Faced with increasingly keen global competition, manufacturers must not decide whether or not to change but, instead, should determine what changes they should make. Leaving things as they are in a status quo is a fatal option. Successful companies can choose to control industry change or can allow the competition to do so. Naturally, among manufacturing best practices is the Just-in-Time (JIT). Although JIT is not the only thing that a company needs to compete, it is evident that no manufacturer can remain competitive for long without taking advantage of the advancement possibilities that this system offers. No matter how high current company performance is, any decrease in efforts to improve operations will lose a competitive position. For this reason, continuous improvement is a present imperative for manufacturing companies that wish to be in the vanguard of their industries that must be vigorously pursued.
Leading companies around the world have adopted this globally recognized management philosophy. This has led to extraordinary advances in quality, agility in deliveries, and costs.
A great way to understand the possibilities of the Just-in-Time system is to imagine a pipeline that runs through an entire factory. At one end, manufacturers pay suppliers for the material that enters the pipeline. At the other extreme, customers pay for the products that have been shipped to them. A primary goal of using JIT manufacturing best practices is to reduce the time between payment at one end and collection at the other of the pipe. So, we need to move the material along the pipeline faster. A thick pipeline will allow us to ship, but slowly. With a thinner pipeline, we can achieve the same rate of shipments if we accelerate the flow rate inside it. If our production time is shorter, we will also respond better to changes that place in a dynamic market.
Just-in-Time manufacturing is an extension of the original concept of material flow management to reduce inventory levels. However, there are many more things involved in a manufacturing business besides reducing inventories to control costs. Manufacturing has to do with other issues, such as process regulation, level of automation, flexible manufacturing, the establishment of start-up times for machinery, productivity of direct labor, administrative expenses, administration of suppliers, engineering support, and the quality of the product that manufacturers must deliver to their customers.
The modern manufacturing firm interested in employing best manufacturing practices must efficiently handle these issues to operating departments in a lean, productive, and quality-oriented manner.
Manufacturing is no longer a local issue. Advances in communication and transportation have significantly reduced distances in the world. Thus, manufacturing must now be viewed as a global issue. To maintain their competitive advantage, committed companies must face the challenge of lowering costs and improving quality levels. One way to make this feasible is by reducing the outlay on materials and labor required to manufacture the product. These are the prominent factors that are generally considered in this regard, but they may not reflect the totality of the situation. Included in the cost equation should be administrative costs associated with a product integration process, as these items tip the balance towards a particular side of implementation.
It is imperative to use the right strategy in employing the best manufacturing practices. Most companies have one product strategy and various sales and marketing strategies, but they often lag when it comes to manufacturing strategy. They may fail when they develop a product and introduce it to the market. They may get beat by their competition. Their production cost is too high because they cannot produce the required volume or because their quality levels are not acceptable.
The products made in a manufacturing company have three implicit cost variables. These include materials, labor, and administrative costs. That of materials is made up of the costs of the material inputs used in producing the product. Labor is the hours invested in assembling and testing the product. Administration includes the cost of production, payments to banks for interest on equipment acquired to produce the product, and the cost of money invested in inventory. With few exceptions, the content of materials used to manufacture the product is the most critical part of the cost of the finished goods. The highest cost is the administrative one, while the smallest of the three costs in question is labor. In manufacturing, all three variables must be managed to obtain the lowest cost without compromising the quality of the products delivered to consumers. Just-in-Time (JIT) takes a similar approach to the three variables: it understands them and reduces costs by using common sense and simple procedures. In this way, it succeeds in cutting the excess fat from the manufacturing equation.
- Competitive advantage in manufacturing best practices
Developing a competitive strategy by using manufacturing best practices at the business level involves defining the variables for which a company seeks to be superior to the competition. That makes customers buy its products rather than those of another manufacturing firm. Below five variables have been identified that will serve as the basis for achieving this competitive advantage. They are cost, quality, service, flexibility, and innovation.
- Cost: managing to place low unit cost products on the market by manufacturing them, for example, with highly productive production and distribution systems, investing in specialized equipment that allows mass production.
- Quality – By designing reliable products and manufacturing flawless items, getting to achieve the brand-quality binomial. (Toyota in cars, Minolta in cameras, Seiko in watches, for example).
- Service: ensuring the commitments to deliver the products in terms of quantity, date, and price. Giving some level of assistance post-sale when and if appropriate.
- Flexibility: adapting to variations in demand, changes in the market, in technology, modifying products or production volumes.
- Innovation: developing new products, new production technologies, new management systems.
Each company must decide with which variable or variables it wants to compete in the market. Each must determine in which variable or variables it wants to be superior to the competition. Based on this decision, companies seeking to employ best manufacturing practices must articulate the other decisions made in the production area, which will constitute the company’s production strategy.
It must also be considered that the variables chosen to achieve competitive advantage are linked to the product’s life cycle. The way to compete will depend on which phase the product is in its evolution. Thus, while in the growth phase, quality and service are vital in gaining a competitive advantage, in the decline phase, the product’s price is key.
Once the variables with which a company can compete and manufacturing best practices in the market have been established to ensure that consumers prefer its products, all decisions made in production, as we have already said, must be following them. This set of decisions constitutes what is called production strategy.
- The Just-in-Time (JIT) philosophy
In a Just-in-Time system, waste is defined as any activity that does not add value to the customer. It uses resources above the theoretical minimum necessary (labor, equipment, time, space, energy). Overstocks, lead times, inspection, material movement, transactions, or rejections can be wasteful. In essence, any resource that is not actively involved in a process that adds value is in a state of waste.
As one of manufacturing best practices, the JIT method is not just another technique to eliminate waste. Additionally, it is not a program aimed at motivating staff or reducing defects. Furthermore, it is not just another inventory reduction project or a method of reducing lead times, space, or setup times. It is not simply a production or purchasing project. Neither is it a project at all, but it is a complete process. It is not a list of things to do but a process that helps to prioritize what to do. The purpose of the JIT method is to improve a company’s ability to respond economically to change. Thus, as pipeline thicknesses are reduced, the JIT method will flag and prioritize constrictions that impede flow and block the company’s ability to respond to change quickly and economically. Furthermore, once every bottleneck becomes visible, the JIT method forces action to be taken to eliminate them, thereby stimulating total quality control.
The conventional description of JIT as a system for manufacturing and supplying goods needed, when needed, and in exactly the quantities needed only defines JIT intellectually. People who in work areas, using their minds and gaining experience, strive for improvements, do not define JIT in that way. For them, JIT means relentlessly pruning losses. When companies implement JIT as a manufacturing best practice, factory waste is systematically eliminated. To achieve this end, manufacturers seeking success should not hold traditional and fixed ideas unquestionably to maintain a less than optimal status quo.