Introduction to TQM and JIT

Concept of JIT

What is JIT?
Background of JIT

The Goal Of JIT

Focus of JIT?

Elements of JIT

JIT-Philosophy or Technique?

Kanban, Jidoka and Andon

Implementation of JIT

How JIT Implementation can be successful?

Problems Implementing JIT

Guidelines for Successful Implementation

Benefits of JIT

Drawbacks of JIT

Factors Debilitating JIT

JIT in manufacturing
JIT and Costs

Kanban-An Integrated System

When and How Kanbans are effective?

Case Study:

From three various Countries of the world

Conclusion

Bibliography

Introduction to TQM and JIT

Total Quality Management (TQM)

Total quality management (TQM) is not a technique; it is a broad management approach

or methodology, dealing with processes and attitudes. TQM places quality as the primary
objective for the organization, as opposed to the traditional management objective of
maximizing production and subsequently controlling costs. Although, TQM was initially
developed for the manufacturing environment, it can be equally applicable to any
environment, which involves inputs and outputs, such as knowledge service industry like
universities.
Principles of TQM may be summarized as follows:

There is a goal of ‘Continuous Improvement’ against achieving some static level of

quality. It is about approaching excellence in an incremental way. Quality is a continuous
ongoing process. Quality is responsibility and mission of all. Hence all employees should
be continuously trained and motivate to consistently achieve better and better quality.
Even ‘Commitment of Top Management’ should be visible and clear to all.

Instead of reactive and person dependent system, TQM is a ‘Proactive Systematic

Approach’. This means ‘prevention and immediate detection of errors and problems at
root source’ is preferred over of ‘correction for problems after its occurrence’.
Responsibility for quality takes place at the source. This feature demands ‘Quality
Design’ rather than inspection of quality after poor design.

TQM attempts to expose problems rather than hide or burry them. ‘Just in Time (JIT)’
helps us to understand more on this. TQM identifies and addresses causes of problems,
not effects.

TQM creates, encourages and nurtures simplicity, instead of bureaucratic approach of

adding controls. It attempts to identify and eliminate non-value-added activities thus
naturally motivating people to use quality procedures.

The essence of TQM is the simple but extremely powerful belief that it is better and
hence cheaper; to do every process right at first time, rather than not to do it right and
then corrects it afterwards. Doing things right at first time requires no money. Doing
things wrong is what only costs money, as allowing defective products to get produced
wastes time and resources.
Thus, longer it takes to identify problem, more will be the cost incurred to correct it.
TQM is systematic way of guaranteeing that all activities within an organization happen
as planned. It is the management attitude that concerns with preventing problems at
source, rather than allowing problems to occur and then correcting them afterwards.
 Introduction

Just-In-time or JIT, is a management philosophy aimed at eliminating manufacturing

wastes by producing only the right amount and combination of parts at the right place at
the right time. It is also that ‘Just in Time (JIT)’ enforces ‘Continuous Improvement’ by
continual reduction of non-value-added inventory stocks to lower and then further lower
levels. This is based on the fact that wastes result from any activity that adds cost without
adding value to the product, such as transferring of inventories from one place to another
or even the mere act of storing them.

The goal of JIT, therefore, is to minimize the presence of non-value-adding operations

and non-moving inventories in the production line. This will result in shorter throughput
times, better on-time delivery performance, higher equipment utilization, lesser space
requirement, lower costs, and greater profits.

JIT was developed as a means of meeting customer demands with minimum delays.
Thus, in the olden days, JIT is used not to reduce manufacturing wastage, but primarily to
produce goods so that customer orders are met exactly when they need the products.

JIT is also known as lean production or stockless production, since the key behind a
successful implementation of JIT is the reduction of inventory levels at the various
stations of the production line to the absolute minimum. This necessitates good
coordination between stations such that every station produces only the exact volume that
the next station needs. On the other hand, a station pulls in only the exact volume that it
needs from the preceding station.

The JIT system consists of defining the production flow and setting up the production
floor such that the flow of materials as they get manufactured through the line is smooth
and unimpeded, thereby reducing material waiting time.

This requires that the capacities of the various workstations that the materials pass
through are very evenly matched and balanced, such that bottlenecks in the production
line are eliminated. This set-up ensures that the materials will undergo manufacturing
without queuing or stoppage.
Another important aspect of JIT is the use of a 'pull' system to move inventories
through the production line. Under such a system, the requirements of the next station are
what modulate the production of a particular station. It is therefore necessary under JIT
to define a process by which the pulling of lots from one station to the next is facilitated.

JIT is most applicable to operations or production flows that do not change, i.e., those
that are simply repeated over and over again. An example of this would be an automobile
assembly line, wherein every car undergoes the same production process as the one
before it.

Some semiconductor companies have likewise practiced JIT successfully. Still, there are
some semiconductor companies that don’t practice JIT for the simple reason that their
operations are too complex for JIT application. On the other hand, that’s precisely the
challenge of JIT – creation of a production set-up that is simple enough to allow JIT.
(find a semi conductor factory)

Inventory stocks allow production process to continue even when some problem occurs.
In a way, inventory stocks act like a buffers to hide any problem that may occur. But,
with JIT, there are no buffers to hide problems and thus, occurrence of problem can shut
down the entire production process. Thus, JIT philosophy helps organization to
prominently expose problems and thus, bring a clear focus on removal of it at source,
by eliminating the cause, rather than effects, of problem.

With JIT, it is believed that the root causes of most problems are due to faulty production
process design. Hence, with JIT, nothing is taken for granted, everything is subject
to analysis.
Each activity is identified as either ‘Value-Added’ or ‘Non-Value-Added’. The
reduction of ‘Non-Value-Added’ activities is achieved mainly through increasing
manufacturing flexibility and improved quality.

JIT is an extremely powerful tool to identify where improvements should be made. It

helps you to identify cause (not the effect) of problem and its elimination. Failures and
exceptions are treated as opportunities to improve the system. In fact, JIT initiates
failures due to problems to expose them. It is a system of trouble-shooting, within a
culture of constant analysis and improvement. It is clear, as an attitude and approach, JIT
and TQM are perfectly complimentary to each other, to expose and correct problems at
source, so as to avoid wasting resources on production of defective products.

Just-in-time manufacturing is a process where suppliers deliver inventory to the factory

only when it's needed for assembly. Companies are beginning to turn to Internet-based
technologies to communicate with their suppliers, making the just-in-time ordering and
delivery process speedier and more flexible.
 A Walk from Past…
Background of JIT

JIT finds its origin in Japan, where it has been in practice since the early 1970’s. It was
developed and perfected by Taiichi Ohno of Toyota, who is now referred to as the father
of JIT.
Before the introduction of JIT, there were a lot of manufacturing defects for the existing
system at that time. This included inventory problems, product defects, risen costs, and
large lot production and delivery delays. The inventory problems included the unused
accumulated inventory that was not only unproductive but also required a lot of efforts in
storing and managing them. Other implied problems were parts storage, equipment
breakdowns and uneven production levels. For the product defects, manufacturers knew
that only one single product defect could destroy the producer’s credibility. They must
create a defect free process. Thus began the search for the system that could bring about a
turnaround.

The original concepts for the present day JIT philosophy is derived from the car plant
developed by Henry Ford in the early part of the century.

The ideas probably originated even earlier than this. Although many elements of JIT
manufacturing were present in Ford's assembly line in the 1930s, JIT as a manufacturing
process was not refined until the 1970's by Toyota Motors. Springing from Japan's post
World War II goal of full employment through industrialization, Japanese manufacturers
imported technology to avoid heavy R & D expenditures and focused on improving the
production process. Their aim was to increase product quality and reliability. Tai-ichi
Ohio established Toyota as leaders in quality and delivery time through the
implementation of JIT. This position was gained due to a commitment to two
philosophies: elimination of waste and respect for people.
The Japanese developed what we today understand as Just-in-time, through intensive
government supported work, and intended to improve their then inferior industries. Their
programmes began by learning existing techniques from experts such as Deming and
Juran, American quality specialists. The characteristics of Japan, restrained spaces, no
natural energy sources or mineral wealth put them under pressure and appears to have
banished complacency.

Total Quality Manufacturing experts, Deming and Juran, are responsible for pushing
North American manufacturers to adopt JIT philosophies. JIT gained world prominence
as North American manufacturers modified JIT principles to fit into their top down
planning and manufacturing systems approach.
The Goal of JIT
The prime goal of JIT is the achievement of zero inventories, minimal work in progress
not just within the confine of a single organization, but ultimately through out the entire
supply chain.

