Analysis of Just-in-Time Manufacturing - Case Study Example

Introduction Lean or Just-in-Time manufacturing is a highly recommended production management tool that is associated with increasing the firm’s competitive advantage. The ideals of JIT are to have the supplies a firm requires at exact time that they are needed. The main objective of lean manufacturing is to reduce waste while increasing value. With regard to these directives, the president of operations for Leagile Manufacturing; Scott Murphy hastily implemented Lean manufacturing at the company replacing the Manufacturing Resource Planning (MRP) rest assured that JIT will reduce the firm’s operational costs while increasing its value. However to his surprise the outcomes were contrary to his expectations. A myriad of operational problems emerged. This paper seeks to identify these problems together with their root causes, recommend possible solutions linking strategy to operational issues while addressing the problems and their root causes, and finally, the paper will also provide an implementation plan of the recommended strategy and related action. Strategic Problems Strategic management with regard to change implementation: the study and final implementation of the Just-in-Time was done solely by the vice president of Leagile Manufacturing Mr. Scott Murphy. He read and understood how Lean Manufacturing works theoretically. In addition he had never worked in any production firm using lean manufacturing as their production strategy and neither did he consult experts in relation to how JIT is implemented. With regard to this, the top management strategic move to replace MRP with JIT although the move was meant to increase the firm’s productivity while cutting on wastes, doing it without training employees as to how the model works was a massive strategic weakness. Consequently, a firm cannot implement JIT all by itself; partnership is recommended when undertaking this vital task for it to be fully successful. Further, poor JIT implementation plan; the implementation of the latter was so hasty; the management never undertook extensive feasibility study to establish the viability of Lean manufacturing to the firm before implementing it. Theoretical information is not enough and Scott’s move to implement JIT was immature and thus it led to a myriad of problems. Sales problems Late deliveries: production activities are overwhelming given the fact that customer demands consistently change within a short period and thus their orders keep on varying. The production department inefficiencies are the primary cause of delayed deliveries. For instance, the production department failure to match up customer demands and taking more time in manufacturing different parts resulted into reduced overall productivity. Given these facts, there were no enough products to be supplied to customers on time. Massive manual data entry; the continued customer habit to change their orders contributed largely to increased paper work in the sales department. In addition their re-order habit means increased data manipulations thus making sales department work more tasking and tiring. Production problems Late Supplies: the suppliers were inefficient in their raw material delivery and hence causing delays in the commencement of production process thus leading to delayed productions. Changing in-progress orders: due to placing future orders, customers were at times compelled to change their product specifications thus making production process tedious and inefficient. Delayed productions: the production process management was poor; for instance a slight breakdown of the production machine halted the entire process. Consequently, there were no line engineers and other quality assurance personnel to efficiently assess and evaluate manufacturing machine parts before they found their way into the production section. Procurement problems High raw material costs: the company orders materials in low quantities and have it delivered in time to cut down on inventory costs. However, suppliers charge more for less-than-full tracks thus exponentially integrating the company’s raw materials purchasing costs. Accordingly, given the fact that frequent deliveries have to be made on time the costs are subsequently high. Higher number of raw material orders: the company’s operations require many raw materials deliveries within a day, owing to the fact that each delivery is made in line with the products to be made at that particular time the company is forced to place high number of raw material orders. Transport problems Scheduling: due to increased raw material and customer orders there are many trucks making deliveries causing congestion in the truck bay. There is need for more space for unloading trucks together with more manpower to enhance efficiency. Leagile Manufacturing is a master of everything: the company operates virtually everything thus increasing the general operating costs. The company has its own shipping company meaning that it has to employ more employees to tackle transport issues and also create or increase the bay size in order to accommodate the increased number of shipping and deliveries. Accordingly, increased number of the aforementioned services demands increased number of employees to load and off-load the trucks. Recommended solutions First, Leagile Manufacturing management should undertake a feasibility study to understand if the company was ready for JIT manufacturing strategy. This entails, constituting a team of experts to critically analyze the general company business operations and consulting other companies that have already implemented the strategy. After an inherent understanding of the organization, they should develop a JIT implementation plan that will guide the entire implementation program (Featherston, 2000). Planning should also include management personnel from different departments; collaborative strategic planning is essential in bringing different helpful approaches and extensive understanding of what is needed and how it can be achieved. Consequently, the executives and employees will have a chance to do planning together and analyzing the new strategy thus isolating misinformed strategy interpretation (Johnson, 2005). During the imp-implementation of JIT, Leagile Manufacturing it recommended to involve its entire supply chain. This allows everybody to completely understand what is required and how it is should be done. Consequently, after implementation the workforce should be trained on how the system works. This equips them with relevant knowledge thus making them dedicated to the