Just in Time Manufactuing

Running Head: JUST IN TIME MANUFACTURING 1
Just In Time Manufacturing:
Explore Toyota’s Manufacturing Control System
Prepared for
Dr. Susita Asree
California State University, Fullerton
Prepared by
Beverly Ong
Daniel Mercado
Rohan Nakrani
Femi Okeowo
Date Submitted: May 5, 2014

JUST IN TIME MANUFACTURING 2
Table of Contents
Table of Figures...........................................................................................................................................................................2
Abstract...........................................................................................................................................................................................3
History of the JIT Management Strategy ..........................................................................................................................4
Concept of JIT...............................................................................................................................................................................4
JIT Performance Indicators....................................................................................................................................................5
Implementation and Effects of JIT in Toyota..................................................................................................................9
Benefits of JIT manufacturing of Toyota........................................................................................................................15
Problems Of Implementing JIT in Toyota......................................................................................................................18
Implementation...................................................................................................................................................................18
Product Delivery Logistics..............................................................................................................................................19
Purchasing and Communication..................................................................................................................................20
Unexpected Events.............................................................................................................................................................21
Demand Forecasting...............................................................................................................................................................22
Total Quality Management ..................................................................................................................................................22
Continuous Improvement of the JIT System................................................................................................................23
Conclusion...................................................................................................................................................................................23
References...................................................................................................................................................................................24
Table of Figures
Figure 1 ...........................................................................................................................................................................................6
Figure 2 ...........................................................................................................................................................................................7
Figure 3 ...........................................................................................................................................................................................8
Figure 4 ...........................................................................................................................................................................................9

Abstract
This paper is divided into four different sections to separate the content of four different
authors. The first section covers the history of the “Just in Time” (JIT) strategy, the concept of
JIT, and lastly JIT’s financial indicators. The second section will cover implementation aspects
of JIT. The third section will cover problems which arose during Toyota’s implementation of
JIT. Just-In-Time was introduced to the business world over 30 years ago and till now; most
companies that have been trying to imitate the system have struggled with the concept. The
implementation problem is very real in JIT, and these problems can be one of the largest cost
drivers for corporations trying to replicate the system.

History of the JIT Management Strategy
Toyota’s JIT manufacturing management strategy has had a large enough effect that it
has been adopted by other manufacturing groups. Dell Inc., Wal-Mart Stores Inc. and NEC
Corporation have acknowledged the benefits of JIT and have implemented JIT methodologies
(Minahan, 2014). Although JIT has made a large impact on inventory management strategy, it
remains as an iteration on previous management techniques. JIT’s impact could not be
recognized without the early manufacturing advancements such as Henry Ford’s assembly line.
The current Toyota JIT strategy was introduced by Taiichi Ohno between the 1940s and
1970s. Taiichi Ohno earned his way to the position of Toyota’s Vice President using his idea of
JIT. JIT is known as the Toyota Production System in Japan. The Toyota Production System
was essential for Japan’s automakers in order to be competitive with American automakers
(International Journal of Applied Engineering Research, 2012).
Concept of JIT
A business is only validated through profits because without profits the company will
eventually bankrupt. One of the driving factors for Toyota’s JIT production system is cost
reduction. Since the customer and not Toyota controls the final price of the automobile Toyota
must keep costs to a minimum in order to maximize profit. This leads to the fundamental goal of
JIT which is the eradication of waste. Toyota identified six key areas in which eliminating waste
would most benefit the company, in other words Toyota targeted the ‘low hanging fruit’ (Taiichi
Ohno, 1978).
The seven targeted areas identified by the Toyota Production System (JIT):
1) waste of overproduction
2) waste of time on hand

