The Jit Workshop Report

Published Date: 02 Nov 2017

During the JIT workshop we had a chance to observe and experience the main differences between the traditional and the competitive systems of manufacturing and understand main elements of the competitive production system. We also had an opportunity to analyse the effect of new production system on production performance and business measurements.

To give a clear example of the differences between the two production systems two companies were set up: the traditionally run Muddle Ltd. and the competitive Wellrun Ltd. Production was run in two phases: phase one; Muddle Ltd and phase two; Wellrun Ltd. The performance of the two companies was assessed and compared. Every participant of the workshop had a role in the company.

My role in the Company

During the first phase of the workshop I was working in the sub-assembly warehouse of the Muddle Ltd. kitting orders before they were released to the sub-assembly work station. After a thorough training I was told by my superiors to work as fast as I possibly could within a given time sending as many orders as I could out to the sub assembly work station (push system). I was also told to follow the procedures and paperwork.

The kitting procedure consisted of preparing the components indicated by the paperwork (for example: 5 of the 70-red-00 blocks, 5 of the 70-bolts-00, 5 of the 90-washers-00) placing them on the tray and sending to the next workstep along with the paperwork. There was a substantial inventory in the warehouse to make sure that the material for the production will be accessible at any time and the warehouse will not run out of it. Bolts and washers were stored in multiple plastic containers and so were the blocks. There were two different groups of the wooden blocks, that the subassembly warehouse was dealing with. The blocks were divided by colours: 70-RED-00 and 70-GEEN-00 and they were stored in separate containers to prevent mix-ups. The amount of inventory was significant.

The production ran for 7 minutes and during that time multiple orders were sent out from the subassembly warehouse to the subassembly work station. The new batches of bolts, washers and blocks (both red and green) were ordered from the supplier and delivered on time without the disruption to the production. After the production process was stopped there was a high inventory level.

After the first phase was over and the new system in the new company, the Wellrun Ltd., was implemented, the subassembly warehouse was redundant and personnel was looking to be redeployed in different areas.

Push system

The push system of inventory control includes forecasting how much inventory a company needs to meet customer demand. The company must predict which products customers will buy, together with determining what quantity of products will be bought. The company will manufacture enough product to meet the forecast demand and sell- 'push' the goods to the customer. Disadvantage of the push system are that forecasts are often incorrect and sales can be unpredictable and there could be difference year after year. Another problem with push systems is that when too much material is left in inventory company's costs for storing these goods increases. Advantage to the push system is that the company is quite sure that it will have enough product to finish customer orders, fulfilling customer demand for the product. An example of a push system is Materials Requirements Planning (MRP) that involves calculations for operations, logistics and financial planning. MRP is a computer-based system. It controls scheduling and ordering with purpose of making sure that raw materials needed for manufacturing are available.

Pull system

The pull inventory control system starts with a customer's order, this way the company only makes enough product to satisfy customer's orders. The advantage of the system is that there is no excess of inventory stored. It means reducing inventory levels and also the cost of carrying and storing material/components. The disadvantage to the pull system is that it makes ordering materials harder if it happens that a supplier is not able to ship goods on time. This causes the company to miss that order and leads to customer dissatisfaction. JIT is an example of a pull inventory control system. The main objective is to keep inventory levels to a minimum and only have enough inventory to meet customer orders. The JIT system get rids of the waste by cutting down the costs of storing material and the amount of storage space.

Muddle Ltd. Vs Wellrun Ltd.

The two companies represent two different approaches to production system. Muddle Ltd. is a traditionally run company with production system characteristics like: push system, production schedule based on forecasting and two-level bill of material. Management in Muddle Ltd. focuses on people and machine utilisation. Production in the Wellrun Ltd. on the other hand is based on actual need and product is manufactured to the customer's order and 'pulled' by the customer through the distribution channel. Management focuses on the flow of the production and on the teamwork.

During the first phase of the workshop the production was organised according to the principles of the push system. The product was manufactured and 'pushed' through the pipeline to the warehouse, where it was stored with hope, that the forecasting of the market needs was accurate and the customer will actually buy it.