system rather than complain about it. Nevertheless, cross training employees outside of their business function increases employee’s problem solving and thus increasing their final view of the entire firm. The workforce will also feel empowered to make JIT a success for Leagile Manufacturing. Secondly, the sales problems at Leagile Manufacturing will only be solved by ensuring proper JIT scheduling. In this case, working to reduce inventory to the lowest working levels, Leagile Manufacturing, must persistently and constantly be adjusting the ordering and delivering schedule. For instance, frequent orders small orders should be placed for raw material supplies while small productions are constantly initiated (Johnson, 2005). For the company to achieve this breakneck pace of order/production schedule, Leagile Manufacturing must frequently and constantly be making small adjustments to orders/production thus recognizing that kanbans are of significant importance. With regard to manual data entry, the company should implement customer relationship marketing model where customers can directly place their orders online and also communicating any order through the same (Womack & Jones, 2009). Production problems can be alleviated at Leagile Manufacturing by the company deploying the demand-based material pull system. This will help the company to manage both material flow and work-in-progress inventory levels. JIT production planning is also recommended; since the there are less error margins, the company needs an expert planner particularly one who is familiar with changeover times, changeover patterns and the true lead times of each product (Johnson, 2005). Consequently handling actual demands patterns for products is essential. Furthermore, the Leagile Manufacturing needs to improve process flexibility, a JIT environment only a cross-section of products is produced daily. In order to effectively achieve this, the company needs a flexible production process that can easily change from one product to another. In addition, Leagile Manufacturing should put much focus, analysis, and effort into changing over its processes as designing work process being completed. Evaluating company’s production process flexibility and developing specific methods and processes for improving changeover is essential for curbing all production problems at the company (Womack, et al., 2003). In procurement, Leagile Manufacturing should source for credible suppliers and partner with them particularly those that will supply or can supply lowest cost and acceptable quality materials. Supplier/Company partnership will help the company in different ways; they will play a great part in consignment inventory and also setting up pull system between the company and the suppliers (Featherston, 2000). In this regard, materials will consistently be replenished as the company uses them in a JIT friendly supplier environment. In the same line of argument, the company should select suppliers based on common geography in that materials can be pooled to effectively leverage logistic expenditures. Consequently, before the company deciding on any supplier, it should define the parameters and qualifications of a JIT-capable supply base to reduce or rather eliminate the inconsistencies that are eminent in the company. In the same respect, Leagile Manufacturing need to evaluate its current suppliers and the enhancements required to for them to continue serving the company’s operations in the JIT environment (Womack & Jones, 2009). Accordingly, Leagile Manufacturing needs to take total cost analysis; in essence understanding how much the company spends on raw materials is recommended. Establishing raw material cost means considering all cost implications of ordering, transporting, handling and storing. Understanding the true cost of materials will automatically change the traditional way that the company used in making sourcing decisions. Additionally, these figures will help the company to develop a more robust total cost picture with regard to raw materials purchased. Changing to JIT environment means that Leagile Manufacturing has order small quantities of raw materials while only processing requested orders. With regard to this, transportation and logistics to be kept low, the company ought to use third party logistics providers, foresight forwarders and consolidators. For instance smaller orders or loads of several customers can be combined to achieve economies of scale. The company must do an extensive research to understand how unbundled transportation works and design a logistics supply chain that meets both company’s JIT and transportation cost objectives. Sometimes it is recommended for any company with JIT strategy to combine both bundled and unbundled solutions (Womack & Jones, 2009). Further, transportation network optimization will help the company; for instance, before acquiring the logistics solution and service to support a JIT environment, a comprehensive assessment of the company’s transportation network should be completed. Particularly to those companies with a base of owned or leased assets for transportation or warehousing; Leagile Manufacturing falls under this category. This assessment will allow the company to know or determine the optimal location for warehouse, what optimal stocking strategies are for each and what combination of transportation routings and modes are optimal to achieve to meet the company’s cost and service level objects (Cheng & Podolsky, 2007). Leagile Manufacturing should use transportation network optimization to alleviate itself from the current transportation problems. For example, it should develop the models and perform the analysis thus enabling it to optimize the logistics, transportation and manufacturing networks. Just-In-Time Inventory Management Strategy Just-In-Time inventory management strategy and Lean manufacturing is the systematic elimination of waste while focusing on production costs, product quality and delivery together with worker involvement (Greenberg, 2002). Waste is an undesirable by-product of many factory production systems; it is also an inevitable end-of-pipe control expense. Waste also represents inefficiency and makes production processes expensive. Reducing the amount of resources wasted in manufacturing processes is something many manufacturers covet. With regard to this, it is imperative that every bit of raw material is effectively used and reused to make sure that waste is extremely minimized if not eliminated. There are seven common sources of waste: waste of [production, waste of time on hand (waiting), waste of