3) waste of transportation
4) waste of processing itself
5) waste of stock on hand (inventory)
6) waste of movement
7) waste of making defective products
On the one hand the targeted areas seem trivial but on the other making improvements in
these areas can be a complex task. There are design tradeoffs when attempting to implement JIT
manufacturing. First if not enough labor or inventory is planned for or if the arrangement of
machinery on the assembly line is incorrect, delays can be introduced which affect the entire
supply chain. The Toyota Production System mitigates these delays using the Kanban operations
system. The Kanban system involves a document which accompanies the product through the
manufacturing process. This document gives workers vital manufacturing information such as
product information, assembly information and transfer information. The advantage of the
Kanban system is the work backward mentality. Using the Kanban system manufacturing
theoretically works backward from the final step of the manufacturing process. An example of
working backward is when a technician from the final step of manufacturing moves to the
previous manufacturing step in order to retrieve the parts required at his manufacturing state. In
this method the technician retrieves the exact amount of parts required to complete his/her job
(Taiichi Ohno, 1978).
JIT Performance Indicators
Assessing the performance of the JIT manufacturing system with other top automotive
manufacturers required a commonality between all manufacturers in the comparison. The

commonality used in this research was financial performance. Although many financial
indicators exist, only a few would be applicable due to the nature of JIT. Only indicators which
showed relationships with manufacturing and inventory were utilized since JIT is inherently a
manufacturing control system.
The first indicator used was the inventory to current assets ratio. This ratio gives the
percentage of inventory to total current assets. It can also be described as the amount of assets
tied up in inventory. The data shown in Figure 1 tells us that Toyota has the least amount of
assets tied up in inventory. One of JIT’s main goals is to eliminate waste in the inventory
system. The inventory to current assets ratio shows that Toyota, who has implemented JIT,
benefits the most from JIT’s inventory waste elimination (Easton, Wild, Halsey, and McAnally,
2013).
Figure 1
The second indicator utilized in the research was PPE Turnover (Property, Plant and
Equipment). The ratio compares Sales and PPE Assets to assess the efficiency of a company’s
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TOYOTA
FORD
GM

productivity. The ratio quantifies the amount of PPE assets required to earn one dollar of
revenue. Figure 2 illustrates PPE Turnover and shows that over the last ten years Toyota has had
the lowest PPE Turnover ratio. The chart agrees with the JIT principles of efficient
manufacturing through the elimination of unnecessary manufacturing steps, movement and
process time (Easton, Wild, Halsey, and McAnally, 2013).
Figure 2
The third indicator, Inventory Turnover, shows how many times a company’s inventory
can be sold and replaced over a period of time. It can be calculated two ways, first by dividing
sales by inventory and second by dividing cost of goods sold by the average inventory. This
indicator was used due to the fact that it is related to inventory turnover. JIT’s goal is to increase
the speed and efficiency at which the products are manufactured. Therefore a high inventory
turnover shows that a company can turnover its inventory quickly in a given period. This
indicator is also highly dependent upon the sales figures for that particular period. Toyota in this
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case has been consistent in their inventory turnover which suggests that they have forecasted the
demand of their vehicles accurately (Easton, Wild, Halsey, and McAnally, 2013).
Figure 3
The fourth and final indicator used was Gross Profit Margin. This indicator is linked
with JIT closely because it takes into account the cost required to manufacture the vehicles. It is
calculated using the following equation: [( Revenue – COGS ) / Revenue ] * 100. JIT’s
primary, if not most important, focus is to eliminate waste which should dramatically reduce the
cost of goods. Reducing the cost of goods allows a company to keep more of the revenue and
recognize larger profits. Gross Profit Margin can be described as the percentage of sales which
go into the cost of goods required for manufacturing. This chart illustrates how Toyota has been
able to use JIT to their advantage in maximizing their profits. In 2006 Toyota had 35% more
gross profit margins than Ford. Throughout the last 10 years Toyota has positioned itself has the
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leader in Gross Profit Margins which means Toyota has been more profitable than GM and Ford
(Easton, Wild, Halsey, and McAnally, 2013).
Figure 4
Other indicators such as Current Ratio, Quick Ratio, Return on Assets, Return on Equity
and Basic Earning Power were considered during the research. The goal with this research was
to find indicators that were closely tied to manufacturing aspects affected by JIT. The indicators
not used in this paper are general financial indicators. These general financial indicators take
into account more of the company’s overall operations (Easton, Wild, Halsey, and McAnally,
2013).
Implementation and Effects of JIT in Toyota
The Just in Time (JIT) concept in production strategy is simple to grasp even though the
actual implementation of JIT can be complex, requiring strong commitment from top
management with high initial cost and without guarantees of success. However, successful
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Year End 10-K Data
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implementation of JIT can yield productivity and efficiency benefits within the manufacturing
process resulting in cost savings and quality improvements. For instance, Japanese car
manufacturer Toyota introduced JIT in the 1970s and many companies strived to imitate and
replicate the same system (Steele, 2001). While Toyota was able to enjoy economic success after
implementation of the new production strategy, not all companies were able to enjoy the full
benefits like Toyota did due to previously unforeseen obstacles and challenges nascent within
JIT. Therefore, there are more factors to consider and changes that need to be made than
previously thought to successfully path the way for JIT implementation.
For one, there are physical changes in the factory that need to be altered when
implementing JIT. The critical difference between a traditional manufacturing plant and a JIT
manufacturing plant is that machinery are product oriented rather than function oriented (AIDT,
2006). At Toyota, the typical linear subassembly line that is used in many manufacturing
companies such as Ford was converted into U-shaped subassembly cells. In order to level the
demand on their supplier, Toyota also had to alter its final assembly line to a mixed model final
assembly system and redesigned the job shop into manufacturing cells (Black, 2007). Basically,
the layout of the plant needs to be changed to best fit JIT implementation. U-shaped assembly
lines allow workers to quickly drop off materials and pick up finished work. Machines would
need to be rearranged in a sequence that best suit the work flow. The U-shaped assembly lines
also demand one worker to be responsible for several work process in a work cell who is able to
perform multi-machine handling (Aghazadeh, 2004). The U-shaped cells take up less floor
space and place operators closer together and allow flexibility in the crew size depending on
demand. Also, defective supplies or deficiency in quality can be identified easily by this process
since operators are working with smaller batch sizes and can oversee the entire process of