In Muddle Ltd. material was delivered to the subassembly warehouse, where orders were kitted and sent to the subassembly step and from there back to the warehouse, to finally get sent on the assembly line (compare Transportation routes, Diagrams 1 and 3) where they were assembled and inspected and sent to the warehouse, then to distribution and finally to the customer. Production process involved 9 people (operators), excluding transportation personnel, supervisors and managers. Production run time was 7 minutes. Labour used was 63 minutes (people x run time). 50 units were produced and 22 were sold (compare Figure 2) thus production effectiveness was 44%;(quantity sold /quantity produced) x 100%. Out of 22 sold product 18 was delivered on time which lives customer satisfaction at 81% (on time/late)x 100%. The amount of inventory was very high- 50 WIP (28 raw material). The inventory level in between the steps was very high (queues were very long). Diagram 1 outlines the production layout.

During the second phase of the workshop the production was reorganised to meet the criteria of the pull system. According to the pull strategy the product is manufactured to the customer demand. - the product is being 'pulled' by customer, which stimulates the production.

In Wellrun Ltd. customer orders triggered the production activities. As the product was 'pulled' activities to 'fill the void' started. Material was delivered to the warehouse and from there to the assembly line (compare Transportation routes, Diagram 2 and 4). Production process involved 2 people (operators), excluding supervisors/managers, transportation personnel and distribution personnel. Production run time was 7 minutes. Labour used was 14 minutes. 21 units were produced and all of them were sold (Figure 3), thus production effectiveness was 100%. All of the products were delivered on time resulting in 100% of the customer satisfaction. The amount of inventory was very low- 3 WIP (3 raw). Diagram 2 presents the line layout.

Quality awareness in Muddle Ltd.was very poor: defective component made its way throughout the production process without being detected, while in Wellrun Ltd it was detected immediately and production was stopped.

As to the usage of space/equipment in Muddle Ltd. 10 tables were used to accommodate assembly line, distribution, warehouse, customer, subassembly workstation and subassembly warehouse. In Wellrun Ltd 2 tables were used for the assembly line and 1 for the warehouse.

Manufacturing cycle time in the two companies also differed: in Wellrun Ltd it took 48 seconds for the particular component to complete its way through the production process, in Muddle Ltd., due to high inventory volumes it took 6 minutes.

There was a significant gap between the companies as to the standard hours used, calculated as the quantity produced x unit standard time (30s) and for Muddle Ltd. it was 25 minutes (50 units x 0.5 min), while for Wellrun Ltd 10.5 min (21 units x 0.5min).

Labour efficiency in Muddle Ltd was 40% ; standard hours divided by labour used (25min/63min) and in Wellrun Ltd. 75% (10.5 min/14 min).

Summary

Muddle Ltd. characteristics: high WIP (inventory), poor quality awareness, non effective space usage, long transportation routes, low production effectiveness, low labour efficiency, long manufacturing cycle time, potential loss of the 19% of the customers, who are not satisfied with the service.

Wellrun Ltd. characteristics: low WIP, good quality awareness (production stopped when defect was spotted), effective space usage, transportation limited to necessary minimum, 100% of production effectiveness, high labour efficiency (75%), short manufacturing cycle and 100% of customer satisfaction.

When we analyse the overall performance of the two companies we notice that the Wellrun Ltd characterizes with more efficiency. Wellrun Ltd. might have sold less units than Muddle Ltd, but the losses of invested money frozen in the unwanted inventory in the latter company are higher than the difference in profits of the sold goods (just one unit!). Figures 1&4 illustrate the quantities in WIP and raw material in both companies (Figure 1) and compare quantities produced and sold (Figure 4= Figure 2+3).

Resources in Wellrun were used more effectively, labour efficiency was high and minimum waste was noted at the same time quality of the product and service to the customer was very high.

It is worth mentioning that the defective component in Wellrun Ltd. caused an entire line to stop and it is because of the system design, that not only made the defect visible, but also made the continuation of the production impossible: the operator received only the amount of components she needed to perform the task and one of the components was defective-task could not be performed properly. System 'exposed' the defect and made the further production impossible.

Comments and opinions

During the workshop we assessed the differences between the two companies representing two different systems of production. Advantage of the just-in-time system was apparent and demonstrated through the performance measures. However to introduce JIT, the system must meet specific conditions.

Suppliers. Just-in-time means that the deliveries of material/components necessary for the production arrive when needed and in the amount necessary for the production. It means that the deliveries need to be synchronised with the customer's takt time, which implies very close cooperation with, and control of the suppliers. Suppliers' reliability and ability to perform within a given time is crucial for the system performance.

