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Just in time (JIT) is a production strategy that strives to improve a business' return on investment by reducing in-process inventory and associated carrying costs the process relies on signals or Kanban between different points, which are involved in the process, which tell production when to make the next part. JIT focuses on continuous improvement and can improve a manufacturing organization's return on investment, quality, and efficiency
Why Toyota?
Total annual profit on March 2003 was $8.23 billionlarger than combined earnings of GM, Chrysler and Ford. Profit margin is 8.3 times higher than industry average. Toyota shares rose 24% from their 2002 values. Market capitalization was $105 billion as of 2003 higher than total of Big 3. In 2002, Lexus outsold BMW, Cadillac and Mercedes Benz in the US for the third year in a row. In 2003, sold more vehicles than Ford and Chevrolet. The company has made profit every year over the last 25 years and has approximately $20-$30 billion in cash on a consistent basis.
Why Toyota?
In 2003, Toyota recalled 79% fewer vehicles in US than Ford and 92% fewer than Chrysler. According to Consumer Reports, 15 out of the 38 most reliable models from any manufacturer over the last seven year came from Toyota/Lexus. According to J.D. Powers ranking for initial quality and long-term durability, Lexus was #1 most reliable car in 2003 followed by Porsche, BMW and Honda. Not a single Toyota car is on the dreaded vehicles to avoid list published by Consumer Reports. About 50% of the GMs and more than 50% of the Chryslers are to be avoided.
People and partners (Respect, Challenge them to achieve more, Grow leaders)
Problem-solving (Continuous improvement and learning) Genchi genbutsu
Eiji hired Taiichi Ohno as the plant manager and asked him to improve Toyotas manufacturing process so that it equals the productivity of Ford.
Dell Computers
Dell Computers
JIT at Dell
At Dell, the JIT process is called "pull to order, An order for a customized personal computer that comes in over the internet at 9 am, can be on a delivery truck to the customer by 9 p.m.
After getting an order, Dell notifies its suppliers about what components are needed, and they're delivered within an hour and a half.
Dell builds customized computers, workstations, and servers according to order; none are produced for inventory. With the pull-to-order system, Dell eliminates warehouses in its factories and has improved factory output by double by adding production lines where warehouses used to be.
JIT at Dell
Dell generally fulfills customer demands within five days Dell is able to provide exceptionally short lead times to their customers, by forcing their suppliers to carry inventory instead of carrying it themselves and then demanding (and receiving) short lead times on components so that products can be simply assembled by Dell quickly and then shipped to the customer. In addition, Dells low cost production system allows it to under price its rivals by 10% to 15%.
While machines from Compaq and IBM can languish on dealer shelves for two months Dell does not start ordering components and assembling computers until an order is booked By ordering right before assembly, Dell figures its parts, on average, are 60 days newer than those in an IBM or Compaq machine. That can translate into a 6% profit advantage in components alone.
Old Procedure
Dell had operated its assembly lines in traditional fashion, with workers each performing a single operation. An order form accompanied each metal chassis across the production floor; drives, chips, and ancillary items were installed to match customer specifications.
As a partly assembled PC arrived at a new workstation, the operator, standing beside a tall steel rack with drawers full of components, was instructed what to do by little red and green lights flashing beside the drawers.
Work Station 1
Work Station 2
Work Station 5
When the operator was finished, the components were automatically replenished from the other side of the drawers and the PC chassis glided down the line to the next workstation
New Procedure
Dell shifted to "cell manufacturing" techniques whereby a team of workers operating at a group workstation (or cell) assembled an entire PC according to customer specifications. The result had been to reduce assembly times by 75 percent and to double productivity per square foot of assembly space. Assembled computers were tested, then loaded with the desired software, shipped, and typically delivered within five to six business days of the initial order. This sell-direct strategy meant, of course, that Dell had no inhouse stock of finished goods inventories and that, unlike competitors using the traditional value chain model, it did not have to wait for resellers to clear out their own inventories before it could push new models into the marketplace
Cell 1
Tested OK
Cell 2
Tested OK
Cell 3
Tested OK
Software Installation
Software Installation
Software Installation
Shipping
Virtual Integration
Dell required a highly reliable supply of top-quality PC components, but management did not want to integrate backward.
Instead, the company sought to develop long-term relationships with select, name-brand PC component manufacturers. Dell also required its key suppliers to establish inventory hubs near its own assembly plants. This allowed the company to communicate with supplier inventory hubs in real time for the delivery of a precise number of required components on short notice. This just-in-time, low-inventory strategy reduced the time it took for Dell to bring new PC models to market and resulted in significant cost advantages over the traditional stored-inventory method.
Because computers depreciated at a very high rate. sitting in inventory, a computer loses a ton of value.
Dependable suppliers with the ability to meet Dells demanding lead time requirements.
A seamless system that allows Dell to transmit its component requirements so that they will arrive at Dell in time to fulfill its lead times.
A willingness of suppliers to keep inventory on hand allowing Dell to be free of this responsibility
Dell Today
13 years ago, Dell carried 20-25 days of inventory in a sprawling network of warehouses
Today, Dell has no warehouses. And although it assembles nearly 80,000 computers every 24 hours, it carries no more that 2 hours of inventory in its factories and a maximum of 72 hours across its entire operation.
Harley Davidson
History
Harley-Davidson Motorcycle Company was established in 1903
1985 Corporate Results from Hoover's Company Profile Database Net Sales - $288 million Net Income - $3 million Earnings per Share - $0.09
Original Process
Batch Production
neither inflow or outflow of materials while the process is running disadvantage of high labor costs per unit production difficult with large-scale production production system was a maze-like operation in which parts were moved from one machine to another all over the plant
no straight flow process; therefore, setup times were very high and output rates
Just-In-Time
Harley-Davidson adopted JIT inventory which helped in its quality-improvement If only a few parts are going to be available they all have to be good ones
Suppliers had to implement JIT into their production process in order to compliment Harley's system
Component faults can be detected and quickly corrected
IMPROVEMENTS
Analysis of JIT
Pros and Cons
Advantages Of JIT
Reductions
in the cost of holding stock Space that was used for storing stock can be released for other activities Minimal inventory releases cash flow for use elsewhere in the business Reduces the chance of holding obsolescent stock with less chance of damaged stock Allows a firm to lower its break-even point
Advantages Of JIT
Improved
motivation and teamwork with more flexible and multi-skilled employees Promotes customer focus and increased flexibility and responsiveness to individual customer needs Allows for greater customisation in the production process Greater focus on quality and zero defects and lowering of waste levels Strengthens collaboration along the supply chain
Disadvantages Of JIT
Reliant on suppliers Coordination Excess demand
Thank You!