Just in time (A level BS)
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Just in time
Just in time production occurs when firms produce products to order. Instead of producing as much as they can and building up stocks, firms only produce when they know they can actually sell the items. Similarly components and supplies are only bought in by a firm as and when they are needed.
The aim of just in time production is to reduce a firms stock levels by as much as possible. In an ideal world there would be no stocks at all. