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Just-in-time: a timely opportunity for small manufacturers.

Just-In-Time: A Timely Opportunity for Small Manufacturers

Just-in-time production, or JIT, has probably received more attention than any other "new" manufacturing concept or technique. This attention can be attributed to the credit the JIT philosophy has received for much of Japan's remarkable manufacturing success.

In the United States, manufacturers traditionally viewed inventory as a means to protect or buffer the company against all manufacturing and demand related disruptions. This approach was based on the assumption that managers had little or no control over such occurrences and thus inventory was held "just-in-case." In addition, large production batches were used to help amortize the cost of long set-up times and expensive equipment. Moreover, major manufacturers specialized in building support staff instead of relying on line workers. There was little interest in getting production workers involved in problem-solving, decision-making and cross-training.

In the 1970s major U.S. manufacturers, primarily of consumer goods, began to feel the pressure generated by Japanese competition. After the initial shock and the outcries for government intervention, corporate America started to rediscover manufacturing as an integral part of business operations and began to examine ways to improve its competitive position.

Initially, significant skepticism arose because Japan was thought to possess cultural, governmental, and geographic advantages uniquely required for successful JIT operation. Although it is true that the Japanese approach to implementation integrates such factors, evidence in this country and other Western economies support the idea that successful JIT implementation is not significantly culturally or government-based.

Since the initial shock, U.S. manufacturers have been exploring the possible utilization and adoption of JIT concepts to their operations. Both academic and professional journals in the production and inventory management area have presented much discussion on the characteristics and adaptability of JIT. Although there is no universal definition of what constitutes JIT, the followings are generally accepted as four of its more important components:

* Flexible workers who are more involved in the decision-making process.

* Equipment flexibility, which includes switching to smaller, simpler, more standardized equipment and/or reducing set-up times on existing or new equipment.

* Redesigning plant layout in order to take advantage of product flow and component commonality.

* Closer relationships with vendors. This includes the use of a smaller number of vendors, longer-period contracts, and the development of a partnership attitude.

In the United States, JIT systems are increasingly being adopted by larger manufacturing organizations. Actual case studies have shown the following benefits of a fully implemented JIT program:

* 80 to 90 percent reduction in inventory investment.

* 80 to 90 percent reduction in manufacturing lead times.

* 75 percent reduction in rework and setup.

* 50 percent reduction in space requirements.

* 50 percent reduction in material handling equipment.

Despite the extensive interest large manufacturers have shown in JIT, relatively few small companies have implemented JIT in their manufacturing operations. However, the smaller companies that supply parts and components to the larger JIT manufacturers are finding that they are being forced to change their manufacturing systems in order to conform to the larger JIT manufacturers' needs. If the JIT concept is to function effectively in small manufacturing companies, it is imperative that the smaller manufacturers develop a clear understanding of the basic element of a JIT system.

We conducted an extensive survey of smaller manufacturers in Alabama, Georgia, Kentucky, North Carolina, South Carolina, and Tennessee to find out if JIT concepts were being implemented in smaller manufacturing companies; to determine the extent that companies who define themselves as JIT manufacturers were actually implementing JIT concepts or techniques; and to determine plans for implementing JIT within the next three years among those companies who were not, at the time of the study, using JIT.

A questionnaire was developed in order to capture information regarding current and future practices in the JIT area. The questionnaire was also designed to enable the researchers to measure the degree to which JIT had been implemented in the responding companies. Since previous research and case studies have focused primarily on larger manufacturing organizations, this study was concentrated on smaller manufacturing organizations. Three thousand questionnaires were sent to manufacturing vice-presidents of randomly chosen small businesses. Of the companies responding, 95 percent had sales of $100 million or less and 53 percent had sales of $50 million or less. Two hundred and seventeen useable responses were received. The returned questionnaires represented a cross section of industries in the states selected.

According to the survey, 32.3 percent of the respondents indicated they currently were using a JIT-type program. (These companies will hereafter be referred to as "JIT companies." The other 67.7 percent of the respondents will be called "non-JIT companies.") The survey also indicated that the percentage of the JIT users should increase to 51.6 percent over the next three years.

One of the JIT components, employee involvement, is receiving considerable attention from both the JIT companies and the non-JIT companies. Currently, 55.7 percent of the JIT and 37.2 percent of the non-JIT companies provide support and means for the employees to meet regularly to identify and solve work-related problems. Based on the survey results, over the next three years, these percentages should increase to 72.1 percent and 58.3 percent for the JIT and non-JIT companies, respectively (tables 1 and 2).

The data relating to flexibility and cross-training of employees suggest that the majority, 72.9 percent, of the JIT companies and 70.6 percent of the non-JIT companies feel that employee flexibility and cross training is important. (In analyzing the data in the tables, we combine the "moderate" and "to a great extent" responses into one category. In table 3, for example, 72.9 percent = 38.6 percent + 34.3 percent; and the "not at all" and "some" responses into another category.) According to the survey, there will be an even greater emphasis in this area over the next three years. Further analysis of the data revealed that of the respondents that initially did not see flexibility and cross-training of employees as important, 63.2 percent of the JIT companies and 40.5 percent of the non-JIT companies said they would be adopting employee flexibility and cross-training over the next three years (table 4).