creating the products. This leads to quality improvements by being able to identify root causes of
problems.
JIT implementation requires a change from traditional purchasing practices to logistical
coordination between buyers and suppliers (Dion, 1992). Since JIT is a system that runs on “as
needed” supplies, it relies on a supply chain that is in constant coordination with the supplier to
ensure that materials will be delivered at the right time. This results in operational changes from
bulk deliveries to smaller, more frequent deliveries. In other words, there will be higher
inventory turn. Furthermore, suppliers need to ensure that the products they deliver are damage
free since it is being used up at the time of delivery and there will not be any buffer stock
immediately available. The supplier therefore carries more responsibility in quality control
inspections instead of the buyer. It was reported that there was a 40% reduction in damaged
products and 20% reduction in complaints in an interview with managers in 40 firms who
adopted JIT (Dion, 1992).
Inevitably a change in purchasing practices will also have an effect in manufacturer and
supplier relationship. The first noticeable change is that there will be a stronger dependence on
smaller number of suppliers which results in higher dependence on the latter. This means that the
buyer will focus more on investigating and be more selective in choosing suppliers that are more
reliable and consistent. Also, both the buyer and supplier will have a stronger commitment since
coordination of supply deliveries will have to stick tightly to the required schedule. Suppliers for
JIT manufacturing companies must also be a willing party to alter its traditional relationship with
their buyers. They need to make adjustment to current practices to meet the special needs of the
buyers in terms of increasing reliability, quality, flexibility and stability etc. (Golhar, 1993).
Therefore, the efficiency of JIT requires the support and coordination with suppliers. Toyota’s

strategy is to educate its suppliers in JIT because the latter will be a part of Toyota’s customer’s
operations and therefore will take ownership of the responsibility to the customers during its
partnership (Steele, 2001).
Technology can also be adopted to facilitate free flow of information sharing between the
buyer and supplier (Bandyopadhyay, 1995). An example is the use of Kanban cards in Toyota’s
assembly plants in Georgetown, Kentucky which signal to suppliers the next lot of parts are
needed. Kanban is a Japanese word meaning signboard or billboard. It is a signal to replace what
has been used. Toyota’s assembly plants in Georgetown has 80% of its suppliers located within a
200 miles radius which allows it to develop a distribution network known as a milk run. This
allows Toyota to receive parts on a JIT basis (Steele, 2001). However, suppliers do not need to
be within a certain proximity for the success and low cost of JIT implementation. In the study of
130 companies, it was concluded that communication and information links are more reliable
predictors of success than geographical location of suppliers. There was a strong positive
correlation between greater geographical distance and success of JIT. Therefore it was concluded
that there must be a smart investment in communication and informational technology (Wafa,
1996).
Toyota also used Kanban for shop floor control at its manufacturing unit in California.
The function of the Kanban system is that it provides signal for the next pickup or transport
information and prevents over production and excessive transport. Kanban also provide
production information and serves as a work order attached to goods. Most importantly, it expose
existing problems and maintains inventory control (Ramnath, 2009). The Kanban calculation is
important as it will help prevent overproduction and stock-outs by controlling timing and
quantity.