There are three main objectives.

Increasing the organization’s ability to complete with others and remain competitive over
the long run. The competitiveness of the firm is increased by the use of JIT
manufacturing process as they can develop a more optimal process for their firms.

Increasing efficiency within the production process. Efficiency is obtained through the
increase of productivity and decrease of cost.

Reducing wasted materials, time and effort. It can help to reduce the costs.

Other objectives of JIT:

Identify and response to consumers needs. Customer’s needs and wants seem to be the
major focus for business now, this objective will help the firm on what is demanded from
customers, and what is required of production.

Optimal quality/ cost relationship. The organization should focus on zero defect
production process. Although it seems to be unrealistic, in the long run, it will eliminate a
huge a huge amount of resources and efforts in inspecting, reworking & the production of
defected goods.
Develop a reliable relationship between the suppliers. A good and long long-term
relationship between organization and its suppliers helps to manage a more efficient
process in inventory management, material management and delivery system. It will also
assure that the supply is stable and available when needed.

Plant design for maximizing efficiency. The design of plant is essential in terms of
manufacturing efficiency and utility of resources.

Adopt the work for continuous improvement. Commit a long- term continuous
improvement throughout the organization. It will help the organization to remain
competitive in the long run.

Reduce unwanted wastes. Wastes that do not add value to the products itself should be
eliminated. JIT helps significantly in reducing wastes. JIT also helps in eliminating.

* Waste from overproduction

* Waste of waiting time

* Transportation waste

* Inventory Waste
 * Waste of motion

* Waste from defects

JIT can help an organization to remain competitive by offering consumers higher quality
of products than their competitors, which is very important in the survival of the market
place.
 Focus of JIT?

Mainly JIT focuses to eliminate the waste or the non-value added. Thus there are several
types of wastes categorised. JIT usually identifies seven prominent types of waste to be
eliminated:

• Waste from Overproduction

• Transportation Waste
• Processing Waste
• Waste from Product Defects
• Waste of waiting/idle time
• Inventory Waste
• Waste of Motion
 Elements of Just In Time

The basic elements of JIT manufacturing are:

· People Involvement
· Plants
· System
People Involvement: Maintaining a good support and agreement from people involved
in production. This is not only reducing the time and effort in implementation of JIT, but
also minimize the chance of creating implementation problem. The attempt to maximize
people's involvement may carry through the introduction of quality circle and total
involvement concept.

Manufacturers can gain support from 4 sources.

1. Stockholders and owners of the company - should maintain a good long-term

relationship among them.

2. Labor organization - all labors should be well informed about the goals of JIT, this is
crucial in gaining support from the them.
3. Management support - support from all level of management. The ideas of continuous
improvement should spread all over the factory, managers and all shop floor labor.

4. Government support - government can show their support by extending tax and other
financial help. This can enhance the motivation, and also help in financing the
implementation of JIT.

Plants: Certain requirements are needed to implement JIT

1. Plant layout - the plant layout is mainly focus on maximizing working flexibility. It
requires the use of "multi-function workers".

2. Demand-pull production - it means to produce when the order is received. This can
manage the quantity and time more appropriately.
3. Kanban - a Japanese term for card or tag. Special inventory and process information
are written on the card. This helps tying and linking the process more efficiently.

4. Self inspection - it is carried out by the workers at catch mistakes immediately.

5. Continuous improvement - this concept should be adopted by every members in the

organization in order to carry out JIT. This is the most important concept of JIT. This can
allow an organization to improve its productivity, service, operation and even customer
satisfaction in an on-going basis.

System This refers to the technology and process that combines the different processes
and activities together. Two major types are Material Requirement Planning and
Manufacturing Resource Planning.

MRP is a computer based, bottom-up manufacturing approach. This involves two plans,
production plan and master production schedule. Production plan involves the
management and planning of resources through the available capacity. Master production
schedule involves what products to be produced in what time.
The above three factors form the element of JIT.

JIT - Philosophy or Technique????

Just In Time is a philosophy and not the technique for elimination of wastes. The JIT
strategy is to have "the right product at the right place at the right time."

The Just-in-time philosophy that emerged, is a management logic based on simplicity and
continuous improvement. It may be applied to any process where it will aim to make
improvements through elimination of excess, waste and unevenness.

The Just-in-Time concept comprises methods and techniques that aim to increase the
potential for short times to delivery.

Production system in which both the movement of goods during production and
deliveries from suppliers are carefully timed so that at each step of the process the next
(usually small) batch arrives for processing just as the proceeding batch is completed

The "Just in time" (JIT.) inventory concept, also called Kanban, asserts that just enough
inventories, arriving just in time to replace that which was just used, is all the inventory
that is necessary at any given time. Excessive inventory unnecessarily ties up money,
adds warehousing costs, increases risk of damage and risks obsolescence, and most of all,
can possibly obscure opportunities for operational improvements.

Storing inventory is still the basics of warehousing, but in today’s business it constitutes
only part of the total. A modern thought on warehousing is that large inventories are
really not as necessary as once believed.
To some companies storing large quantities of inventory is detrimental to business
because it ties up capital and can also disguise poor management practices. The JIT
philosophy emphasizes flow flexibility and developing supply chains to reduce all excess
and waste

Kanban, Jidoka and Andon

Kanban, Jidoka and Andon are the tools of Just In Time techniques. They are listed as
under:

What Is Kanban?

A Kanban system is a material control system where work centres use visible, physical
signals to initiate manufacturing and movement of material.

Signals used in a Kanban system can be quite simple, such as an empty container, a card
or a message at a workstation in a computerized system or an EDI message from a
customer or to a supplier. The Japanese word Kanban can be translated as "card" or
"sign." The most well-known and widely used type of Kanban system is the card system
that was first developed at Toyota in Japan.

What is Jidoka?
Transferring human intelligence to automated machinery so machines are able to detect
the production of a single defective part and immediately stop themselves while asking
for help.

Sakichi Toyoda pioneered this concept, also known as autonomation, at the turn of the
twentieth century when he invented automatic looms that stopped instantly when any
thread broke. This permitted one operator to oversee many machines with no risk of
producing large amounts of defective cloth. The term has since been extended beyond its
original meaning to include any means of stopping production to prevent scrap (for
example the andon cord which allows assembly-plant workers to stop the line), even
where this capability is not built-in to the production machine itself.

What is Andon?

Andon at many manufacturing facilities is an electronic device: audio and/or color-coded

visual display. For example, suppose an Andon unit has three color zones (red, green, and
orange) and when the orange zone flashes with a distinctive sound, it calls for an
attention of and is signaling operator to replenish certain material.
The andon communication system promotes teamwork in that it allows team members to
know how they are doing in meeting their fundamental goal. Also, the support received
by the team member who pulls the andon cord serves as positive feedback that they are
indeed the focus of the organization.

Implementation Of JIT

Although the just-in-time (JIT) concept is very young, perhaps 10 to 15 years old in this
country, it is so widespread in American manufacturing and service. Perhaps this is
because the idea is so simple and so appealing. In short, the JIT strategy is to have "the
right product at the right place at the right time." It implies that in manufacturing or
service, each stages of the process produces exactly the amount that is required for the
next step in the process. This notion holds true for all steps within the system.

Suppose, for example, that all products pass through a drilling operation and then a
milling operation. With JIT, the drill produces only what the mill will need next. It also
holds for the last step that is, the system produces only what the customer desires.
Implementation of a JIT system typically includes emphasis on the following aspects of
the production process:

Production Smoothing

Capacity Buffers

Set-up Reduction

Cross Training and Plant Layout

Total Quality Management

Most of the companies today seek this method of implementation:

Form a top-level team:

This team’s responsibilities include deciding upon an organizational structure and

developing a plan to implement JIT within the company. This plan should include the
company’s goals concerning production, as well as how to establish this plan among all
employees (i.e. motivation & discipline) This plan then be used to establish the overall
philosophy of the company concerning JIT

To train the top management in the basic concepts of JIT:

This is the first step of the implementation process. It is very important to educate and
train the top-level management, as they are the ones who frame policies and get things
moving. This being a new idea, getting this into practice will need full support &
cooperation from these people.

To implement this system to every aspect of the company from supplier to

distributors:

First of all each department should establish its goals and a specific problem to attack.
Then a team should be chosen by each department and establish team leaders. The teams
should focus on the reduction of costs and the elimination of wastes. Data must then be
collected on the team’s problems. This data should be plotted in order to find excess
waste or costs. Once this is done, measurement should be plotted in order to find excess
waste or costs. Once this is done, measurement should be made. Manipulation of this data
should show at least some apparent problems in the current system. Further analysis
should help in the implementation of JIT by showing problem areas. In addition, the data
the data could be used to show the effects of implementing JIT into the company.
 How Can JIT Implementation be Successful??

