Briefly describe the concept of JIT and

its relationship to logistics

Contents Page

Executive Summary ……………………………………….... 1

The Concept Of JIT …………………………………………. 1

1. Raw Material Procurement (Suppliers) ………………. 2

2. Production Control And Planning ………………………. 2

3. Inbound Logistics (Transportation and Handling) ….... 3

4. Warehousing And Storage …………………………….... 4

5. Case study – Success …………………………………… 5

6. Would you recommend the JIT – WHY ……………….. 6

Conclusion …………………………………………………… 6

Referencing ………………………………………………….. 7
Executive Summary
Just-in-time (JIT) is an inventory strategy implemented to improve the return on
investment of a business by reducing in-process inventory and its associated carrying
costs.

The concept of JIT

Just-in-time (JIT) is defined in the APICS dictionary as “a philosophy of manufacturing
based on planned elimination of all waste and on continuous improvement of productivity”.
It also has been described as an approach with the objective of producing the right part in
the right place at the right time. Waste results from any activity that adds cost without
adding value, such as the unnecessary moving of materials, the accumulation of excess
inventory, or the use of faulty production methods that create products requiring
subsequent rework. JIT (also known as lean production or stockless production) should
improve profits and return on investment by reducing inventory levels (increasing the
inventory turnover rate), reducing variability, improving product quality, reducing production
and delivery lead times, and reducing other costs (such as those associated with machine
setup and equipment breakdown). In a JIT system, underutilized (excess) capacity is used
instead of buffer inventories to hedge against problems that may arise.

JIT applies primarily to repetitive manufacturing processes in which the same products and
components are produced over and over again. The general idea is to establish flow
processes (even when the facility uses a jobbing or batch process layout) by linking work
centers so that there is an even, balanced flow of materials throughout the entire production
process, similar to that found in an assembly line. To accomplish this, an attempt is made
to reach the goals of driving all inventory buffers toward zero and achieving the ideal lot
size of one unit.

The basic elements of JIT were developed by Toyota in the 1950's, and became known as
the Toyota Production System (TPS). JIT was well-established in many Japanese factories
by the early 1970's. JIT began to be adopted in the U.S. in the 1980's (General Electric
was an early adopter), and the JIT/lean concepts are now widely accepted and used.

Manufacturing, the term comes from quality management theory and the goal is to produce
high quality products in the most efficient and economical way.

Businesses of all sizes are using Just In Time to tighten up production. The goal is to
reduce delivery lead times, cut inventory, reduce the amount of defects, improve staff
productivity and make sure products are delivered on time. It's based on the idea that
holding too much stock or too many finished goods is a waste of money, and that a
manufacturing business can work more efficiently by ordering only the materials it needs to
complete an order, rather than stockpiling.

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1. Raw Material Procurement (Suppliers)
Benefits:

The recommended implementation approach for JIT is to start at the distribution end of
the business, improving the planning processes associated with forecasts, order entry,
inventory strategies and capacity to produce a more stable, predictable, and reliable
master production schedule. Next, the manufacturing operations can be improved by
reducing lot sizes and setup times, creating manufacturing cells or pass-along lines,
improving quality, implementing pull scheduling and Kanban replenishment techniques,
and managing bottleneck operations. Finally, outsourcing and procurement activities
can be improved and integrated into the overall JIT strategy.

Problems:

Unfortunately, most supplier markets are imperfect and do entail some risks for both
buyer and seller with respect to price, quality, time, or other key dimensions. Moreover,
outsourcing entails unique transaction costs - searching, contracting, controlling, and re
contracting - that at times may exceed the transaction costs of having the activity
directly under management’s in-house control. To address these difficulties, managers
should answer three key questions about any activity considered for outsourcing:
- What is the potential for obtaining competitive advantage in this activity, taking
account of transaction costs?
- What is the potential vulnerability that could arise from market failure if the activity is
outsourced?
- What can we do to alleviate our vulnerability by structuring arrangements with
suppliers to afford appropriate controls yet provide for necessary flexibilities in
demand?
Conceptually, first two factors can be thought as dependent each other. Two extremes -
competitive edge and strategic vulnerability - are relatively straightforward. When the
potential for both competitive edge and strategic vulnerability is high, the company
needs a high degree of control, usually entailing production internally or through joint
ownership arrangements or tight long-term contracts (explicit or implicit).

