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Origins of Just In Time Management Strategy
Although the history of JIT traces back to Henry Ford who applied Just in Time principles to manage inventory in the Ford Automobile Company during the early part of the 20th Century, the origins of the JIT as a management strategy traces to Taiichi Onho of the Toyota Manufacturing Company. He developed Just in Time strategy as a means of competitive advantage during the post World War II period in Japan.
The post-World War II Japanese automobile industry faced a crisis of existence, and companies such as Toyota looked to benchmark their thriving American counterparts. The productivity of an American car worker was nine times that of a Japanese car worker at that time, and Taiichi Onho sought ways to reach such levels.
Two pressing challenges however prevented Toyota from adopting the American way:
- American car manufacturers made “lots” or a “batch” of a model or a component before switching over to a new model or component. This system was not suited to the Japanese conditions where a small market required manufacturing in small quantities.
- The car pricing policy of US manufacturers was to charge a mark-up on the cost price. The low demand in Japan led to price resistance. The need of the hour was thus to reduce manufacturing costs to increase profits.
To overcome these two challenges, Taiichi Onho identified waste as the primary evil. The categories of waste identified included
- inventory or waste associated with keeping dead stock
- time spent by workers waiting for materials to appear in the assembly line
- time spend on transportation or movement
- workers spending more time than necessary processing an item
- waste associated with defective items
Taiichi Onho then sought to eliminate waste through the just-in-time philosophy, where items moved through the production system only as and when needed
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How Toyota Implemented Just in Time: Kanban
Toyota JIT manufacturing strategy centered on changing factory layout to eliminate transporting items back and forth to different machines and instead arranging machines to ensure the items flow smoothly from one machine to another.
To control the flow of items in the new environment, Toyota introduced kanban, or information on what to do that controlled all movements throughout the factory.
The two types of kanban in Toyota are:
- withdrawal kanban that details the items marked for withdrawal from the preceding step in the process
- production ordering kanban that details the items to be produced
A part disappearing from an assembly station was the sign to produce or order a new part.
Toyota started work on the Just in Time system in 1952, and established kanbans throughout the organization by 1962.
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The origin of kanban effected precise specifications of item quantities, leaving no room for defects. The success of this initiative therefore depends on no defective components entering the assembly line. To ensure this, Toyota introduced autonomation, or automating the production system and reducing human intervention only on detection of defects. The system detects defect automatically and will not proceed until human intervention fix the problem.
The implementation of autonomation meant stoppage of the entire production line, and in the first week, line stops occurred almost hourly. It took six months for line stops to fall to few-a-week and have no economic impact.
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A major initiative of the Just in Time was re-engineering machines and processes to reduce the setup time required before processing of a new item. Toyota JIT manufacturing identified changing stamping dies used for body parts as the critical retooling operation.
The traditional re-tooling way entailed installation of die-tools one at a time, and adjustment by hand, with crowbars and wrenches. Installing large die sets took several days, during which time the production line remained shut.
Toyota launched "The Single Minute Exchange of Die" (SMED) that substituted measurements for adjustments, controlling the quality of stampings through a written recipe. This reduced the die change times dramatically to about a half an hour, and facilitated economic lot sizes of even one vehicle,
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Challenges Faced and Results
The major challenges faced by Toyota in implementing JIT included
- Multi-skilling the workforce to operate multiple machines based on work-flow patterns
- Redesigning every part of the vehicle to eliminate or widen tolerance since assembly lines did not have a choice of which parts to use and every part had to fit perfectly
- Testing and training suppliers of parts to assure quality and delivery in time on demand
The implementation of JIT met with remarkable success at Toyota. The sale of in-process inventory generated surplus cash, response time fell to about a day, product quality increased improving customer satisfaction, and vehicles built to order eliminating the risk of vehicles remaining unsold, improving the company's return on equity.
The success of Just in Time made Toyota the envy of the industrialized world. Several organizations have emulated Toyota’s Just in Time Strategy. The next landmark in JIT history is when it spread to America by the late 1970's and early 1980's. Today, many organizations such as Hewlett Packard, Dell, McDonalds, and others owe their success to the Just in Time Management strategy.