Tag Archives: JIT

The Origins of Just-In-Time

A couple weeks ago, the students in my ISAT 654 (Advanced Technology Management) class at JMU asked about where and when Just-In-Time (JIT) manufacturing actually started in the United States. Although I still can’t identify the FIRST company to adopt this approach, I was also curious about how the adoption of JIT in the US grew from the Toyota Production System (TPS).

Just-in-Time (JIT) is only one element of lean manufacturing, which is a broader philosophy that seeks to eliminate all kinds of waste in a process.  Although JIT is often considered an enterprise-wide philosophy of continuous improvement, I’d like to focus on the mechanistic aspects of JIT – that is, the development and operations of a production system that employs continuous flow and preventive maintenance. In an effectively implemented JIT production system, there is little or no inventory – which includes Work-In-Process (WIP) – and production is tightly coupled to demand.

The origin of JIT can be traced back to Henry Ford’s production line, in which he was keenly aware of the burdens of inventory. However, Ford’s production system generated large volumes of identical products created in large batches – there was no room for variety, and the system was not coupled to demand levels.

In post-war Japan, Taiichi Ohno (“Father of JIT”) adapted the system at Toyota to handle smaller batch sizes and more variety in the parts that could be used to construct assemblies. In 1952, work on their JIT system was initiated, with full deployment of the kanban pull system by 1962. This was the genesis of the Toyota Production System, an elegant (and sometimes elusive) socio-technical system for production and operations. This approach bridged the gaps between production and continuous improvement and became the basis for lean manufacturing as it is known today.

After the oil crisis in 1973, other Japanese companies started to take note of the success of Toyotaand the approach became more widely adopted. The JIT technique spread to the United States in the late 1970’s and 1980’s, but due to inconsistencies in implementation and a less mature grasp on the human and cultural elements of the Toyota Production System, western companies experienced limited success. The Machine that Changed the World by James Womack made the JIT+TPS concept more accessible to US companies in 1990, which led to the widespread adoption of lean manufacturing techniques and philosophies thereafter.

JIT is very sensitive to the external environment in which it is implemented. For a review of Polito & Watson’s excellent 2006 article that describes the key barriers to smooth JIT, read Shocks to the System: Financial Meltdown and a Fragile Supply Chain.

(P.S. Why the picture of butter? Because JIT, when implemented appropriately, is perfectly smooth and slippery and thus passes The Butter Test.)

Shocks to the System: Financial Meltdown and a Fragile Supply Chain

Just-In-Time (JIT) practices are a cornerstone of the fast-paced, 21st century globalized economy. But as the October 2008 financial meltdown has so starkly indicated, when just a few of the assumptions on which a critical system is based change, all hell can break loose. What effect could the economic crisis have on businesses that rely on JIT?

There are several scholars who have studied JIT in depth – the pros, the cons, and of course the implementation details. But one recent article stands out most, to me, as I try to gauge how the seismic shift might impact business. In 2006, Tony Polito (an Associate Professor in the Department of Marketing and Supply Chain Management at East Carolina University) published an article in the Journal of the American Academy of Business detailing the ubiquity and fragility of Just-In-Time practices. If you’re involved in a business that uses or depends on JIT, you should be aware of his conclusions – forewarned is forearmed! I’ll summarize them here to save you some time, so you can start thinking about the structural health and viability of your own business processes.

First of all, it’s important to recognize that JIT is indeed a cornerstone of business practice in the U.S. and abroad. Polito notes a 2001 survey in which 92% of manufacturers believed that JIT was critical, and a 1990 study showing that 98% of customers at that time expected “JIT treatment”. He remarks that “global corporations are mistakenly reliant on extensive supply chains that are disastrously under-buffered [by sufficient excess inventory].”

Polito calls out five “major constraints” on the JIT process:

  • Customer-Driven and Economic Conditions: “JIT savings are based on the implicit assumption that additional inventory is always available for quick delivery at the same price as old inventories.” Effective JIT also depends on capital availability, and relative stability of customer demand. In a challenged economic environment, capital is not as readily available to companies and consumers alike, and customer demand wanes.
  • Logistics: If transportation fails, so will your supply chain. This can happen not only as a result of economic turmoil, but also due to rising energy costs, labor disruptions like strikes, and catastrophic weather events like hurricanes and floods. The proposed solution is, again, to increase buffer stock.
  • Organizational Culture & Conditions: Worker-based collective decision making, trust, and decentralized control are also noted as essential ingredients for JIT. If the people doing the work don’t have the freedom to improve their own processes, the health of the JIT-based supply chain will suffer. Trust across international boundaries is also critical; foreign suppliers or recipients of product may unexpectedly change their policies to reduce risk, especially if credit is an ingredient in the business relationship.
  • Intractable Accounting & Finance Practices: After describing some specific roadblocks that disparate financial systems between supply chain partners can present, and calling out limitations based on financial accounting methods themselves, Polito recommends that improvement of processes prior to improvement of measures may help.
  • Small Supplier Difficulties: One of the criticisms of JIT is that it silently offloads costs from larger companies onto the smaller partners, and many small suppliers have implemented “JIT premiums” to offset this effect. Relaxing JIT requirements could have a positive effect on these members of your supply chain, which could also reduce your costs, so examining the pressures on your smaller suppliers is warranted in an economic downturn. There might be hidden opportunities for both sides.

What does this mean for managers? Among other things, increase long lead-time inventories, compare the costs of stockouts with the benefits of not having stockouts, re-examine the risks that your upstream and downstream partners may perceive, and assess the resilience of your smaller suppliers within an economic crisis. You might also think about resetting expectations with your customers regarding how quickly you can deliver.

Polito’s article is available on his web site at http://www.tonypolito.com/wri_jit5.pdf – I strongly encourage everyone to give it a read as it provides far more detail, and illuminating examples that are not presented here in my summary.

Polito, T. & Watson, K. (2006). Just-in-time under fire: the five major constraints upon JIT practices. Journal of the American Academy of Business, Cambridge. 9(1), March 2006, 8-13.