy
assured them sufficient business. That‟s why, most of them (forty suppliers) have built their
production facilities near (surrounding) the case company, which enables them quick and
small lot delivery. This aspect enabled them to reduce inventory the most, to absolute
minimum.

Questions:

Q1) If you are asked to adopt only one of the above 5 elements or aspects of JIT, which one
would you implement and why ?

Q2) Do you expect success by implementing JIT in Bangladesh ?

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