The ideal number of Kanban cards can be calculated using the formula below,
N = DT (1 + X)/C
where,
N = Total number of containers (1 card per container)
D = Number of demands per day
T = Average waiting time for replenishment of parts plus average production time for a
container of parts
X = Policy variable set by the management that reflects possible inefficiency in the
system
C = Capacity of a standard container
The physical and inter-business relationship factors in the implementation of JIT is an
important contribution to its success, however human factors determine the success or failure of
the implementation. The biggest concern on JIT implementation is the human aspect as it is
something management have less direct control over. The first step is to have strong commitment
from top management who have the ability to lead and guide workers to believe that JIT is the
right direction to go. Eiji Toyoda and Taichi Ohno who pioneered the concept of JIT, were able
to achieve success in their idea because they were both strong leaders who can influence and
shape workers to believe in the system. In a case study done by Gupta in 2000, he identified 4
pillars of JIT “Humanware”, namely education and training, a cooperative environment, rewards
and incentives, and open communication with worker involvement. The case study emphasizes
that “Humanware” is the critical function why an organization can operate as it should assuming
it has the right physical and software aspect of the manufacturing process. The method Toyota

pioneered (The Toyota Way) is now an adopted culture that supports JIT systems which
encourages, supports and demands employee participation.
The human factor is an important driving force behind the successful implementation of
JIT. As mentioned earlier, JIT manufacturing processes contains a cultural aspect that cannot be
ignored. The first step is to educate and train managers on how use JIT correctly so that they will
be in a better position to lead their workers. Training for employees must also be provided so
they understand what JIT entails and what is required of them to ensure success, while at the
same time also seeing the benefits for themselves coming from this transition (Gupta, 2000). Part
of Toyota’s method includes on-the-job training charts as well as classroom studies for their
workers. JIT also provides opportunity for workers for self-improvement by improving problem-
solving skills and also obtain more knowledge in their expertise which can in turn increase their
job security and personal satisfaction. This step proves to be the strategy many companies adopt
to secure their worker’s cooperation and commitment (Im, 1994). The second step is to provide
an environment that supports teamwork and the third is to provide rewards and incentives
programs that cater towards group activities and not individual merit. Lastly, open
communication and worker involvement is an important factor that supports the first three
factors mentioned above.
Since JIT requires the cooperation of people to ensure its success, it can be drawn that
there are behavioral implications to consider in JIT which directly affects human resource
management. A study was performed to observe changes in job classifications and number of
employees after implementing JIT in 43 companies. Results show a reduction of job
classification ranging from 17% to 80% with an average reduction of 47% and work force
reduction ranged from 14% to 30% with an average of 22% decrease (Im, 1994). The main

reason for the reduction is due to cross-training programs where employees get trained on
multiple machines and performing several functions.
In the long run, the success of implementing JIT is a continuous process that relies on top
management commitment to employee involvement and back to top management commitment
(Bandyopadhyay, 1995). A company who wishes to adopt and implement JIT must be willing to
give up traditional concepts and be open minded to new concepts and commit to continuous
improvement of the process. Most importantly, major focus must be placed on employees in
order to tap into JIT’s full potential. It was found in an empirical study that organizations do not
achieve high levels of JIT flow and high levels of JIT quality without obtaining a high level of
employee involvement (McLachlin, 1997). A successfully implemented JIT system should be
one which produces products customers want at their desired time and where products are of
perfect quality. Additionally, the system should produce instantly with zero unnecessary lead
time, with no waste of labor, material, equipment and idle inventory (AIDT, 2006). The success
must also be measured with having highly motivated and multi-skilled workers who live out the
culture of JIT, who are professionally challenged and are committed to the continuous
improvement of the JIT system.
Benefits of JIT manufacturing of Toyota
The benefits of JIT manufacturing are very impressive. Because of this many companies rush to
adopt the JIT without knowing the actual concept of JIT and the potential risk that are involved.
As a result most of the companies do not enjoy its benefits because they lack to implement the
culture necessary for the JIT to succeed. A major aspect of JIT manufacturing is its view of
inventory. JIT manufacturing of Toyota views inventory as a waste that needs to be eliminated.
Inventory is carried to cover up a wide variety of problems like Machine Breakdowns, Poor