Stabilize and level the MPS with uniform plant loading: create a uniform load on all work
centres through constant daily production (establish freeze windows to prevent changes
in the production plan for some period of time) and mixed model assembly (produce
roughly the same mix of products each day, using a repeating sequence if several
products are produced on the same line). Meet demand fluctuations through end-item
inventory rather than through fluctuations in production level.

Reduce or eliminate set-up times: aim for single digit set-up times (less than 10
minutes) or "one-touch" set-up -- this can be done through better planning, process
redesign, and product redesign.
Reduce lot sizes (manufacturing and purchase): reducing set-up times allows
economical production of smaller lots; close cooperation with suppliers is necessary to
achieve reductions in order lot sizes for purchased items, since this will require more
frequent deliveries.

Reduce lead times (production and delivery): production lead times can be reduced by
moving work stations closer together, applying group technology and cellular
manufacturing concepts, reducing queue length (reducing the number of jobs waiting to
be processed at a given machine), and improving the coordination and cooperation
between successive processes; delivery lead times can be reduced through close
cooperation with suppliers, possibly by inducing suppliers to locate closer to the factory

Preventive maintenance: use machine and worker idle time to maintain equipment and
prevent breakdowns

Flexible work force: workers should be trained to operate several machines, to perform
maintenance tasks, and to perform quality inspections. In general, the attitude of respect
for people leads to giving workers more responsibility for their own work.
Require supplier quality assurance and implement a zero defects quality program:
errors leading to defective items must be eliminated, since there are no buffers of excess
parts. A quality at the source (jidoka) program must be implemented to give workers the
personal responsibility for the quality of the work they do, and the authority to stop
production when something goes wrong. Techniques such as "JIT lights" (to indicate line
slowdowns or stoppages) and "tally boards" (to record and analyze causes of production
stoppages and slowdowns to facilitate correcting them later) may be used.

Small-lot (single unit) conveyance: use a control system such as a kanban (card) system
to convey parts between workstations in small quantities (ideally, one unit at a time). In
its largest sense, JIT is not the same thing as a kanban system, and a kanban system is not
required to implement JIT (some companies have instituted a JIT program along with a
MRP system), although JIT is required to implement a kanban system and the two
concepts are frequently equated with one another.
 Problems Implementing JIT

JIT is a philosophy whose objective is to eliminate all sources of waste, including

unnecessary inventory and scrap in the production. Although JIT can eliminate many
wastes, it also has problems in the implementation.

Repetitive production.
Standard products.
Short set-up times.
Demands discipline.
Sloppy work, no late delivery.
bad management.
Stable demand, level production.
Cooperation and trust between people.
 Guidelines for Successful JIT Implementation

Make the factory loadings uniform, linear, and stable. Fluctuations in manufacturing
loadings will result in bottlenecks.

Reduce, if not eliminate, conversion and set-up times.

Reduce lot sizes. This will smoothen out the flow of inventories from one station to
another, although this may necessitate more frequent deliveries or transfers.

Reduce lead times by moving work stations closer together and streamlining the
production floor lay-out, applying cellular manufacturing concepts, using technology to
automate processes and improve coordination.

Reduce equipment downtimes through good preventive maintenance.

Cross-train personnel to achieve a very flexible work force.

Require stringent supplier quality assurance since an operation under JIT can not afford
to incur errors due to defects.

Use a control system to convey lots between workstations efficiently; the use of a kanban
system is an example of this

Benefits of JIT

Perhaps, the most significant benefit of JIT is to improve the responsiveness of the firms
to the market place thereby affording it an overwhelming advantage in competition.
Specific benefits will depend upon size of the market, technology of processes etc.
Therefore, they vary from organizations to organization.

One of the benefits of JIT is that with raw materials and WIP being processed in smaller
batches, errors can be easily identified and corrected quickly, during each stage of the
production process. This in turn has the ‘knock-on’ effects of reducing non-value added
costs

Conceptually, the JIT benefits could be grouped into the following categories;

Product Cost: This is greatly reduced of manufacturing cycle time, reduction of scraps,
inventories, space requirement, and material handling and eliminations of non-value
adding operations.

Quality: It has greatly improved due to fast detection and correction of defects, use of
automatic stop devices, higher quality of purchased parts, worker centered quality
control and statistical process control. Total preventive maintenance an d lower inventory
levels also help in quality improvements.

Design: Due to fast response to engineering change, alternative designs can be quickly
brought on the shop floor.
Productivity: Order magnitude productivity improvements are obtained due to the use of
flexible workforce, reduced rework, reduced inspection, reduced part delay and reduced
throughout time. Workers acquire multiple skills and become highly productive.

JIT systems have a number of other important benefits also, which are attracting the
attention of various companies. The main benefits are:

• Reduced levels of in-process inventories, purchased goods, and finished goods.

• Reduced space requirements.

• Increased product quality and reduced scrap and rework.

• Reduced manufacturing lead times.

• Greater flexibility in changing the production mix.

• Smoother production flow with fewer disruptions.

• Worker participation in problem solving.

• Pressure to build good relationships with vendors.

• Increased productivity levels and utilization of equipment. 10.Reduction in the need

for certain indirect labour.
 Drawbacks of Just In Time

Regardless of the great benefits of JIT, it has its drawbacks.

JIT has the following major drawbacks:

Culture Differences: The organizational cultures vary from firm to firm. There are some
cultures that tie to JIT success but it is difficult for an organization to change its cultures
within a short time.

Traditional Approach: The traditional approach in manufacturing is to store up a large

amount of inventory in the means of backing up during bad time. Those companies rely
on safety stocks may have a problem with the use of JIT.

Difference in implementation of JIT. Because JIT was originally established in Japanese,

it is somehow different for implementing in western countries. The benefits may vary.

Loss of individual autonomy: his is mainly due to the shorter cycle times which adds
pressures and stress on the workers.
Loss of team autonomy: This is the result of decreasing buffer inventories which lead to
a lower flexibility of the workers to solve problem individually.

Loss of method autonomy: It means the workers must act some way when problems
occur, this does not allow them to have their
own method to solve a problem.

JIT success is varied from industry to industry. Some industries are benefit more from
JIT while others do not.

Resistance to change JIT involves a change throughout the whole organization, but
human nature resists changing. The most common resistance are emotional resistance and
rational resistance. Emotional resistance are those psychological feeling which hinder
performance such as anxiety. Rational resistance is the deficient of the needed
information for the workers to perform the job well.
Relationship between management and employees is important. A mutual trust must be
built between management and employees in order to have effective decision-making.

Employee commitment: Employees must commit to JIT, to enhance the quality as their
ultimate goal, and to see JIT as a way to compete rather than method used by managers to
increase their workload.

Production level JIT works best for medium to high range of production volume.

Employee skill JIT requires workers to be multi-skilled and flexible to change.

Compensation should be set on time-based wages. This allows the workers to concentrate
on building what the customers wants.
 Factors Debilitating JIT

Listed below are few of the factors that can debilitate JIT:

Lack of Experience and expertise: JIT being a relatively novel concept for the Indian
Industries, lack of experience and expertise at every level of management could in turn
hinder the growth and development of the organization.

Shortcoming of Suppliers: These include factors such as unpredictable quality, erratic

deliver schedules, varying quantity dispatches, machine breakdowns and quality related
losses etc

Little or no incentive for suppliers to adopt JIT delivery: JIT generally does not
provide any incentives such as credit facilities, discounts on bulk purchases, etc. to the
suppliers to meet with the delivery dates. It is mandatory that they provide the same.

Lack of commitment from buyers: This basically means cancellation of orders by the
buyer. This happens due to termination or postponement of orders down the line.
Unreliable power supply: Power is among the basic necessity for any plant operation.
Unreliable power supply is quite a common phenomenon is a country like India. Very
few places in the country get uninterrupted power supply throughout the day. This halts
production and deliver dates cannot be met by the supplier.

Labour problems such as lockouts, strikes, etc: Labour unrest also can be a hindrance
in the JIT system. Laborers from labour unions and take out strikes and can vow not to
work unless their demands are fulfilled. These obstacles are mostly expected in
developing or under developed economies like India. Thus, there it is essential to see that
such situations do not occur frequently.