2. Production Control And Planning

Benefits:

Production smoothing, avoids the problems associated with poor demand tracking and
unnecessary interference of the production schedule. The underlying demand was
extremely stable. The volatility downstream in the supply chain was in fact being
artificially induced by poor customer planning, resulting in late changes to the order
schedule, to bring the orders back in line with the very stable underlying demand!
However it is beneficial, and in some cases vital, to flex or move resources to respond

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 to fluctuating demand, the alternative being to pre-build stock to a forecast to afford
some production smoothness, at some risk and tying up of capital. Levelled schedules,
bring more stability and regular patterns of production.

Problems:

Toyota had to test and train suppliers of parts in order to assure quality and delivery. In
some cases, the company eliminated multiple suppliers. When a process problem or
bad parts surfaced on the production line, the entire production line had to be slowed or
even stopped. No inventory meant that a line could not operate from in-process
inventory while a production problem was fixed. Many people in Toyota confidently
predicted that the initiative would be abandoned for this reason. In the first week, line
stops occurred almost hourly. But by the end of the first month, the rate had fallen to a
few line stops per day. After six months, line stops had so little economic effect that
Toyota installed an overhead pull-line, similar to a bus bell-pull, that permitted any
worker on the production line to order a line stop for a process or quality problem. Even
with this, line stops fell to a few per week.

3. Inbound Logistics (Transportation and

Handling)
Benefits:

The best inbound logistics programs worked on getting their hands around the visibility
issues created by a cross-dock situation. The cross-dock/ consolidation center inbound
supply chain network design is an innovative way of consolidating inbound shipment,
however beside delivery, they also can help to perform additional service such as sort
out the materials in requested format more over to get them to deliver to the production
after verifying the quantity.

Problems:

In many cases suppliers have control over shipment coming into production facilities in
terms of arranging for transportation carriers, setting appointment times, actual material
loaded into trucks and the actual pickup/ delivery times and item. Working with supplier
to iron out some of these process flaws is the first step in gaining control over inbound
shipment. Retailers have tried changing the freight payment terms from per-paid to
collect, but this may harm the overall supplier relationship. Instead, working in a
collaborative mode with supplier, to gain control over inbound shipment is the way to
go. If this not done, the costs savings achieved by gaining control over inbound
shipment would be offset somewhere else on the supplier side. In additional, it may
because of the problem of not having the correct information, a potential Line Down will
happen.

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4.Warehousing And Storage
Benefits:

Benefits that JIT concept can provide to the company are huge and very diverse. The
main benefits of JIT are Reduced set up times in warehouse - the company in this case
can focuses on other processes that might need improvement; Improved flows of
goods in/through/out warehouse - employees will be able to process goods faster;
Employees who possess multi-skills are utilized more efficiently – the company can use
workers in situations when they are needed, when there is a shortage of workers and a
high demand for a particular product; Better consistency of scheduling and consistency
of employee work hours - if there is no demand for a product at the time, workers don’t
have to be working. This can save the company money by not having to pay workers
for a job not completed or could have them focus on other jobs around the warehouse
that would not necessarily be done on a normal day; Increased emphasis on supplier
relationships - having a trusting supplier relationship is important for the company
because it is possible to rely on goods being there when they are needed; Supplies
continue around the clock keeping workers productive and businesses focused on
turnover - employees will work hard to meet the company goals. Also, the benefits of
JIT include: better quality products, higher productivity and lower production costs.

Problems:

There are several problems which are connected within JIT concept. Maybe the major
problem with JIT operation is that it leaves the supplier and downstream consumers
open to supply shocks. With shipments coming in sometimes several times per day, the
company is especially susceptible to an interruption in the flow. For that reason, some
companies are careful to use two or more suppliers for most of theirs assemblies. The
hidden costs are present and they include labour union leverage, problems with flexible
manufacturing systems (FMS), problems developing for the flexible workforce,
difficulties with supplying commodities using JIT, increased expenses for suppliers.

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5. Case study - Success
Ryder-Ascent Logistics is a provider of supply chain and transportation solutions and
the market leader in WOLDEWIDE.

The Ryder Logistics Release synchronizes logistics information; storage, transportation

and delivery, regarding a product shipment with the product release information that
initiates a shipment. This synchronization provides a common electronic
communication utility to all parties in the sequence of events; order management,
configuration, optimization, execution and monitoring, and shipment modes; air, rail,
ocean or ground, that comprise a shipment. This novel product also produces a
logistics plan for material flow that is shared among all the supply chain participants in a
shipment’s lifecycle, which includes inbound and reverse logistics.