Vendors, Poor Design, Poor Quality, Long Setups and Insufficient Layout. Reduction in the
inventory level leads to the identification of all the above mentioned problems (Reid, R. D. &
Sanders, N. R.). Inventory reduction also leads to faster replacement of products in the inventory
and hence the inventory turns are increased. Reduction of waste or scrap is also the important
benefit of the inventory reduction. As there is reduction in inventory there is the overall
reduction in the purchasing lot size and the amount of raw materials required are also reduced to
a certain extent.
Another important benefit of the JIT manufacturing that Toyota enjoys is the improved
quality of the products. Major focus of Toyota is the relation of customers with the company.
The company believes that quality of the products is closely related to customer requirements.
Toyota aims at providing the optimum quality of products in order to satisfy each and every
customer requirements. After the improvement of the quality of products the company
experienced an increased customer relations and has also enjoyed the competitive advantage over
other companies (Reid, R. D. & Sanders, N. R.).
One of the important aspect of JIT manufacturing of Toyota is the optimization of space
requirements. The company designs the assembly line in a way the increases the utilization and
efficiency of the machines. Optimizing space requirements also leads to the flexibility among
different parts of assembly line. Flexibility helps workers to switch places within different places
in assembly line without wasting time (Conrad, B.). An important feature the Toyota
implemented under JIT is the use of Andon Cord. With the Andon cord any worker that finds
any kind of defect in the product can stop the assembly line without going through the chain of
procedure to stop the assembly line. This actually saves a lot of time and cost that the company
would have suffered if it had used standard procedure (Skipsey, C. 2014). Optimizing space

requirements reduces the space required for the establishment factory for the assembly line. This
leads to huge investment savings.
JIT manufacturing also aims at the workforce improvements. Toyota believes that work
environment is very important in improving work force. Simplicity and order are considered
highly important. According to JIT, a simple and orderly environment creates a calm, clear mind
and encourages respect for workplace. Clean and orderly work place makes it easy to identify
anything that is out of order (Dr. Singh, S. & Dr. Garg, D. 2011). This helps in improving the
efficiency or workers. Toyota provides rigorous training to workers in order to minimize delays
and maximize output. Training provided to the workers focuses mainly on increasing the
flexibility of the workers so that they can switch between jobs easily and efficiently. This
prevents workers from mental and physical fatigue and workers gradually start enjoying job
resulting in the improvement of efficiency. Various forms of incentives are also provided to
motivate workers. Toyota, as a part of JIT program has divided its administration in the well
defined categories among different departments in order to increase administrative efficiency and
encourage team work (Nayab, N. 2013).
The most important benefit that JIT provides is the overall reduction in the production
cost. Toyota enjoys 16% gross profit margin because of reducing the cost price of the product
(Stock Analysis On Net 2014). JIT also reduces production lead time. As a result customers are
highly satisfied because they have to wait for reasonably less amount of time to receive their
product. All the improvements that the company incorporated as the part of JIT manufacturing
satisfies the ultimate aim of increasing the productivity.
Toyota manufacturing unit in California reported reduction in Raw Materials (RM)
inventory (21%), Work In Process (WIP) (45%), reduction in warehousing cost (30%), reduction

