Just in Time

1. Executive Summary

This report provides an analysis and evaluation of the Just-In-Time system, the advantages and disadvantages of the system and how it would benefit AG & Z. The Just-In-Time (JIT) system is a process where goods are ordered as required, as opposed to the currently used batch processing system where goods are made in bulk and stored in warehouses until sold. The Just-In-Time system was initially developed to not only cut down the amount of waste produced by other systems, which was seen as incurring unnecessary costs rather than adding value to the company, but to also meet customer demands with minimum delays. It has been found that when implemented correctly the JIT system can benefit the company in numerous ways. For example, it has been shown to reduce the amount of inventory stored in warehouses as goods are sold direct to the customer as ordered. It has also been shown to speed up production lead times, eliminate and/or minimise the amount of quality control and reduce the amount of faulty stock returned. As well as benefiting companies in reducing transportation costs, as goods are sent from the factory to the customer rather then via a warehouse first. Another advantage is, the JIT system allows the company to keep up to date with customer demands and new technologies as the goods are made to order so the newest technology available is used. This is extremely important when dealing with goods that have a high turn over such as computers, because the goods would be produced as needed. It has also been proven to eliminate waste on any goods manufactured which have become obsolete due to technological advances. While there are some disadvantages to the JIT system, such as stock outs and possible communication break downs, (explained in detail in the report), the advantages far out weight the disadvantages. “JIT manufacturing has the capacity, when properly adapted to the organisation, to strengthen the organisations competitiveness in the marketplace substantially by reducing wastes and improving product quality and efficiency of production” (Institute for Manufacturing, 2007).

2. Introduction

The following report will explain in detail the Just-In-Time process and how it can be implemented into AG & Z production as a benefit to the company. It will compare and contrast the difference between the currently used Batch Processing System and the newly proposed Just-In-Time system. Also outlined will be the advantages and disadvantages commonly associated with the implementation of the JIT system

3. History of the Just-In-Time System

The Just-In-Time system (JIT) was first developed in the 1970’s by Taiichi Ohno who worked for the Japanese Toyota Motor Company. Mr Ohno developed the Just-In-Time system after observing and improving upon Henry Ford’s system used in the manufacture of Ford cars in America. (12manage, 2007).

As described by Henry Ford he “found in buying materials that it is not worthwhile to buy for other than immediate needs. We buy only enough to fit into the plan of production, taking into consideration the state of transportation at the time ... That would save a great deal of money, for it would give a very rapid turnover and thus decrease the amount of money tied up in materials” (Ford, 1923).

The system was developed to enhance the manufacturing lead times and reduce the amount of waste in forms of labour, inventory and warehousing, which was seen as incurring unnecessary costs rather than adding value to the company. This process was to be carried out by ensuring the parts needed for each production arrived exactly when they were needed. In other words, all parts “should be available when a firm needs … – not any earlier, nor any later (Coyle, Bardi & Langley 2003).

4. How Just-In-Time can be Implemented

One of the most common forms of implementing the JIT system is the Japanese Kanban system or visual record system. The Kanban system is a system where cards or visual records are used to inform the production team or sections of the production line, the exact quantity required for production and when the re-supplement will take place. In its simplest terms, the Kanban system is used to alert the production team exactly what needs to be produced, the quantity required and the designated time frame (Horngren, George & Srikant 1997).

5. Expected Results

The Batch Processing System currently used at AG & Z is a system where products are produced in bulk quantities or batches whether required by the customer or not. These goods are then stored in warehouses until required. This process produces large