Poor transport and infrastructure facilities: this is a major concern for factories
located in remote areas. Taking India as an example, we cannot boast of a good transport
and infrastructure capacity for the movement of men and material. We lag behind by 10-
15 yrs as compared to the western and South-Eastern Nations. JIT is only possible when
there is an uninterrupted flow of material, which is likely to happen when there exists
coordinated and smooth transportation.

Just In Time (JIT) Manufacturing

Just in Time manufacturing is a systems approach to developing and operating a

manufacturing system. It is based on the total elimination of waste. JIT is not a new
concept. It has been part and parcel of the Japanese manufacturing industry adopted
approach for quite some time. It requires that equipment, resources and labor are made
available only in the amount required and at the time required to do the job. It is based on
producing only the necessary units in the necessary quantities at the necessary time by
bringing production rates exactly in line with market demand. In short, JIT means
making what the market wants, when it wants it. JIT has been found to be so effective
that it increases productivity, work performance and product quality, while saving costs.
 JIT AND COSTS

JIT can affect the bottom line in a variety of ways. Improvement in quality and delivery
times can increase demand and, thus, revenue. Costs are also affected; the JIT philosophy
contends that inventory reduction and increased quality reduce costs. Traditional cost
accounting Systems often makes it difficult to measure the effects of changes except in
very aggregate terms. One of the tenets of JIT is to account for these effects more
accurately.

Cost Accounting Systems

Costs are a major factor in PIM decisions. Unfortunately, traditional cost accounting
Systems often do not tell the decision maker how much a specific decision wilt affect
actual expenditures. This is due to overhead costs being hidden by the allocation
methods.

For example, overhead costs usually are allocated to departments (cost centres) rather
than to activities, such as set-up, and inspection and maintenance operations. In addition,
allocation based on the material or directs labour required to manufacture an item ignores
the fact that different items are in different stages of their life cycles.

Thus, different items may have different manufacturing, engineering, and tooting costs,
may have quite different quality and inspection requirements, and may require different
marketing and distribution expenditures. When these costs are aggregated and allocated
on the basis of the average direct labour cost of a part-as is the case with most traditional
cost accounting systems-some products are allocated costs considerably below the actual
expenditures required for their manufacture and distribution and others are allocated
more than their true cost. Thus, decisions often are based on inaccurate information.

In order to manage costs and base decisions on accurate information, the causes (source)
of the expenditures must be identified. Various expenditure causes; such as set-up times,
shop and purchase order processing, receiving, and material handling deserve more
discussion.

These basic causes of indirect costs are called cost drivers. The cost accounting system
must report the cost of these activities to accurately determine the costs of individual
products. Such reporting enables manufacturing management to treat set-up, inspection,
receiving, and transaction costs as direct costs, to base decisions on accurate information,
and to focus on reducing high cost elements. An ABC analysis can be used to select the
activities that are appropriate for cost reduction studies.
KANBAN - An Integrated JIT System
What is Kanban?

A Kanban is a card containing all the information required to be done on a product at

each stage along its path to completion and which parts are needed at subsequent
processes. These cards are used to control work-in-progress (WIP), production, and
inventory flow. A Kanban System allows a company to use Just-In-Time (JIT)
Production and Ordering Systems, which allow them to minimize their inventories while
still satisfying customer demands.

A Kanban System consists of a set of these cards, with one being allocated for each part
being manufactured, that travel between preceding and subsequent processes. The
Kanban System was developed (more than 20 years ago), by Mr. Taiichi Ohno, a vice
president of Toyota, to achieve the following objectives:

• Reducing costs by eliminating waste/scrap

• Try to create work sites that can respond to changes quickly

• Facilitate the methods of achieving and assuring quality control

• Design work sites according to human dignity, mutual trust and support, and
allowing workers to reach their maximum potential

How JIT and Kanban Work Together??

JIT is a method for improving the overall productivity and responsiveness in a

manufacturing enterprise. Eliminating waste that results from overproduction,
unnecessary stock on hand, waiting time, defective items, manual keying, etc accomplish
this. JIT also aims to develop a manufacturing process that is as continuous as possible,
from receipt of raw materials and purchased components to the shipment of finished
goods.
The Pull Principle as Applied in a Kanban System

Kanban systems are based on pull principles for material control. In a pull system,
manufacturing and movement of material is performed only when demanded for use and
authorized by a consuming department or a customer. Compared to a push system, a pull
system represents a decentralized ordering policy.

The number of cards, or whatever else is used as a signal, controls the level of inventory
and work in progress in a Kanban system. The Kanban system is an execution type of
system. To work properly it must be combined and supplemented by some type of
planning system, generally a computerized MRP II or ERP system.

Types of Kanbans

The two most common types of Kanbans used today are:

• Withdrawal (Conveyance) Kanban

• Production Kanban

This is usually a physical card but other devices can be used. Two kinds of Kanban cards
are mainly used:
• A Withdrawal Kanban - specifies the kind and quantity of product, which a
manufacturing process should withdraw from a preceding process. The withdrawal
Kanban illustrated (above) shows that the preceding process which makes this part is
forging, and the person carrying this Kanban from the subsequent process must go to
position B-2 of the forging department to withdraw drive pinions. Each box of drive
pinions contains 20 units and the shape of the box is `B'. This Kanban is the 4th of 8
issued. The item back number is an abbreviation of the item.

A Production-ordering Kanban - specifies the kind and quantity of product, which the
preceding process must produce. The one illustrated (above) shows that the
machining process SB-8 must produce the crankshaft for the car type SX50BC-150.
The crankshaft produced should be placed at store F26-18. The production-ordering
Kanban is often called an in-process Kanban or simply a production Kanban.

Other types of Kanbans

The three other types of Kanbans that exist for special circumstances only. They are
discussed briefly as follows:

• Express Kanban - used when shortages of parts occur

• Emergency Kanban - used to replace defective parts and other uncertainties such as
machine failures or changes in production volumes
• Through Kanban - used when adjacent work centres are located close to each other.
It combines production and withdrawal Kanbans for both stages onto one, through,
Kanban
 When and How Kanbans are effective??

Kanbans help simplify planning and to fine-tune production to meet changing customer
demand of up to + or - 10%. The system requires planned monthly and weekly
production schedules.

Kanbans simplify day to day flexibility, and changes to the production schedule need
only to be given to the final assembly process and will then automatically work their way
back up the line.

Kanban systems can be tightened by removing cards or by reducing the number of parts
on a pallet. The effect will be to speed the flow through the process and hence reduce
lead times.
However it also makes the system more vulnerable to breakdowns and other causes of
dislocation. By identifying the areas within the line that are causing disruption, efforts
can be made to improve them. Thus tackling the key points raises the overall efficiency
of the line.

Other types of Kanban Also used are Supplier Kanbans - to withdraw goods from
external suppliers, and two types of Signal Kanban, which are inserted near the bottom of
a stack of items. These automatically initiate production of batch-produced items when
the stock reaches a pre-set re-order level. Administrative efforts and costs are reduced as
compared to most other kinds of systems.

The built-in design allows for continuous improvement. The P-kanban denotes the need
to produce more parts 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

Objectives of Kanban

Synchronize the movement of material throughout the manufacturing and distribution

system at the rate of withdrawal of material from the system.

Limit the total inventory in the system.

Facilitate analysis, process improvements, and further reductions in inventory.
 India case study

Case Study On the Hero Group

The Hero Group has done business differently right from the start and that is what has
helped us to achieve break-through in the competitive two-wheeler market. The Group's
low key, but focussed, style of management has earned the company plaudits amidst
investors, employees, vendors and dealers, as also worldwide recognition.
The growth of the Group through the years has been influenced by a number of factors:

Inventory Control.

The Hero Group through the Hero Cycles Division was the first to introduce the concept
of just-in-time inventory. The Group boasts of superb operational efficiencies. Every
assembly line worker operates two machines simultaneously to save time and improve
productivity. The fact that most of the machines are either developed or fabricated in-
house, has resulted in low inventory levels.

In Hero Cycles Limited, the just-in-time inventory principle has been working since the
beginning of production in the unit and is functional even till date. The raw materials
vendors bring in the goods get paid instantly and by the end of the day the finished
product is rolled out of the factory. This is the Japanese style of production and in India,
Hero is probably the only company to have mastered the art of the just-in-time inventory
principle.

Ancillarisation.
An integral part of the Group strategy of doing business differently was providing support
to ancillary units. There are over 300 ancillary units today, whose production is dedicated
to Hero's requirements and also a large number of other vendors, which include some of
the better-known companies in the automotive segment.

The Munjals have gone much beyond the conventional definition of ancillarisation,
making it a point to extend technical and managerial support to these ancillaries. Friends,
relatives, ex-employees man these ancillary units or close associates of the Munjal family
since the Group patriarch, Mr Brijmohan Lall, "… never wanted to march alone."