in forklift trucks (30%), reduction in presses (30%), reduction in labor (20%) and increase in
production volume (40%) (Ramnath, 2009).
Problems Of Implementing JIT in Toyota
As mentioned earlier in the previous chapters, a company that wishes to incorporate this
system must redesign its total settings for it to work, it is not possible to just inject certain
aspects of JIT into the current setting and expect it to flourish. In a scenario where there is a
successful implementation, the companies must go beyond its own setting and inspect its supply
chain to ensure continuous improvement (Minahan, 1998).
For managers, that can be a daunting task, but it may be where the true cost drivers in JIT
reside. Managers must tackle issues such as product delivery logistics, purchasing
communications, and any other unforeseen problems that might arise, but not even the most
thorough managers can plan for disastrous failures in the system, such as destruction of a
contractor's manufacturing facility by fire or unforeseen strike action by union workers.
Implementation
Administrative costs to implement these changes can be high. One article reported that all
suppliers in its study said the administrative burden had increased. However, some firms
managed to use existing resources to meet the challenge so that no extra charges were incurred;
others reported having extra costs.
One fundamental thing about JIT is that when suppliers implement it, they actually are
becoming a part of their customer's operations. Toyota feels the key to using JIT successfully is
educating its vendors. The company believes that when it creates the partnership with its
vendors, the vendors take ownership of the responsibility to Toyota's customers. David Hannah,
president and CEO of the Reliance Steel and Aluminum metal service center, feels it is vital to

the success of a JIT supply chain that all participants learn more about the entire industry supply
chain. He says that distributors in all industries need to learn more about the customer's
customer, how they need to change their operations to meet those needs, and how
vendors/suppliers are going to help them do that. JIT cannot be viewed as an isolated supplier-
customer relationship. The link must cover the entire industry supply chain (Stundza, 1999).
Product Delivery Logistics
Product delivery logistics is another factor critical to the success of JIT manufacturing.
The timing of shipments and supplies can make or break a company using the Just-In-Time
system. Close attention must be paid to this issue to avoid production delays and ensure it do not
lead to obsolete products and lost sales, both can be very expensive for the organization. There
appear to be two separate schools of thought regarding the proximity of vendors to
manufacturers, each carrying its own drawbacks and advantages.
Toyota believes it is vital for a company using JIT to pull as much material and
subassemblies from suppliers as close to its assembly plants as possible. For example, North
American suppliers provide 80% of the parts, materials, and assemblies used by Toyota's
Georgetown, Kentucky plant. Most suppliers are located within 200 miles of the plant. This
localized supply base makes it easy for Toyota to develop a closed-loop distribution network
known as a milk run. The milk runs allow Toyota to receive parts on a JIT basis.
Johnson Controls Inc. (JCI) is a producer of seat assemblies, headliners, and instrument
panels for the automobile industry. It was a supplier to New United Motor Manufacturing Inc.
(NUMMI), a joint venture between Toyota and General Motors. JCI subscribes to the proximity
theory of suppliers to customers. JCI maintains that its costs and, more important, its response
times, can be trimmed because it is located only 35 miles from NUMMI. Its lead times could be

even shorter if it did not build in buffers for unseen delays, specifically California traffic
(Minahan, 1998).
Although some customers prefer to have their suppliers near them, it does not appear to
be highly linked with low costs or success with JIT. Analysts examined 130 companies and
found that supplier certification programs and the existence of communication/information links
are much more reliable predictors of success with JIT than the geographical location of suppliers.
The study actually found that longer distances between supplier and customer were positively
correlated with increased success with JIT. It was concluded that an increased level of
communication was required to compensate for the long distances between supplier and
customer. The recommendation was made that companies interested in implementing or
improving JIT systems performance should invest in communication and information
technologies rather than pull suppliers closer to them.
For those companies engaged in an international supplier-customer relationship, border crossings
and customs clearance can be an added challenge. They can create delays in transportation and
increase uncertainty in the JIT supply chain (Yasin and Wafa, 1996).
Purchasing and Communication
Purchasing and communication between the supplier and customer in a JIT environment
require a large investment. The supplier must not only make the investment in information
technology but must take the time to truly learn about the client's business.
To aid in this, a new technique called JIT II was introduced. JIT II empowers the supplier within
the customer's organization (Henricks, 1997). JIT II is an arrangement that allows a supplier, at
its own expense, to place representatives in the customer's organization. Generally, the
representative is placed at the customer's site full time and the responsibility is to monitor the

