International Iron & Steel Symposium, 02-04 April 2012, Karabk, Trkiye

JUST IN TIME (JIT) PRODUCTION AND SUPPLY CHAIN MANAGEMENT

b,*

Young Researchers Club, Ahar Branch, Islamic Azad University, Ahar, Iran. Young Researchers Club, Ahar Branch, Islamic Azad University, Ahar, Iran, h-pourasiabi@iau-ahar.ac.ir

Hamed PourAsiabi ve Hamid PourAsiabi

b,*

Abstract
In this paper, Just In Time (JIT) production system has been investigated as a significant efficiency-increasing outcome in the production processes and as an approach to an optimized supply chain. In addition, the role of JIT in the supply chain and the proper way of making use of it are discussed. From there, this method is widespread especially in developed countries and noticeable effects of its usage in obtaining productivity and high quality in production have been proved in these countries, it is necessary to study different factors of its acceptability. For perusing useful effects of this system, a comparison has been done in planning systems of production/demand, resource finding/shipping and transportation/logistics with JIT and without it. JIT production systems, process flexibility improvement, strategic resource finding to support JIT are major subjects discussed in this paper. Keywords: supply chain, Just In Time (JIT), production planning, strategic resource finding.

1. Introduction
Supply chain is composed of all activities required for delivering a product to a customer, from product design to getting orders, making materials ready, marketing, manufacturing, logistics, customer services, cash payment and so on. Among all these activities, everybody, everything, and everywhere, putting an effect on the product's quality, price, info exchange, and its receiving and delivering to the market are considered as a part of the supply chain [1]. Effective control of materials and components flow in producing and assembling lines is a key for effective production. In an optimal supply chain, all materials and components are received in time to lead to a precise production. Precise production means producing a safe efficient product in a proper place and time with the least costs. In recent years, several achievements have been got to increase production operation outcome and to get an optimal supply chain, among which "Just In Time Production" system has been the kernel [2]. Of the newest phenomena in industry management and engineering, "just in time production" system has got much more attentions in last decade in the world industrial societies while it is still considered a new idea in this field. Although this view dates back to several last years and many organizations in the world especially auto producing companies and the like have accepted this system and have successfully applied its rules and techniques in all activities of their organization such as dealing, producing and so on, there are lots of other industrial organizations and institutions in many countries where owners, managers, experts, and employees have got no familiarity with this phenomenon. This paper keeps on its discussion about just in time production system and its effects on supply chain in details.

2. Just in time production system

Just in time production system was introduced for the first time in Japan in the early 1970 by Taiichi Ohno in auto-assembling factory; Toyota [3]. Just in time production system is a concept explained by several people in different forms. It has been defined by various terms in different articles. The common points of all these interpretations are lack of complete understanding of the subjects. Many papers and articles believe that this system is a technique in controlling inventory and it equals to zero/null inventory. Some believe it as a new view on production, while others concern it as a kind of production method. For some exports, this system reminds a kind of thought and philosophy, for others it is a strategy. Still some believe that it not only includes all these aforementioned concepts, but also has something more than of all. The idea of just in time production does not refer just to some parts of an organization, rather, it is for all parts and units of all kinds of organizations. Just in time production system is something more than goods management and materials transportation. It is a philosophy and thought which aims to delete wastages completely and tries to avoid materials scraps in all activities. Major purpose of JIT is to achieve a continuous quality and to increase outcome through production without inefficient unsafe pieces and zero wastage [4-9].

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Just in time production system is a way of preparing materials in which all required goods are received on time, in fact, JIT is a philosophy for the producer organization. Preparing all primary materials and parts, exactly when they are needed during the production process, this philosophy decreases scraps. Successful application of this system involves different organizational factors such as upper-level managers' support, determination of main production problems, employees' participation in decision making, and simultaneous application of production flow and proper inventory system. Completing these organizational factors depends on some environmental conditions such as the relationship between supporters and customers, culture, relations, economical and political conditions of a country. Using this method, on the other hand, involves upper level precision, as one must prepare efficient safe pieces on time and in a proper situation for work station and/or production line. JIT tries to give a quick service to the customers, while it minimizes the inventory. JIT philosophy is based on wastages deletion via simplification of the production process, declining preparation time, controlling the materials flow with emphasis on preventive maintenance in order to delete or decrease extra inventories and efficient use of stocks [10-12]. Of usual applications of JIT, one can refer to: - Inventory decrease, - Batch production with just a few numbers, - Quality control - Simplicity and decline of sophistications in production process, - Uniform organizational structure, wastages/scraps decline. It is clear that widespread use of JIT leads to increase production process outcome and customer satisfaction. Those companies, therefore, which use JIT in their production system, have much more competitive power in comparison with others. But the problem hidden in this area is how to use JIT principles and its competitive capabilities in an especial industry and its related work status. The main discussion in JIT is this that there should be raw materials and/or final product that can meet customers' need and/or production process, i.e. neither more nor less [4]. The more a production system gets close to use a correct status of JIT, the more there is power of giving services to customers and as a result less investments are needed for raw materials and/or final product. Less inventory and transportation result in less amortization and one can optimize logistics operation and transportation system. The result is to save real capitals of the company. Hyper-sensitivity is the problem this system faces to, that is, being in close touch with it results in much more benefits, and whenever it exceeds up an optimal limit and the inventory is extraordinary decreased, the opposite case is true, that means, benefits will be declined. Too much or too low inventory will have some disadvantages in terms of competition with others. JIT, therefore, would be useful just when the way of its application is acquired. Figure 1 indicates such a case. It has been approved that JIT has considerable effects on achieving high quality and efficiency in production sector in developed countries [11-16]. Thus, it is necessary to survey several factors made it acceptable in developed countries. Several researches such as Okpala et.al [17], Wahab [18], Ofori [19], Abdelhalim [20] and Krajewski and Ritzman [13] surveyed the necessary environmental conditions for just in tiem production in many developed countries.

