Just in Time

It is time I wrote this post. Having completed two terms (out of a total 5 terms) here at PGPX, if I have to write about one learning that made the biggest impact on me, then it would definitely be about the concept of ‘Just in Time – JIT‘ production process as evolved at Toyota’s ‘Toyota Production System – TPS‘.

My learning was via a 20 page case, a two hour lecture, a four hour group discussion and days spent contemplating about this concept. In spite of the realization that I cannot make justice via this blog I record my thoughts via this post. If this blog introduces you to the JIT concept and creates an interest, then my goal is accomplished! If it provokes you to gather further knowledge, then I am delighted!!

Few properties of the TPS:

Produce only what is needed, only how much is needed and only when it is needed. For example, once the frame for a particular type of car gets painted and starts its journey in the assembly line, only then the seat manufacturer starts manufacturing the seat for this car. The requirements for the seat depends on the model and the variations required (Camry itself had 23 models, 11 external colors, 24 internal variations and 30 options). The car frame takes around 6 hours to reach the post in the assembly line where the seat will need to be fit. Hence within this 6 hours, the seat manufacturer makes and transports the lot (seats for 58 cars make a lot) to the Toyota factory. The assembly line worker at Toyota has the power to stop the assembly line if the seat waiting does not match the seat needed for the particular car standing before him!! One worker stopping the line can cause a ripple effect and can stop the whole line!! There is hardly enough space to hold one lot of seats and hence there are multiple deliveries per day.

The assembly line does not produce the same product continuously. There will be a mix of products as per how the market demands it.

The whole assembly line works as a Pull system. Once the the last guy in the assembly line gets the car ready and sends it to the parking lot, the last-but-one-guy in the assembly line finishes his job and sends the car one post down the line. Thus the car gets pulled from the end of the assembly line rather than getting pushed from the start of the assembly line.

These are just few of the properties that I have highlighted in order to convey the following learnings that got etched into my hard disk:

i) The objective of JIT is to make the problem self evident by having a small inventory and by NOT having a backup option. A big inventory or a huge buffer can give you the results and keep you running, but you are wasting precious working capital in trying to maintain the buffer. When you try to work with ‘just in time’ supply of resources, the quality issues will be visible to everyone immediately and that will lead to resolution of those issues. Do not try to hide the quality issues by having a big system or a big inventory or an infinite supply of resources/people.

ii) The Pull system ensures that there is no overproduction (if there is no demand by the market) and hence no tie up of capital on products that are not needed. The production team does not produce a whole lot of models just because it is efficient usage of the assembly line (In normal assembly lines such a method is employed and when it happens, it is the responsibility of the marketing team to ‘somehow’ sell the overflowing inventory).

iii) A even balance of the product mix ensures that your suppliers have even demand. For instance if 25% of your cars need moon-roof and if you decide to produce all such cars in a stretch of 5 days (in a 20 day work month) then the moon roof parts supplier is going to have peak demand only on those 5 days and will be idle for the rest 15 days. If he tries to spread the demand across the month then you deviate from JIT and hence either you or your supplier waste capital in storing the moon roof parts. The intention is to have ‘low-cost suppliers’ and not ‘low-price suppliers’. So it is in your interest (as a consumer) to ensure that your supplier is able to keep his cost low. If not, eventually he is going to jack up his quote and either your profit goes down or you have to pass the extra cost to your customers.

iii) Empower your workforce so that they do not need to go via a hierarchy when they see quality issues, and they can take immediate action – even if it means stoppage of the production line and loss to the organization.

“Those who are not dissatisfied will never make any progress” – said Shigeo Shingo who is a leading expert on TPS. The JIT and the TPS are systems which are designed to fail. Fail so that you can resolve the failure and deliver further value to your customer. If it stops failing then reduce the threshold for failure so that the next weak link will fail, that failure will become self evident and you get a chance to fix it and further improve the value delivered to the customer.