buyer's inventory and keeping it replaced. This results in bottom line enhancement for both
parties. Also, electronic data interchange (EDI) systems, which is used by most manufacturers,
can eliminate the need for a supplier representative at the customer's site. A system of
information exchange for orders can be created and monitored by the customer's own employees
or by the supplier's representative (Ninneman, 1997).
Unexpected Events
Some of the purchasing strategies explored in the previous section were less than ideal
for a supplier in the JIT supply chain. Suppliers warehousing steel for an automotive customer at
its own expense leads many to say that inventory is not eliminated or reduced but simply pushed
up the supply chain. Many of the supply chain customers want these buffers to protect against
unforeseen problems. Two situations in recent memory have reinforced the behavior.
The JIT method that includes larger than normal inventory buffers is sometimes called JIC, or
just in case production. JIC is identical to JIT, but subscribes to the belief that bad things
sometimes happen to good companies. It is thought that at some point lean inventory levels will
be erased because of an unforeseen catastrophe.
An example of such incident was the earthquake that occurred in Japan in 2012. Toyota
produces more than 50% of its vehicles in Japan. In fiscal year 2009, ended March 31 2010,
Toyota produced more than 60% of its vehicles in Japan, as Japan accounted for a little over 25%
of its global vehicle sales. Almost two thirds of Toyota’s suppliers from northeastern Japan have
not yet recovered from the disaster, and this will put pressure on Toyota’s manufacturing
capacity. The damage to Japanese sea ports could hurt, in the short-term, Toyota’s vehicle
exports as well as the supply of Japanese automotive parts to Toyota’s other international
automobile manufacturing facilities (Trefis, 2011).

Demand Forecasting
In the purest form of JIT production, a demand forecast is not required. However, many
hybrid production systems exist, and some suppliers feel it is wise to use forecasts from
customers to pace their system in order not to incur massive losses. In this case suppliers depend
on the customer to provide them with accurate and timely demand forecasts. Uneven and
unpredictable demand means that suppliers must resort to holding more inventories of raw
materials and finished goods. That is the case for suppliers who use a build-to-order system
(Porter, 1997). The accurate information is vital to the success of JIT in some manufacturing
companies.
Total Quality Management
No discussion of JIT production would be complete without considering TQM. It is the
only component of JIT that can stand alone as its own concept. One of the main fundamental
concepts of TQM is empowerment of the employee. Many people point out that this can be a
major problem. It is emphasized that TQM will work only if employees truly care about their
jobs. Because quality control must be delegated to the lowest possible position, shop floor
workers and office workers are responsible for their own quality control. In theory, final
inspections are not needed nor are inspectors. If a problem occurs or a trend is identified that
may lead to quality problems, employees have the right to stop the process and correct the
problem. Quality can be guaranteed only if everyone is fully committed and trusted.
In TQM, self-direction needs to be shown by the employees without the managers being
present. This requires a degree of trust. In other words, this ownership cannot be imposed from

above. If it is, then what you have is employees being "forced to be free". Lack of employee
commitment, therefore, ensures that the system will fail miserably.
Overall, TQM is a vital part of a JIT production system. It ensures that quality parts will
be produced in the JIT supply chain. JIT production methods attribute the improved quality of
incoming materials to the implementation of TQM and statistical quality control on the supplier's
side.
Continuous Improvement of the JIT System
This is a concept closely tied to TQM. As discussed in earlier chapters, JIT production
system to improve, employees must be responsible for the change. More often than not, the
“most obvious and easiest to correct” problems give organizations the largest return on their
investment. These problems are mostly on costs related to the factory layout and supply
delivery/purchase.
After the first step of continuous improvement is carried out, the companies identify more
problems in the system. Instead of fixing it this time around, the companies consider the
financial justification for the change they are planning on making. Improving the process or the
product is no longer the issue; the issue becomes whether or not it is sensible from a return on
investment perspective to develop the current system. This mentality may keep companies from
improving the JIT production system.
Conclusion
A business is only validated through profits because without profits the company will eventually
bankrupt. Toyota has taken Henry Ford's assembly line idea to the next level by drastically
improving efficiency. Toyota's financial performance is proof that the JIT system is a viable
manufacturing control system.

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