Employee Policy.

Another Striking feature within the Hero Group is the commitment and dedication of its
workers. At Hero Cycles Limited, the flagship unit of the Group it is claimed that except
for a few days during Operation Bluestar, the plant has never had any stoppage of work.
There is no organised labour union and family members of employees find ready
employment within Hero. The philosophy with regard to labour management is "Hero is
growing, grow with Hero."

When it comes to workers' benefits, the Hero Group is known for providing facilities,
further ahead of the industry norms. Long before other companies did so, Hero was
giving its employees a uniform allowance, as well as House Rent Alowance (HRA) and
Leave Travel Allowance (LTA). Extra benefits took the form of medical check-ups, not
just for workers, but also for the immediate family members.

Dealer Network.

The relationship of the Munjals with their dealers is unique in its closeness. The dealers
are considered a part of the Hero family. A nation-wide dealer network comprising of
over 3,500 bicycle dealers, 350 dealers for mopeds and 225 franchise holders for
motorcycles, the Munjals have a formidable distribution system in place.

Sales agents from Hero travels to all the corners of the country, visiting dealers and send
back daily postcards with information on the stock position that day, turnover, fresh
purchases, anticipated demand and also competitor action in the region. The
manufacturing units have a separate department to handle dealer complaints and
problems and the first response is always given in 24 hours.

Financial Planning.

The Hero Group benefits from the Group Chairman's financial acumen and his grasp on
technology, manufacturing and marketing. Group Company, Hero Cycles Limited has
one of the highest labour productivity rates in the world. In Hero Honda Motors Limited,
the focus is on financial and raw material management and a low employee turnover.

Consolidated Family Business.

The Hero Group is a strong family run business - there is no other Group that has so
successfully managed to stay together for over 40 years. The system is to bring in any
new family member, coming of age, within the fold of the existing business or set him up
in a new business. The third is generation is already actively involved in existing as well
as the new initiatives within the Group. The second and the third generations of the
family, aided by workers who typify the hardy spirit of the Punjab, are consolidating the
Group’s future with the same zeal.

Diversification.
Throughout the years of mammoth growth, the Group Chairman, Mr Lall has actively
looked at diversification. A significant level of backward integration in its manufacturing
activities has been substantial in the Group's growth and led to the establishment of the
Hero Cycles Cold Rolling Division, Munjal and Sunbeam Castings, Munjal Auto
Components and Munjal Showa Limited amongst other component-manufacturing units.

Then there were the expansion into the automotive segment with the setting up of
Majestic Auto Limited, where the first indigenously designed moped, Hero Majestic,
went into commercial production in 1978. Then came Hero Motors, which introduced
Hero Puch, in collaboration with global technology leader Steyr Daimler Puch of Austria.
Hero Honda Motors was established in 1984 to manufacture 1000 cc motorcycles.

The Munjals also took a foray into other segments like exports, financial services,
information technology, which includes customer response

services and software development. Further expansion is expected in the areas of

Insurance and Telecommunication.

Conclusion

The Hero Group's phenomenal growth is the result of constant innovations, a close watch
on costs and the dynamic leadership of the Group Chairman, characterized by an ethos of
entrepreneurship, of right attitudes and building stronger relationships with investors,
partners, vendors and dealers and customers. Brijmohan Lall's aspiration to provide
cheapest transportation to the poorest of India's poor inspired him to perfect his
operations and make them as cost-effective as possible. This is how increased vendor
efficiency and zero-inventory management practices evolved at Hero.
Hero Honda believes in

"The raw material vendors would bring in the goods, they would be paid instantly and by
the end of the day, the finished product would roll out." In order to curtail of the
inventory cost and other waste ages.
American Case study

American companies applying JIT to American plants have reported the following
results:

The Apple Macintosh factory, is months into JIT, reported that rejects were reduced from
28 percent to 1 percent, inventory turns were twice the industry average, space
requirements were reduced 35 percent, labour productivity was increased 60 percent
(Sepehri 1986).

Omark Industries, in the first year, reduced inventory 25 percent ($20 million), increased
productivity 30 percent, reduced lot sizes, shortened lead times, and improved quality.
Later into the program, raw material was reduced 95 percent and WIP 96 percent. In the
case of WIP, the reduction was from 100,000 pieces on the floor at any given time to
4,000 pieces, with an eventual goal of 1,000. The consequences of this reduction to
material scheduling and control are that material can be much more tightly controlled.
(Sepehri 1986)

Harley-Davidson reports a 50 percent inventory reduction, a 50 percent reduction in

scrap and rework, a 32 percent productivity increase, an increase in inventory turns from
5 to 17, and a decrease in warranty claims despite a longer warranty period (Sepehri
1986).

IBM's plant in Raleigh, North Carolina, which makes terminals for mainframe
computers, while not reporting numeric results did report that manufacturing costs were
greatly reduced, inventory turns increased, mean time between failures was reduced, and
cycle time from product inception to customer availability was reduced (Sepehri 1986).

JIT's applicability is not limited to discrete parts manufacturers or to large companies.

ChemLink, a small petroleum processor, reports that inventory was reduced by 21
percent, sales grew by 9 percent, obsolete inventory was reduced by 30 percent, and
transportation cost was reduced 8 percent (Crane 1989).

Hay (1988) estimates the range of improvement possible for a western JIT
implementation to be about 83 to 92 percent reduction of lead time, 5 to 5O per-cent
reduction of direct labor, 21 to 60 percent reduction of indirect labor, 26 to 63 percent
reduction in the cost of poor quality, 6 to 45 percent decrease in purchased material costs,
35 to 73 percent reduction in purchased materials, 70 to 89 percent reduction in work in
process, 0 to 90 percent reduction in finished goods inventory, 75 to 94 percent reduction
in setup time, and 39 to 80 percent reduction in space requirements.

JIT presentations often employ the analogy of a stream when describing proper inventory
management. Well-managed systems achieve a flow of inventory from raw material to
the customer like a smooth river, unimpeded by shoals of scrap or machine breakdown or
other problems. This concept did not originate with the Japanese; Henry Ford's River
Rouge plant regularly converted iron ore into a Model T in 4 days. However, in recent
years, especially the 1970's American Business has not improved its manufacturing
capability quickly enough to maintain a competitive position in cost or quality or market
responsiveness or flexibility.

Computerworld

Until a crystal ball comes along that lets companies forecast exactly what their customers
will want so they can make it in advance, large corporations will continue to turn to just-
in-time manufacturing.

This process lets manufacturers purchase and receive components just before they're
needed on the assembly line. As a consequence, it relieves manufacturers of the cost and
burden of housing and managing idle parts.

Although companies such as SAP AG offer enterprise resource planning software to

coordinate supply chains so they can handle just-in-time processes, analysts say there's
still a lot of room for improvement by using the Web.

Most observers point to automotive firms such as Torrance, Calif.-based Toyota Motor
Sales USA Inc. as the earliest and highest-profile adopters of just-in-time processes.
High-tech companies such as Round Rock, Texas-based Dell Computer Corp. and San
Jose-based Cisco Systems Inc. have followed suit.
"The Toyota production system is famous for efficiency and coordination, but it has been
a highly manual system with very low-level technology," says Tom Jones, a senior vice
president at Miami-based Ryder System Inc., which outsourcers just-in-time supply-chain
services.

But Toyota has been working to make its supply chain more flexible by moving it onto
the Web, and other car companies such as Dearborn, Mich.-based Ford Motor Co. have
been following in Toyota's treads, says Jones.

The Web allows the automakers to send requests for parts to their suppliers as the need
arises, regardless of whether disparate computer platforms are involved. For instance, if a
car company experiences a high demand for a certain color vehicle, it can notify its paint
supplier and get the product delivered to its factory quickly and with a minimum amount
of human intervention or paperwork.

Build to Order (Dells Approach)

In the high-tech area, companies are turning to a build-to-order process in which a

product is customized and manufactured according to specific customer requests, making
just-in-time manufacturing and delivery key, says Michael Burkett, a senior research
analyst at AMR Research Inc in Boston.

At Dell, the process is called "pull to order," says company spokesman Venancio
Figueroa. "It's a critical element of our build-to-order manufacturing process," he says.
The model contributes to "increasing the accuracy of doing business, both from a
customer and supplier standpoint."
Once the parts are delivered, the assembly-line process can begin prepping components.
Dell then begins manufacturing the actual computer. Afterward, it tests and does custom
integration work for the finished product.