High Customer Service Level

Competitive Disadvantage

Optimal Mix
Cost Disadvantage

Low

Inventory
Fig. 1. The variation of customer service level vs. inventory in JIT sytem.

High

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3. Effects of application of JIT system in developed countries

3.1. Application costs
Most of researchers believe in high level management as the most important factor of long-term success in JIT application. Complete acceptance of this system by high level managers would be a must in order to overcome the barriers on the way of using this process by mid-level managers to achieve a complete coordination with suppliers. One can admit that supporting JIT by high level managers in developed countries is a little bit difficult, because this system requires applying quality systems, new technologies, preventive maintenance, and educational /training programs which impose much more costs on the companies and have no competitive benefits for the company. Kaming et. al [21] believe that high costs of new machineries and technologies ,due to the civilized world technologies dependencies together with high interest rate of bank loans, are among the most important problems putting effects on companies investments.

3.2. Costs of technology and maintenance

The principles of scraps deletion in JIT system involves decline of preparation time. Long preparation time leads to inventory promotion and decline of machineries outcome. Also, preventive maintenance decreases inventory. Kaming et. al [21] suggested that developed countries get no benefits from preventive maintenance due to high costs of machineries maintenance. Using just in time production system deletes the problem of high maintenance costs, and supports this principle that maintenance must be in hands of machineries operators and intra-organizations staff/workers.

3.3. Cost and workers efficiency

The principle of null/zero inventory in JIT system involves production flow to be a "pull system" that declines workers waste time, in other words, workers waste time can be decreased through multi-purposes activities. Workers perform some operations such as switching one machine to another one, preventive maintenance, machineries tune up and preparation. Multi-purposes skills increase workers efficiency, a purpose which is achieved by proper training. However, one can not justify all kinds of progresses in workers efficiencies through training for companies of the developed countries, and this is the time when working costs are extremely low and training ones are very high [22].

3.4. Inflation and supply conditions

Production without defective products needs deletion of those activities which have no added-value on the final product. The most important reason to keep inventory in developed counties is high inflation rate which is considered as a significant problem in JIT system application. Using JIT requires the risk of inflation excitement, like those times when suppliers try to increase the prices due to lack of primary materials [23]. Another reason of preserving the inventories is to avoid a delay in production which can be due to both production lines and supply chain. Successful application of this method relies on coordination of production timetabling with suppliers' inventory, so whenever suppliers' services are in upper level, issues of product quality and reliability of inventory would get importance [24].

3.5. Demand condition

Success in using JIT needs the stability of demands and supply. Since long term relations with suppliers are important for stability of supply and its quality, a relation with the customer have an equal importance. Government policies have considerable effects on demand stability, while presence of several independent dealers in one country instead of presence of one or two limited customers in market will provide a better environment for invention. The more customers demand, the more companies will have to empower their competitive superiority, because these customers make the companies to meet much more standards in products quality improvement [25-26].

4. How to use JIT correctly

The first researches performed on JIT talked about its fundamental elements such as time decline, preparation, little production volume, using media, production level timetabling and preventive maintenance. Widespread studies have been performed on some subjects related to JIT application which include relationship between JIT and other production processes, customers or salespersons, etc. Figure 2 shows the standpoint of JIT system in a productive system. First one should know that using a JIT system with success is not limited just to inventory management and/or logistics, rather, JIT is an occupational strategy which involves a mid-functional team that works in a harmonized way to get a common clear purpose [27]. This may seems very easy at first sight. To

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make the issue clear, production planning systems/demand, resource finding/dealing, transportation/logistics are compared with JIT.

Problem Solving By Workers and Managers

Ideas for Reducing Preparation Time

Ideas for Products Quality Improvement

Ideas for Changing in Processes

Inventory Reduction

Small Batch Production

Multitask Workers

Equipment and Layout

Universal Production Program Products Universal Quality Control Communication Systems

Just In Time System

Reduction in Wasted Costs and Time Higher Benefit

Lower Investment

Increment of Total Inventory Efficiency

Fig. 2. Just In Time system location in production system.