This logistics plan is updated throughout the life of the shipment and all participants in
the shipment—carriers, shippers, payment firms, receivers, and logistics providers—are
provided common information through web - native information utilities and software
applications. This plan and the associated electronic communication utilities provide the
core capability to automate, optimize, monitor and intervene appropriately as shipments
vary from planned performance, thereby enhancing transportation management
capabilities.

Ryder’s online tools allow their clients and their trading partners to view consolidated
data from disparate IT systems including ERP, Legacy, Transportation Management,
Warehouse Management, Demand Planning and MRP’s.
Ryder’s Supply Chain Solution encompasses the design, delivery and execution of the
optimal Supply Chain for every client. Ryder applies operational expertise to an
integrated set of transportation and warehousing processes, enabled by world-class
technology, to deliver quantifiable value to its clients.

A success Just – In – Time Inbound Manufacturing Product Flow, also known as

Materials Flow Management, is often combined with logistics management to provide
an integrated solution. The objective of Inbound Manufacturing Product Flow is to
create a seamless flow of materials delivered at the right time, in the right quantity and
to the right manufacturing and/or assembling facility. The benefits included levels
products/materials flow from suppliers to manufacturers, optimizes use of
manufacturing space for production (vs. storage), enables pre-planned shipments,
provides exception documentation and analysis for continuous improvement,
decreases expedite deliveries to the manufacturing plant, increased network visibility.

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 6.Would you recommend the JIT – WHY
In my opinion, the primary goal for the company is customer's satisfaction and if
company can not reach perfection in this area then all the processes are worthless. All
parts of the value chain and everything in the enterprise must be healthy for realization
of competitive business processes. If the company wants strong and long-lasting value
chain all the links within the chain must be prepared to overpass all existing problems.
One of the most important links inside that value chain is definitely logistics. Logistics
is concerned with the physical distribution and storage of products and services. During
the 20th century several approaches of implementation of logistics were developed.
Surely, one the most famous and most important logistics concept is the Just-In-Time
concept.

I will recommend the JIT because it is a collection of concepts and techniques for
improving productivity. A process aimed at increasing value-added and eliminating
waste, improving the work environment and simplifying processes and with the benefits
of reduced operating costs, greater performance and throughput, higher quality,
improved delivery, increased flexibility and innovativeness.

Conclusion
After all, I think that if the company wants to have a JIT concept it does not mean that
everything must be done very fast. The most important thing for the company is to have
good organized resource allocation. Also, the management and employees must have on
their mind that this concept can help the organization to solve many problems in logistics.

It is true that implementation and development of JIT is a long-lasting and expensive

process, but if the company can manage with these difficulties it is possible to achieve high
levels of workflow.

The JIT concept is only one part in the value chain that brings the satisfaction to the
customers. It means that the JIT concept cannot must solve existing problems in other
organization processes. Everything in enterprises is needed to be healthy, through the
hierarchy of employees and all workflow processes. Synergy is the only thing that can
improve business results. And in the bottom line, the JIT concept is just one link in the
whole chain, but very important.

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Referencing

• http://en.wikipedia.org/wiki/Just_In_Time_(business) information about Executive Summary,

Problem Production Control and Planning (Accessed 8 Sep 2008)

• http://personal.ashland.edu/~rjacobs/m503jit.html information about The concept of JIT

(Accessed 11 Sep 2008)

• http://www.is4profit.com/business-advice/general-advice/jit-working_2.html information about The

concept of JIT (Accessed 9 Sep 2008)

• http://www.hho.edu.tr/huten/Huten%20Dergi/2007Temmuz/4_GULEN.pdf information about Benefits

and Problem of Raw Material Procurement ( Suppliers ) (Accessed 10 Sep 2008)

• http://www.smthacker.co.uk/just_in_time.htm information about Benefits Production Control And

Planning (Accessed 11 Sep 2008)

• http://www.zlw-ima.rwth-aachen.de/mitarbeiter/dokumente/2-Mladen-Radisic-JIT.pdf information
about Benefits and Problem Warehousing And Storage, Would you recommend the JIT, conclusion
– WHY (Accessed 8 Sep 2008)

• http://www.ryder.com/lms_sol_supplychain_inboundmanuf.shtml information about Case study –

Success (Accessed 8 Sep 2008)

• http://www.1000ventures.com/business_guide/im_jit_main.html information about The Would you

recommend the JIT – WHY (Accessed 9 Sep 2008)

• http://www.infosys.com/industries/transportation-services/parcel-express-logistics/white-
papers/driving-costsout-supply-chain.pdf information about Benefit and problem Inbound Logistics
(Transportation and Handling) (Accessed 9 Sep 2008)