The build-to-order process is only one part of Dell's approach to efficiency - to further
improve the manufacturing processes, the company also relies on special hydraulic tools,
conveyor belts and tracks, reducing the need for human intervention by half. This means
better overall quality, says Figueroa.

Dell is able to achieve a four-hour production cycle time using an Internet-based supply-
chain management system, Figueroa says. After getting an order, Dell notifies its
suppliers about what components are needed, and they're delivered within an hour and a
half.

"With our pull-to-order system, we've been able to eliminate warehouses in our factories
and have improved factory output by double by adding production lines where
warehouses used to be," says Figueroa.

Dell plans to save $15 million in the first six months with its build-to-order process;
within three years, that figure should be $150 million, says Figueroa.

Dell generally fulfills customer demands within five days, and the firm plans to reduce
that time by relying on more extensive Web-based collaborative technologies, he says.
In addition to the manufacturing efficiencies, there are other reasons why build-to-order
is appealing. For instance, it helps prevent manufacturers from being stuck with inventory
that may become obsolete as it sits gathering dust in a warehouse, says Burkett. Or if
there's a design change to a manufactured product, a company can be stuck with useless
inventory that it has to dispose of at a loss.

Pros and Cons

There's a flip side, however. The just-in-time method demands a very disciplined
assembly-line process, says David Dobrin, an analyst at Surgency Inc. in Cambridge,
Mass. The entire factory has to be in sync to successfully exploit its methods.
Manufacturers can afford fewer errors in the delivery of the supplier's component; if a
part isn't there, the assembly line stops, and that can result in the loss of manpower and
cash.

Moreover, just-in-time manufacturing doesn't necessarily mean a company is saving

money on its supply chain - often, companies just have a distributor or supplier maintain
a warehouse, either on-site or nearby, says Dobrin.

This is an area where the Internet could improve existing processes, say analysts. Like
Dell, other companies are trying to establish faster, more efficient communications with
their suppliers by using the Web, says Dobrin, and the older form of communication -
electronic data interchange - is being phased out.
The Web permits very intimate contact between supplier and manufacturer. For instance,
Cisco shares its manufacturing schedules with suppliers so they'll know how much
inventory they need to have on hand.

There can be obstacles to getting these Web processes for just-in-time manufacturing up
and running. Cincinnati-based Procter & Gamble Co., for instance, is struggling with
variations in data-formatting methods among its suppliers, according to CIO Steve David.
Human intervention is required to do the data translation, which slows the process.

In the near term, Procter & Gamble plans to get 50% of its orders to the Web next year,
taking two days off the order cycle time. For the long run, David says, he hopes to have a
just-in-time-based supply chain that's accessible to everyone, from the retailer to Procter
& Gamble's suppliers to the suppliers' suppliers. However, for that to happen, "we need
to have data visibility across all of the supply-chain partners," he says.

- An inventory management system based upon the philosophy that well-run

manufacturing plants do not require the stockpiling of parts and components.
Instead, they rely upon receiving necessary inventory in the exact quantity and at a
specified time to support manufacturing schedules.
Xerox

How did these two philosophies emerge? Let us get to 1980s. Xerox was one of premier
companies in US (and it is even today a premier company) It was in deep trouble and
almost about to be out of business.
Japanese had entered the US market and were selling copiers, at prices, for what was
costing Xerox to make.

Xerox lost its market share; down from 90% to 15% of course Japanese were one of the
causes. But, there were many internal factors, which were more responsible for the
downfall of Xerox. There was no quality control to speak of; overhead and inventory
costs were high; company was overloaded with managers; lost touch with customers
etc…

Mr. David Kearns became CEO of Xerox. in 1982. He with his core group of
unconventional thinkers mapped out a strategy adopted a totally new approach that
included the tenets of TQM and JIT. It took 7 years for Xerox to get back its market
share. It also bagged the coveted Baldrige Award in late 1989. By and large their
approach was on the following:

1.customers define the business

2.success depends on involvement and empowerment of trained and motivated people

3.line management to lead quality improvement

4.top management develops, articulates, and deploys clear objectives and directives.

5.quality challenges are met and satisfied

6.business is managed and improved by using facts.

Competitive advantage:

Making things better: US rely on CAD\CAM to enhance product design and

manufacturability.

Japanese rely on group technology, good condition and proper placement of equipment,
smaller manufacturing units, and quality circles.

Both adopt SPC processes, zero defects, and vendor quality programs

Making things cheaper: US rely on job enlargement programs, automation and robotics to
reduce direct labour content.

Japanese focus on improving products and processes by using value analysis,

standardization of products and reducing lead / cycle time.

Making things faster: US rely on robotics and flexible manufacturing systems (FMS),
relocation of facilities, and improved labor-management relations to maintain or reduce
delivery times. Japanese emphasize on continuous reduction of lead /set-up times,
equipment maintenance, supervisory training, and broadening of worker’s jobs.

More agile: Japanese have edge over US and European companies in the ability to
introduce new products and designs and to respond to changes in customer demands
quickly.
US emphasis is on technology,, process flow improvements, quality management, and
cross functional communication improvements , which Japanese consider as part of
quality, and delivery capability. Steps taken by them to produce better and faster are also
aimed to achieve manufacturing agility.

Product development: US ideas tend to move sequentially through functional areas.

Japanese are honed in product development TEAMS. US sought improvement in discreet

times through automation and new technology. Japan sought improvements through
small but continuous improvements

in processes, and procedures and investment in human capital. JIT /TQM philosophies
while not disputing the need for high technology or capital intensive efforts, emphasize
continuous attention to fundamentals and to the crucial role of workmen in improvement
efforts.

JIT, TQM, AND THE PRODUCTION PIPELINE

Think of a company as a pipeline with raw materials entering at one end and products
emerging at the other.( the pipe can be extended conceptually with customer needs or
orders going in at one end and products arriving to customers at the other.)
The goal is to minimize the through put time, that is to move the materials as quickly as
possible Shorter throughput time is better But the pipeline varies in size and has
obstructions through out. Output is determined by the narrowest part of the pipeline and
the biggest obstruction.

These must be identified and then eliminated to achieve the goal. As each obstruction is
eliminated the flow speeds up but only by as much as allowed by the next biggest
obstruction elsewhere in the pipeline.

Identification and location of these obstructions, understanding them, and finding ways to
eliminate them are the purposes of JIT and TQM. The pipeline analogy may give an
impression those barriers to flow / production, once removed is gone forever. This is not
true. To identify the obstruction and its precise location in itself is difficult and time
consuming
Inventory as a way of avoiding problems

Sources of obstructions keep changing and it could be any one of the factors of
production and /or in any combination of the factors. One gets eliminated and another
one crops up and therefore it has got to be continuously attended to.

The pipeline itself and the things that floe through are changing always. The diameter of
the pipeline may have to be changed. But only the extent required. Over size is waste,
while undersize would not meet the required throughput.

The BEST flow rate would be that which matches the required output rate.

At times the pipeline itself may have to be modified or even replaced. As changing
processes and products introduce whole new set of obstructions.

In short the work on the pipeline is CONTINUOUS. JIT and TQM continuously enable
tinkering the pipeline so that the material coming out of the pipeline is the best possible
in all respects.

JIT / TQM Difference in Organizations.

JIT /TQM greatly increases the number of people who are involved in identifying and
eliminating obstructions. Every one does it Level of authority of workers to make and
carry out decisions is much higher Emphasis is on measure, diagnose, and improve it.

Second difference is in the process employed to identify and prioritise problems and
sources of waste

In JIT the primary process is reduction of inventory, mainly to reveal the obstructions
(which were earlier hidden or ameliorated by the inventory) and prioritise them.

Japanese case study

Toyota Production System

The Toyoda family had been in textile business since 1800s. Began production of cars
in1935. Eiji Toyoda visited Ford River Rouge Plant in 1950 to learn methods of mass
production. Ford plant was huge, with iron ore entering one end and out the other end
rolled cars, 7000 a day. It produced one type of car in a plant. Toyoda concluded that
Ford’s production system was unworkable in Japan. Toyoda wanted to produce variety of
cars in just one plant.

He could not readily hire and fire workers as was common in US. Capital was in short
supply and could not invest heavily in modern equipment and technology. Returning to
Japan, Toyoda discussed with his production engineer Taiichi Ohno to design a system
that would be less wasteful, more efficient, less costly, and more flexible than traditional
system of mass production. System thus developed was called the Toyota Production
System

Reduced set up times:

US practice was to have large numbers of stamping presses, each for making only one or
a few kinds of parts. These required months to set up.

