Just in time manufacturing refers to a method of making goods developed by Toyota in the 1980's. Widely used in Japan, it catapulted many Japanese firms to international competitiveness before Western Hemisphere industral nations cottoned on and started to use the methods involved themselves. Attempts to use it have been employed by the vast majority of world class manufacturing businesses since.

Waste in any form causes some type of cost. Some of this cost will have to be absorbed by the firm, seriously denting their profits, other waste will be pushed on to the consumers, seriously denting their wallets, and some will have an effect on the environment, seriously denting the trees¹. The aim of the Just In Time process is to reduce waste at all levels in manufacturing leaving a streamlined and efficient operation. There are seven forms of waste to get rid of:

• Product defects
• Process Waste
• Overproduction
• Inventory
• Waiting time
• Movement of the product through the process
• Transportation

The difference between Just-in-Time and classic thinking is easy to understand when you know where they are coming from. The classic thinking company accountants (and with them most of the directors and shareholders) see stock as something that can be sold later to make a profit on it. Property, like the warehouses, has a similar value and, should the company get into too much debt, they can always be sold off to pay off the overdraft. However, when proponents of the Just-in-time system see stock, they see something that is taking up money that could otherwise be given to shareholders or spent on advertising; something that is taking up warehouse space that could otherwise be rented out to other firms or sold to get at the cash tied up in it.

So what are the implications? Well the main point is that (as you might have guessed from the name) the components of the product
you are making arrive just in time for when you need to use them. There is no waiting around in store rooms, they get delivered, get put into the product and the product moves on to the next stage of the
process where another bunch of components arrive and are put into the slightly more developed product. This continues ad infinitum until the finished product is sent off to the customer.

Example - H2G2 NoteMaking Kits

Let's try to explain this a bit more with an example. Those of you who already understand the concept and don't want to read through the example can skip to the next headed section. Say that h2g2 starts making official researcher pen and paper notemaking kits for researchers to take with them when looking for ideas about guide entries. They decide to get another firm to make the pens and yet another to provide the ring-bound notepads, but they assemble and package the kits themselves before posting them off to the researchers
that have requested them.

There are a few stages to this manufacturing process. Firstly they receive the stock of all the supplies they need; things such as pens, notepads, plastic wrap packaging, labels for addresses, stamps, "Don't Panic" guide on how to use the kits. Then they put the pens into the binding of the notebooks, slip the "Don't Panic" instruction manual on top, put the notebooks into packages, label and address the packs, apply the stamps and drop them into the post office for delivery.

Classic Manufacturing

Now, before Toyota started up this Just-in-time lark, any company assembling such kits would need vast warehouses ², firstly, to keep the stock of parts before they are assembled, and secondly, to keep the stock of assembled packs before they are sent off to the researchers. Large stocks of pens and pads would arrive every couple of months and these would gradually be shifted to the assembly plant in smaller batches until the warehouse starts looking empty again, when a fresh batch would be ordered. Once the batch reaches the assembly plant, it would probably hang around on the shelves surrounding the assembly area for days until it is fully used up. Everyone is happy. The customers (researchers) are happy because there is always stock available when they want new notepad and pen packs, the assembly staff are happy because they always have stock when they are making up the packs and the company accountants are happy because there are plenty of assets (things the company owns) to pay off the short term debts.

The Just-In-Time Version

But, as was mentioned earlier, the Just-in-Time system sees stock as a form of waste and something to be avoided. So the last thing they want is to have large warehouses full of these notemaking kits, at any stage of the production. One of the fundamental differences
is that they use far less warehouse space. New stock is ordered to arrive just as you are running out of your old stock, so when the last pen from one batch is being inserted into ring-binder a new load of pens is freshly delivered. There are far more deliveries as well
so the warehouses don't fill up at all. And again everyone is happy. The Customers (researchers) are happy because the goods are produced when they need them. The workers are happy because the stock arrives just as soon as they need it and the Accountants are happy
because they are not spending as much money on warehousing and stock purchases are spread throughout the year, easing the cashflow situation.