transportation, waste of processing, waste of stock on hand (inventory), waste of movement, and waste of making defective products (Greenberg, 2002). Identifying the primary source of these wastes is not only an important step towards improving efficiency without integrating production costs, but also introducing two innovative elements: JIT inventory management system and automation. JIT assures manufactures that the right, defect-free parts will reach the production line in the right place, the time when they are needed, and in specific quantities. In JIT environment coordination among groups of people is essential for the final success of production. JIT is a management philosophy that was initiated and developed within the Toyota Production system just after the end of World War II and it comprises of three main concepts: people, plant and systems. Its single most aim was to reduce inventory levels however, the systems has evolved into a comprehensive managerial strategy that optimizes quality-cost related elements. Reducing inventory levels at any manufacturing firm is wholly related to reducing costs while being committed to its long-term objective to gain market by offering high quality products at competitive prices. JIT Elements People: this is basic and fundamental element that demands the involvement and support of people that are associated to the mission of the organization like stockholder, employees, labor organization, suppliers, managers and customers (Greenberg, 2002) Plants: the implementation of JIT demands substantial changes in plant layout for flexibility maximization; for instance suppliers should supply or deliver materials directly to the place where they will be incorporated directly to the product; employees should be able to multi-task with the production site (Womack, et al., 2003). Additionally the plant layout should necessitate implementation of pull strategy, as in, demand should indicate when production should be initiated. The organization of the plant must permit employees the flexibility to assess or inspect the production and halt the system whenever defective parts are detected (Greenberg, 2002). Systems: these are processes applied to coordinate activities and materials. The JIT directives are that a limited number of specialized suppliers for each and specific part that the firm buys. These suppliers should work in conjunction with the organization while receiving financial and technical support together with long-term contractual assurance. In return, suppliers should be able to promptly deliver defect-free parts in right quantities. Consequently, parts must be ready for assembly; the supplier must also comply with the quality at the source thinking (Greenberg, 2002). JIT Production Kanban production; this is a pull driven method for controlling the flow of components where cards are used to authorize production parts and their movement within the assembly process. This production limits production of parts to just what is needed in the assembly. For instance, nothing is manufactured until it is needed (Pragman, 2007). Given these facts, suppliers must only deliver needed components in the right quantities when they are required at every assembly station. JIT inventory management system is basically meant to increase the control and allocation of raw materials. According to the pull approach of production, JIT eliminates manufacturing inventories by scheduling the delivery of raw materials at the favorable times and locations needed (Porter, et al., 2002). Firms using JIT usually establish multiple receiving docks designated to receive deliveries of materials needed assembling centers nearby while suppliers deliver materials in smaller quantities but at frequent intervals .(Warszawski, 2007). This helps in reducing material handling and storage thus eliminating wastes resulting from any operation that adds cost without adding value like moving and storing. Furthermore, it reduces overproduction, transportation, and wastes resulting from production of defective parts. The following are the characteristics of JIT production process: Limited number of suppliers: the company works with a few suppliers who make frequent deliveries in small lots. In this regard suppliers must be ready and willing to make several deliveries within a day in exact quantities as specified by the customer (Pragman, 2007). Plant Layout: in order to successfully implement JIT the manufacturing firm must improve manufacturing flow lines. In this case, all machines needed to make specific products must be placed in one location within the factory (Pragman, 2007). Flexible workforce: workers on a JIT line should and must be multi-skilled and flexible, they must and should be able to undertake minor repairs, and also they should be able to do maintenance services especially when there is no production going on (Chinowski, 2001). Setup time: JIT is mainly focused towards decreasing setup time; in this regard, equipments are dedicated to wards producing single product line hence setups are highly eliminated and products can be manufactured in any batch size. Defective parts: firms using JIT are committed to a minimum level of defective parts as it is essential to eliminate any delays in the process. These firms tend to achieve a goal of zero defects (Warszawski, 2007). JIT has other elements that cannot be described in words but critical for the companies and their suppliers. For example, the firms’ partnership with suppliers; they must deliver parts with no defects within specified time (Pragman, 2007). The teamwork and problem solving atmosphere that is created by JIT; employees are contribute largely to the improvement of the firm while also in decisions with regard to defective parts on the workstation. And lastly, the management is focused to the total quality approach. The organizational culture is customer focused and JIT plays a significant role in customer satisfaction by decreasing defects while effectively adapting to the increased customers’ changing needs. Leagile Manufacturing JIT Implementation First and foremost, the company must accept JIT as an organizational strategy; for instance the top management, employees, suppliers and customers should be informed about the change of the MRP system (Ballard & Howell, 1998). Consequently, after acceptance of the system, Leagile manufacturing need adapt operation procedures, production systems and the organizational culture that is customer focused. Additionally, the latter should be applied to the entire material chain thus extending beyond the factory and hence it is imperative for the