Short supply of capital limited procurement to only a few presses, but necessarily had to
stamp out a variety of parts. Set up time for switching over from one to another part had
to be drastically reduced.

From months it was brought down to amazing minutes, by carefully analysing existing
procedures, challenging each step, eliminating wasteful steps, revising procedures,
training workers to do their own steps, and without the die changing specialists.

The procedures developed by Ohno can be applied to any set up in almost any work
place. With large set up time, large batch sizes were justified. And became the norm

Small Lot Production

As mentioned earlier, high set up cost, and high capital cost for high speed dedicated
machinery, justified large lot size of production. Large batches result in large inventories
and in turn results in high inventory holding costs.
Plant wide higher levels of inventories extend the lead times because they tie up the
machines for a longer time and reduce scheduling flexibility.

Effect on lead-time is negligible when demand is constant. But it is pronounced when

demand variability increases. Large batch size also tends to have larger defect costs.
Production problems and product defects often happen as a result of set up mistakes or
errors that affect only one batch at a Larger the batch, more items are affected.

Batch size is normally determined using EOQ concept. This approach balances total
holding costs and total set up costs. EOQ is square root ratio of set up cost to holding
cost

Traditionally holding cost is under estimated as it ignores the effects of batch size on
quality and lead-time. Since set up cost, a direct function of set up time, is usually large,
the formula of EOQ (and also managers’ thinking) has been biased towards large lot
sizes.

Ohno found ways to reduce set time significantly and turn the set up cost. Also, he had
correctly assessed the impact of larger batch size on quality and ability to respond to
changes in market demands. Therefore, it became possible for Toyota to economically
produce a variety of things in small quantities.
Employee Involvement and Empowerment

One significant difference in Japanese approach compared to west, is the involvement of

people, particularly workers. US plants employed specialists for doing just about every
thing Few added value to the product. Ohno reasoned that assembly workers could do
most tasks done by specialists and probably better, as they were more familiar with the
work place.

Ohno organized his workers by forming teams, giving them responsibilities, and training
them to do many specialized tasks. In addition to the normal tasks, teams were given
responsibility for house keeping and minor equipment repair work. They were allowed
time to meet and discuss to find ways to improve the process.

Workers were trained in using statistical tools; they collected data to help diagnose
problems, develop plans, and use suggestions, if needed, from a few specialists who were
available in small numbers (compared to large numbers in US)

The notion of workers asking ‘why’ five times to get to the problem root cause was first
introduced in Toyota. Eventually worker responsibility expanded to include many areas
usually held by specialists, including quality inspection and rework

Quality at the Source:

Ohno saw the traditional manufacturing process of stationing inspectors at locations
throughout and at the end of the line did little to promote product quality. Defects missed
by the inspectors were passed from one worker to next. As a product was assembled,
defects became progressively embedded inside and thus more difficult to detect. At times
defective items reached the customers.

Thus, relying on inspectors was not a practical means by which to eliminate defects and
the costs, associated with making and reworking them. Thus, Ohno realised the need for
detecting and correcting defects as soon as possible. This meant going to the source of
defects and stopping them there. This responsibility was assigned to each worker.

Any worker could halt the entire production line, if the defect could not be readily fixed.
(This is called JIDOKA or line stop) As the worker teams diagnosed and solved the
problems, the number of defects dropped, sources of errors were eliminated, and the
quality of parts and the assembled products got better and better.

Eventually, the quality of finished goods was so high that the need for rework specialists
was practically eliminated.
Equipment Maintenance:

Manufacturing organizations laden with work-in-process may not be much concerned

with equipment maintenance because the inventory is a buffer that work to continue (for
a while) even when equipment breaks down.

Traditionally it is assumed that equipment will definitely break down and buffer
inventory is a must. Also, it was felt that one should utilize expensive equipment
constantly, if required in three shifts, for recovery of overheads, until it breaks down.

Thus, inventories were held, operations were idled till equipment is repaired. the costs
were, obviously, high on account of repairs and inventories.

Organizations which use pull production system or have minimized inventories have very
little buffer stocks. any breakdown of equipment have potential to stop the entire process.
Therefore, organizations trying to reduce inventories must also reduce equipment
breakdowns.

Regularly scheduled preventive maintenance can help to curtail such breakdowns.

Consistent with the philosophy of worker empowerment at Toyota, operators are

assigned primary responsibility for basic maintenance since they are in the best position
to detect signs of malfunction.
Maintenance specialists only diagnose and fix complex problems, train workers in
maintenance, and improve the performance of equipment.

Pull Production:

Traditionally, products are made by moving batches of materials from one stage to
another .At each stage an operation is performed on an entire batch.The batch size and
process times vary from stage to stage. Also several jobs are there that need work at each
operation. It becomes difficult to co ordinate and synchronizes the flow of materials from
one stage to the next As a result materials wait at each operation before they are
processed. Typically the wait time is more than the process time. This results in large
amounts of WIP waiting at various stages of completion. In terms of inventory holding
costs and lead times, the waste can be staggering.

To reduce these wastes, Ohno developed the Pull Production system, wherein the
quantity of work at each stage of the process is dictated solely by the demand for
materials from the immediate next stage.

Ohno also developed KANBAN to coordinate the flow of small containers of

materials between stages so that just as a container was used up at one stage, a full
container would arrive to replenish it.

This is where the term JUST IN TIME originated. As earlier discussed, production lot
sizes are kept small and use small containers to hold materials.

Pull production does reduce inventory considerably, but it is difficult to implement.

Toyota took 20 years to work out the process.
Supplier Involvement:

Ohno also recognizes problems with traditional customer—supplier relationship in the

US.

Typically manufacturer would develop detailed specifications for each product part and
then contract with suppliers through a competitive bidding process, and award to the
lowest bidder. Multiple suppliers for each part were retained and these suppliers were
routinely played one against the other to keep prices down.

This resulted many a times in delayed deliveries and poor quality supplies.

Ohno saw the need for a different kind of relationship with the suppliers., wherein
manufacturer would treat the suppliers as PARTNERS and as such an integral part of the
Toyota production system .

Suppliers were trained in ways to reduce set-up times, lot sizes, inventories, defects,
machine breakdowns, etc.., as if they were part of the same production system. In return
suppliers take responsibility to deliver the best quality parts/services, to the manufacturer
in time.
In this arrangement every body viz: the manufacturer, supplier, and the ultimate
customer, benefited. Top of Form
 Press Release

16th July 2002

Wholly-owned Indian cos can succeed' — Mr T. K. Balaji, MD, India Nippon

Electricals

M. Ramesh
Raghuvir Srinivasan

Mr T. K. Balaji

EXCEPT for the two-wheeler segment, the auto components industry has been through a
tough phase. Business Line discusses the industry's outlook with Mr T. K. Balaji,
Managing Director, India Nippon Electricals.

Excerpts from the interview:

How was last year for the auto components industry?

I think those who supply two-wheelers had a good year. Particularly the motorcycles
segment — which has been improving at an unprecedented rate. But those who have been
focussed on cars, commercial vehicles and tractors have not had a good year... because
the CV segment has not been growing for quite sometime. Tractors have been in a very
difficult situation for a while. There has also been pressure on prices because of
intensifying competition.

If the two-wheeler segment was going well, why was there pressure on prices?

If you consider two-wheelers as a whole, the growth has not been so great. It is only the
motorcycles segment that has been growing at a phenomenal rate. Scooters and mopeds
have been under pressure. Even in motorcycles, four-strokes are growing well, while the
two-strokes are under pressure.

Do you think there could be competition from imports?

In the area of hi-tech components, where volumes in India are not sufficiently large to
justify local production, like for example, MPFI or special class of electronics there may
be imports. In the volume segment, generally competition will be from players here,
except for a few commodities. There are some items such as electronic components,
seals, bearings that are not specially engineered, where imports could take place.

What about competition from MNCs such as Delphi and Visteon?

Obviously you are dealing with very large corporate here. There will be advantages in
some areas. For instance, in-car entertainment video systems.

However, if you are talking about normal products with established technologies, then
they will also have to compete with everybody else. I do not think one can assume that
just because they are big they will try to have an approach of trying to buy the market. I
have seen all these companies approach it very rationally.
Where do you think the strengths of wholly-owned Indian companies lie?
Companies that have no foreign technology support...

You can talk about ownership. But technology is an area where you do not need to have
ownership to access it. In some specialised products, they go together. Unless you are
talking of specifics, it will become difficult to answer this question. Take for example,
TVS Motors. It is on its own. But

TVS can access technology wherever required. The same for Bajaj and Indica. You do
not need to have ownership to have access to technology.