Getting Rid of Waste

Those of you who have been paying attention will notice that this process only seems to cover two of the forms of waste mentioned above, namely, inventory waste and waiting time waste. However the other forms of waste must also be dealt with in order to run an efficient operation. Having big stocks of inventory hides these forms of waste from view, but the less stock there is to cover these mistakes, the more evident the problems become. Knowing there is a problem there is the first step to solving it, and this is one of the areas where implementing a Just-In-Time process is very useful.

Over-Production

Unlike the following forms of waste, Over production is partly prevented by the Just-In-Time process of production itself. Because the firm is not keeping large stocks of products it won't have lots and lots of wasted goods lying around in warehouses when no-one else wants to buy their product. The other way that Just-in-Time helps reduce this form of waste is through the ordering process. Many firms operate a pull system³ to manage production, so they do not actually produce anything unless specifically requested by their customers.

Product Defects

ForJust-In-Time time to work effectively there can't be any hold-ups during the process. It is rare for firms to inspect quality in the product at each stage as this would interrupt the flow and put things out of sync. Any inspection, if done at all, is done right at the end. As you might guess, if there is a problem with the production process they only find out when it is too late to fix the product. In such a case, the entire production line is stopped and checked for faults. There is a lot of reliance on making sure there is quality
consistently throughout the process⁴ and similar reliance on suppliers to make sure that the problems are not caused by faulty parts. Some firms go to the extent that if a
supplier's part is found to have caused the defect then their contracts specify that they have to pay massive penalties, from specific cash penalties to having to pay the costs of stopping and finding the defective part.

Waste from the Process

Just-in-Time is not compatible with all processes. Often, firms wishing to implement a Just-in-Time process will have to redesign the ways they do things. This is an ideal time to reduce waste caused by the process itself. This might be such waste as scrap from raw materials that could be reduced or it might be such less obvious waste such as producing something itself that could be bought in more cheaply.

Product Movement

Shifting the components of the product around the factory to get to the workstations wastes time and adds no value to the product being made. This should be considered whilst designing the process and eliminated as much as possible by, for example, locating the tools sequentially in the order they are used and close to each other.

Transportation

In a similar way moving the product or its components around between production stages is wasteful. This is one of the reasons that major producers either encourage suppliers to locate close to their manufacturing centres or use local suppliers if available. It also accounts for developments such as Silicon Glen in Scotland where a large number of smaller companies have set up in close proximity to some major hi-tech manufacturers.

Problems with Just-In-Time

When Just-in-Time works, it is clearly a very useful and efficient system, so obviously everyone should use it, right? Not necessarily. The Just-in-time system may not suit every business, probably not even some of the firms that have installed it in the first place. Just-in-Time doesn't necessarily reduce inventory in total. One firm operating a Just-in-Time system can reduce its inventory, but this is often at the expense of firms further up or down the chain. Suppliers, for example, may need to keep stocks just in case there is a rush order - remember that there are often major penalty clauses if they can't deliver , and the firm's customers (providing it is not selling direct to the public) may need to keep stock in case there is a hold up at some point.

There are environmental effects of this shifting inventory as well⁵. Many firms implementing Just-in-Time still actually have quite a lot of inventory, it just happens to be carted around on trucks instead of sitting around in warehouses. This isn't really great for air pollution and such like, not to mention the increased congestion on the roads from the more frequent journeys the trucks are making between factories. Those warehouses the goods used to be kept in are still standing as well, often empty. This is a form of waste as well. The firm with an empty warehouse basically has a large stock of room for storage, and with Just-in-time implemented it is less likely to use it than the stock that was held there to begin with.

One of the reasons that Japanese businesses are able to use Just-in-Time is the relationships that they build with their suppliers. In contrast to many businesses in Europe and North America, they form long-term mutually respectful relationships⁶. This aids understanding about the requirements each side have in any contract and leads more often to a Win-Win situation. Should this relationship be absent, it is very difficult to get the guarantees of quality and timing that are so necessary for Just-in-Time to work.