The second and third major components of JIT in our study deal with plant engineering. Switching to smaller standardized equipment, and redesigning the plant layout to take advantage of components and process commonality have been used in successful implementations of JIT. This has led to reduced production and maintenance cost and improved flexibility. The majority of the companies surveyed (73.6 percent of JIT and 88.0 percent of non-JIT companies) are not taking advantage of these components of JIT (table 5). There appears to be very little movement in implementing this major component of JIT, which strongly suggests that this important component of JIT has not been utilized by the smaller manufacturers. Furthermore, the results indicate that of the companies that currently do not utilize the smaller standardized equipment, only 14 percent of the JIT companies and 9.3 percent of the non-JIT companies plan to switch to smaller, simpler, and more standardized equipment over the next three years (Table 6).

A little over half (50.7 percent) of the JIT companies and only 32.2 percent of the non-JIT companies have redesigned their plant layouts in order to take advantage of commonality (table 7). Over the next three years, there appears to be little change in both the JIT and non-JIT companies attitudes toward redesigning their plant layouts. Of the respondents that currently have not redesigned their plant layouts only 33.3 percent of the JIT and 22.2 percent of the non-JIT companies plan to redesign their layouts over the next three years.

The fourth major element of JIT in our survey is the company/vendor relationship. The majority (69.6 percent) of the JIT companies and 67.6 percent of the non-JIT companies felt the proximity of vendors to the plant was not very important (table 9).

Besides location, another component of the company/vendor relationship is a movement toward reducing the number of suppliers. The results from the survey indicated that there will be little movement toward reducing the number of vendors over the next three years. Most companies surveyed--78.6 percent of the JIT companies and 95.8 percent of the non-JIT companies--have no plans to reduce the number of vendors over the next three years (table 10).

Based on the survey results, there appears to be some interest in and movement toward adopting JIT concepts in smaller manufacturing companies. According to the survey, one third of the respondents indicated they currently had a JIT-type program. Moreover, they indicated that this ratio would increase to over 50 percent within the next three years. The study, however, suggests that there is a lack of understanding as to what constitutes JIT. This is evidenced from the relatively large percentage of the companies who consider themselves JIT users but who have not adopted, and do not plan to adopt some of the major components of JIT. Of the four major components of JIT studied in ths survey, employee involvement was the most widely utilized. However, companies utilizing this component accounted for only 55 percent of those who considered themselves JIT users. Plant redesign was considered by only 50.7 percent. The remaining two basic elements were not implemented on a wide basis by JIT companies. More than three quarters of the JIT companies have not, to any extent, switched to smaller, simpler, more standardized equipment. More than two-thirds of the JIT companies indicated that the proximity of vendors was not important. More than three-quarters of the JIT companies indicated they had no plans for reducing the number of their vendors.

It appears that small manufacturers may not quite understand what a JIT system is, and what is involved in implementing a successful JIT program. This lack of understanding is not unique to small manufacturers. Similar misconceptions have existed and still exist among larger companies, due at least in part to the many faces of the JIT philosophy.

The surge of global competition does not discriminate between small and large companies. No longer are small manufacturers immune to foreign competition. Small U.S. manufacturers must understand the basic principles and philosophy of JIT if they are to be competitive in a global economy. A basic JIT system does work and can be implemented with little capital outlay. Given the potential benefits from switching to JIT, and given the pressure on small companies to implement such a system, adopting JIT concepts is an opportunity small manufacturers cannot afford to miss. The first step is to learn what JIT is and how it can be implemented. The time is now.

Further Reading

Ansari, A., and Midarress B., "Just-In-Time Purchasing Problems and Solutions," Journal of Purchasing and Materials Management, Summer 1986.

Musselwhite, C.W., "The Just-In-Time Production Challenge," Training and Development Journal, February 1987

Sadhwani, A.T., Sarhan, M.H., and Camp, R.A., "The Impact of Just-In-Time Inventory Systems on Small Businesses," Journal of Accountancy, January 1987.

Sepehri, Mehran, "Just-In-Time: Not Just In Japan," APICS 1986

Walleigh, R.C., "What's Your Excuse for Not Using JIT?" Harvard Business Review, March-April 1986.

Waters, C.R., Why Everybody's Talking About Just-In-Time," INC., March 1984.

Lawrence P. Ettkin is the Marvin E. White Professor of Business Administration and head of the departments of Management and Marketing at the University of Tennessee at Chattanooga. He has worked with companies throughout the eastern U.S. developing successful MRP, Maintenance Resource Management, and JIT systems. His publishing credits include Industrial Management, Business Horizons, Personnel Administrator Industrial Engineering, and Production and Inventory Control Management. Ettkin's Study Guide for Production and Operations Management has been published by Random House.

Farhad M.E. Raiszadeh is the Summerfield Johnston Professor for Production/Operations Management at the University of Tennssee at Chattanooga. He has worked in industry both in the United States and abroad, and has published in Industrial Management, Production and Inventory Management, Journal of Information and Optimization Sciences, Interfaces, Journal of Operations Management, and others.

Harold R. Hunt is a graduate student in the department of Management, University of Tennessee at Chattanooga. His area of interest is manufacturing productivity.
COPYRIGHT 1990 Institute of Industrial Engineers, Inc. (IIE)
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Author:Ettkin, Lawrence P.; Raiszadeh, Farhad M.E.; Hunt, Harold R., Jr.
Publication:Industrial Management
Date:Jan 1, 1990
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