4.1. Operation without JIT

Programmer of production/demand tries to optimize the production oriented purposes and some other aims such as application of equipments, workers outcome, operation capacity, and system active time period. To do so, a production programmer has to use many batch productions or those ones which rely on high inventory of raw materials. This way leads to optimization of equipments application, worker outcome and operational capacity. But what about the inventory level of the final product? If a customer requires a different product, what should one do? It is clear that production programmers and managers must put an emphasis on the operations, but not by considering general frames costs such as JIT, because JIT application is necessary for batch products in small sizes with ordinary machineries to get much more benefits [10].

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Managers of purchasing/resource finding intend to use those principles that decrease general expenses of their company. These managers base the expenses on these strategist suppliers who suggest low prices for goods in mass dealing. According to the purposes an organization may have, managers do some negotiations on transformation costs and their effects on product purchasing price. Managers of logistics/transportation try to insert raw materials into the production process and get the final product out of it, while they look for solutions to optimize the distribution network. These managers mainly put emphasis on less costs and high reliability of the solutions for transportation/logistics. This is a good idea when the dealing team does some negotiations about the costs of the packs going to be delivered by the suppliers, it means cost decline, because in this case the supplier will be the charge of reliability and function of the transportation [28].

4.2. Operation via JIT

The same as the aforementioned case, here planners and managers of demand focus on the operational functional indices such as applying facilities and equipments, workers outcome, operational capacity and the system's active time period. This emphasis is not taken place in a complete exclusive state, rather, there are some other purposes with the same importance supporting JIT operations. These purposes are as following: machines status changing time, number of machines in each shift, and providing new indices for the process flexibility and inventory of final product which support and manage the customer's short term demands [10]. In operations based on JIT, daily activities are taken place in accordance with continuous appeal of inventory of the final product which has been demanded by the customers. These aims lead the production program to applying production investments, workers, and even to raw materials re-ordering from suppliers or from stocking and distribution operations. In fact, JIT needs a production which relies directly on the patterns of customers' short-term demands. Resource finding managers, also, insist on the least cost but with a meaning in a widespread frame. Putting JIT aside, the best price will be achieved if materials are purchased and delivered in whole. This issue may face no problem in terms of applying JIT principles; however, it will have many hidden disadvantages. First of all, large volume of new materials should be transported and stored which require many capitals. In addition, it involves many more workers and equipments. Second, whenever the materials are inefficient, much more time will be wasted, it means it will probably takes weeks or even months to solve the problem of the time [29]. In operations based on JIT, purchasing will be on the basis of the least general cost. This cost includes not only the raw material cost of one unit, but also that of transportation, stocking, and all other costs related to this issue. When all these are totally summed, purchasing in JIT environment involves some different relations and contracts with suppliers, something which is not completely based on a unit cost and the supplier's quality. Logistics manager still focuses on the costs and reliability while JIT changes many things, first of all, it deletes mass transportation or gets use of it rarely. In contrast, logistics managers need to get familiarity with the way of transporting just a few packs, as in JIT, one pack is rarely used in its complete form. Managers should be aware of the way of transporting those packs which are less than a complete pack. They also should be familiar with packs division and integration. This method makes it possible to transport small packs with the same price of big ones, while it declines the costs related to stocking and transporting of big packs [28].

4.2.1. JIT production programming

Production programming in JIT environment involves doing different works, as there is little bound for errors, the programmers must be familiar with the process capabilities on the time of machines status change, machines templates (relative problems in converting one especial product to another one) and the time wasted for producing any kinds of products, that is, to have a correct view on real pattern of demand of the product. There are just a few key entities to develop the production program in JIt environment. Applying empirical ways for better understanding and defining acceptable parameters, a consultant can develop an effective production program in JIT environment (10).

4.2.2. Process flexibility improvement

The flexible production processes produce a large amount of a product, before switch to another product. In a JIT system, required amount of all products being produced, daily. In order to do this task effectively, the system should be such flexible to switch from one product to another, easily [30].

4.2.3. Strategic resource finding for supporting JIT

Choosing of supply partners in JIT setting involves a different way of thinking. Presence of suppliers who provide products or materials with the lowest price and highest quality would not be enough. In JIT, these suppliers should give services in other ways: inventory of the delivered packs and adjusting exit systems among the producer and suppliers in cases where the materials are re-saved for next application are good instances of

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friendly cooperation between the producer and his/her suppliers. Choosing of suppliers on the basis of common geography, where materials are delivered to the producer via an effective logistical system is another example of strategic resource finding. Prior to choosing the suppliers, one should define the conditions and parameters of one powerful JIT source, and it is necessary to survey the way of evaluating the suppliers and the way of introducing the developmental needs to the products in order to improve the JIT setting [31].

5. Conclusion
In order to achieve a precise production, i.e. an efficient product in a proper place and time and with the least costs, one should use JIT in supply chain. Using JIT in supply chain, one can increase flexibility and productivity of products and s/he can meet customers' needs. The more production system tries to use JIT, the more it will give benefits to the producer. AS a widespread JIT application lead to high outcome and economical production process and customer satisfaction, those companies which get use of JIT in their production system, have more competitive power in comparison with others.

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