Page 3: Just-in-time and lean production
Just-In-Time (JIT) is a very simple idea but one that is essential in modern supply chain management. JIT sets out to cut costs by reducing the amount of goods and materials a firm holds in stock. JIT involves:
- producing and delivering finished goods ‘just in time’ to be sold
- partly finished goods ‘just in time’ to be assembled into finished goods
- parts ‘just in time’ to go into partly finished goods
- materials ‘just in time’ to be made into parts.
The principle that underpins JIT is that production should be ‘pulled through’ rather than ‘pushed through’. This means that production should be for specific customer orders, so that the production cycle starts only once a customer has placed an order with the producer. Stocks are delivered when they are needed. Consequently, this approach requires much more frequent delivery of stocks. Developing a JIT approach requires sophisticated planning and considerable experience in this field. This is why leading companies contract out their supply chain management to a specialist company like Exel with considerable experience of this area.
Just-In-Time is the key element in what is termed lean production. Lean production is a philosophy and a way of working involving eliminating all forms of waste (where waste is defined as anything that does not add value in the production process and supply chain).
The idea behind lean production stems from Japan where for many years supply chain managers have been seeking to eliminate ‘muda’ ie any activity which involves wasted effort, materials and time. Exel is particularly effective in ensuring lean production because it is able to reduce ‘muda’ at every stage in the supply chain from designing efficient warehousing systems, to sophisticated tracking methods in freight forwarding, developing e-commerce links, and cutting out any wasteful processes at any stage of distribution.
A further advantage of JIT is the benefit derived from eliminating lineside storage of parts and the associated “clutter” which inhibits efficient movements to/from the production line. By reducing the storage of parts at the production line, a manufacturer is often able to increase the speed of the production line and produce more cars with the same number of resources, lowering the overall unit cost of production.
Helping Volkswagen to transfer its JIT system from Spain to Mexico
One of the best examples of modern supply chain management is in motor vehicle manufacturing. Modern cars are an example of global products containing research and design features which involve the collaboration of many people from many nations. The components that go into the final assembly are likely to be produced in many separate locations and involve a range of assembly and sub-assembly activities.
For young people one of the most exciting new cars is the new VW Beetle. Traditionally a German product, a lot of VW models are produced today in North and South America, taking advantage of a pool of skilled labour in countries like Mexico and Brazil – and with ready access to the lucrative United States market.