Quality of the material/components supplied need to be to the highest standard in the name of the rule 'do it right the first time'. If defective material is delivered production suffers losses, as there is no 'buffer' time to allow the damage control before the material is transferred onto the assembly line. If a supplier deliveries 2000 of defective components for example, pouches to 'feed' 2 lines with target of 450 units per shift on 2 shifts, those two lines will be stopped until the contact with the supplier is made and proper material delivered as those pouches were suppose to cover production during 2 shifts. Costs of such a delay: losses in production output depending on how long the stoppage lasts in average 58-60 units per hour , idle workers, et cet. In certain cases defects can be identified on the production line, with no prior inspection in the warehouse.

As mentioned before external suppliers' performance is crucial for the success of the system. However neither supplier nor manufacturer are able to control and predict all circumstances. Sometimes components travel from different places, countries, continents and accidents, natural disasters can prevent or damage the delivery. That of course is a very extreme example, but it doesn't mean it has not happen before. Disasters in the furthest part of the planet like the one in Fukushima in Japan had impact on business in Europe, as the manufacturing plants producing components were destroyed. There is no need for a hurricane or an earthquake to negatively impact the production, a local floods or a car accident could prevent the deliveries from being carried out.

These kind of extreme situations do not happen very often, but they expose the vulnerabilities of the system and should be acknowledged.

Small lots. In JIT system there is an emphasis on decreasing the quantities of units in lots- small lots are preferred. However, if the volume of lots decreases, the number of lots has to increase: to meet the given target more lots have to be processed. That means more lot change-overs have to be performed. It could pose a problem for a highly regulated environment, where substantial amount of paperwork is needed to document steps of production. Device history records need to be filled and signed, machine set ups need to be verified and confirmed by a support engineer (engineer or technician have to be present at the time to sign of the machine's parameters). The system can be modified and some changes facilitating change-overs are acceptable, but in certain cases (FDA or internal regulations et cet) there is a need for hard copies of documents, which need to be filled, signed off and verified during the change-overs (machine logs, example: crimper force or cycle times). That delays the production. Change-over times have to be looked into and time has to be decreased to ensure the production flow.

PART 2

JIT PROS AND CONS

JIT Pros

By reducing inventory, JIT frees up resources to use in other areas of the company. For a manufacturer it means more space to produce goods and the workforce gets deployed to focus on tasks like interaction with customers or manufacturing goods and not stocking merchandise. Employees can be trained to work at different stages of the production process on assembly line or at different worksteps, to meet customer demand. More flexible workforce focuses on quality production which can mean less defects and lower costs better control of time lines of the product production and delivery ultimately leading to increase customer satisfaction (Fullerton & McWatters 2001).

JIT Cons

JIT is its relatively complex, which can be considered one of its main disadvantages. Management must analyse and reorganise the work flow in the company from when the raw materials is supplied to when the finished product is sent out to the customer. It also implies rethinking of the relationship with the suppliers. The company might need to get involved with multiple suppliers located closer to the premisses, who are able to supply goods with little notice and eliminate suppliers, who cannot meet quality or delivery expectations (Peters & Austin 1995).

All material must meet quality requirements to prevent shut-down caused by defects. Employees must be aware of how the entire process works and deployed in the areas where they are needed to ensure system flexibility in meeting changes in customer demand (Peters & Austin 1995).

To implement JIT means to commit both financially and time-wise. It also means a change in mindset and in the corporate culture. It also needs a commitment to stay on track in implementing the system, at the risk of never gaining acceptance within the corporate culture.

The implications of JIT on employees are subject of a controversy: critics of just-in-time claim that the focus on elimination of waste and multi-skilling can have adverse impact on the quality of working life of the manufacturing employees while its promoters claim that it creates an environment of continuous challenge and creative tension stimulating improvement (Mullarkey et al. 1995).

Mullarkey et al (1995) claim that the JIT implementation can bring positive reactions among the employees once the appropriate approach is taken to the introduction of the new system and techniques. One of the companies investigated, took human-centred and participatory approach to the JIT implementation, by making sure that employees were adequately multi-skilled and properly trained in the principles of quality control, before introducing kanban systems and reducing inventory (Mullarkey et al. 1995).

It is a common sense knowledge that inventory provides a buffer to secure that operation is free from supply chain disruptions like delivery delays, equipment breakdowns or unforeseen customer demand.

Careful planning and systematic execution of the JIT system can eliminate waste and ensure high quality output. Workers take over control of the process. All elements of the system work towards one purpose: to gain and keep customers. Whoever or whatever does not contribute to that purpose can be eliminated.