I am talking of Indian companies...

If you are talking of Indian companies whose ownership is entirely Indian, want to
remain that way and still want to be able to have a place in the market place, I see no
reason why that model will not work. I see that working in a number of areas — in the
vehicle and component areas. But it will work only on the principle that persons who
want to follow the strategy must raise the efficiency level of organizations to compete. It
can be done.

Do you see Indian companies doing that?

Well, today there is little evidence of it. I do know that there are quite a few Indian
companies thinking on those lines and taking steps. But it will take some time before it
manifests in the form of evidence that will satisfy people. So, at this stage it is only an
ambition. Will they succeed? I hope so. How long? I would say, the next four-five years.
If it does not happen in the next five years, then the chances are it will not happen.

Do you think Indian companies would typically end up being Tier-2 or Tier-3
suppliers?

That could be true. It is not as if Tier-1 means excellent, Tier-2 means mediocre and Tier-
3 means lousy. Tiering is a matter of convenience, cost and efficiency of vehicle makers
who have structured their business to say, I want only sub-systems and I want him to deal
with somebody else and so on. Tiering does not mean technology.
Take for example, bearing. Typically a ball bearing manufacturer may not be a Tier-1
supplier, but that does not mean that bearings are not important. In fact, if India can
emerge as a large player in Tier-2-3 I think we will do fantastically well.

But are margins the same across all tiers?

Obviously not. If you take the value chain, those who have full control of the value chain
will have a greater margin than those who control a part of it. So, if I have control on
technology, design, integration, production, supplies and everything else, obviously I
have much greater leverage for controlling my margins than if I am only a part of it. I am
just making it to somebody's design and supplying... my margins then come only out of
manufacturing efficiency.

Are you satisfied with the level of R&D in the industry today?

We are not doing enough; we have to do a lot more. That is a statement that can be made
for quite some time to come, because there is so much to catch up with. Take for
example, `just-in-time' (JIT). JIT is a big thing for us, but it is the standard everybody
operates at today. But catching up to that standard is a big thing for us. If we reach the
standard, we will feel we have achieved something fantastic.

Similarly, we have so much of catching up to do in products. But I think products such as

the Indica and Victor are inspiring examples for industry. They provide the confidence
that you can do things on your own and be successful.

In high-tech products such as emission control systems, would it be beneficial for

Indian companies to invest in product development rather than getting the
technology?

Obviously in all these areas, you cannot reinvent the wheel. You have got to get it from
somewhere. In areas you cannot get it, you cannot enter. There are some areas that are
closed at this point in time, because they are so far ahead. For example, fuel cells. I do
not think any Indian company will be able to get into it without help from somebody.
That somebody would want control.

So there will be some areas that will be out of bounds. So what? There are so many other
areas. It need not be all or nothing.

How good are Indian companies at quality and keeping to delivery schedules?

The progress Indian companies have made in the last five-ten years is phenomenal. Five
years ago if you had talked to Indian companies and asked about zero ppm (parts per
million) rejection, they probably would not have recognised the concept.

Today, quite a few companies are achieving it. There are a number of products where we
have been achieving zero ppm consistently in the last, say, 12 months. We are not doing
this in all products for all customers across the board, which we should do. But we have
achieved it in some products for some customers, so we know it can be done.

What is your outlook for the industry this year?

I am positive for the coming year. There have been good signals from the CV industry in
the last two months and it looks like the upswing will stay this time.
The ICFAI Journals
Where is Indian Industry Headed?
There is little doubt that significant progress has been
made in the years since India gained its independence, but
is the progress enough? Compared with the kind of
growth and development that has been achieved by
countries like Japan, Germany and the far eastern
countries, India’s growth and development have lagged
far behind.
Economic Development in India
Close to 50 years of operating in a controlled economy
has resulted in industries being uncompetitive (in the
global arena), lack of economies of scale and a complete allowed them to manufacture in lot sizes of a few in number
lack of innovation and development. Another casualty,
not so apparent, is the fact that the Indian consumers have dramatic reduction in inventories. This also resulted in the
become possibly the least demanding of consumers. A
demanding quality-conscious consumer base is a
necessary requirement for a thriving competitive
environment for organizations to excel in.
India is home to a population of around a billion. Though customer satisfaction by delivering his requirement with
as of today only a small fraction of this vast population
has disposable income, there certainly is an opportunity to therefore customer centric and all improvement action begins
convert the entire population into a thriving competitive with a clear definition of customer needs.
marketplace that in turn will attract and nurture
productive and innovative organizations. While
government policies can be blamed for part of the
problem, Indian industry itself cannot be absolved of
blame altogether. In nearly 25 years of experience in
industry involving active interaction with a cross-section
of industries, one has rarely
come across a company that has been customer focused.
The overwhelming majority of companies in India are
internally focused and not only that there is rarely a long-
term focus. These are attributes that can hardly contribute
to a long-term global competitiveness.
The one only positive outcome of the years of
development has been the creation of sufficient
infrastructure, a trained work force and also a vast body
of well-qualified knowledge workers capable of
effectively and creatively exploiting the vast natural
resources that the country is endowed with.
The Global Scenario
All emerging economies, especially China, have made
rapid and dramatic strides in the past decade or so. One
can admit that the Chinese economy has a head start of
nearly 10 years in its road to economic liberalization.
Companies if they are to survive have to constantly
reinvent themselves. Innovative product offerings are the
order of the day. A lean, mean and innovative
organization is a prerequisite for not just competitiveness
but also to survive in such an environment. It took the
war-ravaged economies of
Germany and Japan nearly 20 years to transform themselves
into world-beaters. Surely, it ought not to take such a long
time for a country like India endowed as it is with both
resources and skilled manpower.
Developments in Organization
The last 20 years or so has seen rapid developments in the
area of Operations Management pioneered by the likes of
Toyota and Motorola. The initial thrust was the concept of
Just In Time (JIT) that was pioneered by Toyota. The corner
stone of this concept was the reduction of set up time that
rather than the prevailing large batch sizes. The result was
ability of the organization to quickly respond to customer
requirements.
An equally important development was the concept of Six
Sigma pioneered by Motorola. It is a process that aims at
defect levels less than 3 parts per million. Six sigma is
A large number of globally competitive and successful
organizations have readily taken to these concepts to improve
both their operations as well as their profitability. For
instance, the big three of American auto industry, which took
a beating from the Japanese in the early 80’s have improved
their performance and have
forced the Japanese to set up operations in America to cater
to the American market. This is ample demonstration that the
concepts can be transported and implemented across cultural
barriers.
The Indian Scenario
While the experience of the past 50 years have not been very
encouraging and certainly do not give any reason to be
optimistic about the future of the Indian industry, a few
developments in the recent past certainly kindle a ray of hope.
TELCO and TVS Motors as they have been able to effectively
compete on equal terms with some of the very best in the
world. Therefore, individual companies, areas of excellence
can in turn be catalysts for an all-round improvement in the
industry as a whole thus transforming India into a vibrant
competitive economy.
Conclusion
Urgent affirmative action needs to be taken by both the
industry and the Government of India so that the availability
of natural resources and trained manpower can truly be
converted into a global competitive advantage.
 PREFACE

It gives us great pleasure in to present this project based on

Production and Quality Management in our second year of

BMS. We have all put in a great deal of hard work into this

Project and see that it has paid of well.

Our main objective while preparing this project was to

incorporate our own knowledge about the subject along side

our observations with different case studies (Japan-the

origin of JIT, US the most powerful nation, India-Motherland

so that our Understanding of the subject would improve

further.

With the help of this Project on Just In Time Technique of

Total Quality Management we got to learn and know the

importance of time and its consequences if not tackled

properly.

We would also like to take this opportunity to thank Prof.

Yogesh Kolhatkar for his guidance & would appreciate any

feedback or suggestions on his behalf. Members of Group X

Bibliography

Library

Books on TQM

Magazines

ICFAI Journal
Google.com
Conclusions

JIT is an important operational system for manufacturing and supplying companies to

adopt and implement. Technically, procedurally and managerially it requires attention to

• Data, information and communication.

• Assessment of requirements

• Programmes to change the structure of production, materials handling,

manufacturing processes and distribution facilities

• Improved methods of controlling unit supply costs

• Consideration of the buyer-supplier partnership and the possibility of strategic

collaboration.

If change is piecemeal and management attention wanes then JIT may fail. An integrated
perspective is needed with coherent strategic direction and increases in
productivity/effectiveness at each operational Ievel so that the whole supply chain has a
competitive edge