management to use relationship marketing strategy for them to receive and exchange information through the distribution channel. As aforementioned, manufacturer-supplier partnership is paramount for the successful implementation of JIT, therefore Leagile Manufacturing should identify credible suppliers and partner with them to ensure efficiency in raw material deliveries and in right quantities. The manufacturer-supplier relationship should be of long-term basis to develop mutual support and trust (Ballard & Howell, 1998). Leagile Manufacturing must evaluate, and certify a limited number of suppliers who will wholly commit to delivering materials according to the JIT Requirements. Suppliers’ suggestions should also be welcomed as they may enhance the whole process. Additionally, Leagile manufacturing should provide the necessary assistance to improve the quality of their suppliers. For instance introducing future production plans in order to inform the suppliers about levels of production and capacity (Cheng & podolsky, 2007). The company should also restructure its manufacturing operations to conform to JIT environment requirements. For instance the company layout should be such that all machines required for producing specific product lines, be put together in one location within the factory. In addition, suppliers must be directed such that when delivering their supplies, the supplies should be defect free and in right quantities and delivered to right assembly locations. Consequently, for Leagile Manufacturing to subsequently reduce lead time, it should dedicate specific equipments to producing single product line. This will also increase productivity as well as decreasing setups and product defects. Leagile Manufacturing must also continuously train their workforce to align them with the new JIT environment. Employees must be equipped with necessary skills for them to be able to multi-task as required by the JIT strategy (Cheng & podolsky, 2007). It is essential for employees working on JIT line to be multi-skilled and flexible and also must be able to perform repairs in case there are minor production system defects. Training them will enhance their knowledge and skills, and also will make them understand the relevance and importance of the new system. Customers form a vital part of Leagile manufacturing, with regard to this, the management should let all their customers understand how the new system operates thus making them place future orders. Consequently, customers should be encouraged to define their product requirements; further should be allowed to provide feedback as to how the products perform in the marketplace against competitors. For instance, customers will initiate the JIT system each moment they demand for goods. Information Technology is widely used manufacturing companies thus it is a critical factor to employ when implementing JIT system. For instance the latter contributes to improving the reliability, accuracy, speed, and the overall potential of equipments and the system. Owing to this, Leagile Manufacturing, should use a computer based system like Computer Aided Design (CAD) and Computer Aided manufacturing (CAM) in the implementation and operations in the JIT environment. CAD is computer software used for creating new parts or product designs or improving existing designs. For instance drawings are created and displayed on a monitor and the designer can manipulate the designs to come up with new parts specification. In JIT environment, virtual design data stored on computer memory can rapidly be manipulated while eliminating errors as well as exchange data between the manufacturer and the supplier. CAM is used to transfer the final design specification into instructions thus guiding how a specific part should be manufactured. In JIT environment, CAM is a significant way of efficiently communicating part design specification to suppliers that are part of customer company network. CAM also allows suppliers to coordinate their designs and plans with those from manufacturers on line. After Leagile manufacturing implementing the JIT system correctly they experience an efficient product production at considerably low costs while eliminating inventory at each stage of production from raw materials to finished products. Consequently, Leagile Manufacturing will be able to manage and reduce non-value adding functions like storage, setups and handling. The implementation of information technology manufacturing at Leagile manufacturing will facilitate the implementation of JIT production system. Conclusion Incorporating JIT lean manufacturing in a company makes production operations to be highly efficient, cost effective and customer responsive. For instance the latter allows manufacturers to purchase and receive raw materials just before they are required on the assembly line thus relieving them of inventory cost (Tommelein, 2006). The pull-to-order system eliminates warehouses in factories while improving the factory output. The system was developed based on cost reduction and quality improvement aspects. Companies that have implemented JIT have extremely achieved excellence in waste elimination while making the company responsive to short term customer demand patterns. Generally, JIT manufacturing culminates into lower total system costs as well as improving product quality. With JIT, firms have reduced inventory by more than fifty percent and lead time by more than eighty percent (Droge, and Germain, 1998). However, poor JIT implementation strategy can result into a myriad of problems and in fact can bring manufacturing operations to a stand still; a situation experienced at Leagile Manufacturing. The strategy used by Scotty Murphy to implement JIT system was extremely irrational and illogical; he could have followed the right procedure of involving all stakeholders for the system to be a success. The problems experienced at Leagile manufacturing were basically as a result of poor JIT system implementation. In order to correct the problems being experienced, the top management should go back to the drawing board and follow the right procedures. In doing so, the company will be able to reduce its system costs while increasing the overall efficiency of the firm. Bibliography Ballard, G., and Howell, G. 1998. Shielding Production: Essential Step in Production Control. Journal of Construction Engineering and Management, ASCE, vol. 124, no. 1, pp. 11-17 Chinowsky, P. S. 2001. 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The Machine That Changed The World: The Story Of Lean Production. New York: Harper Perennial. Read More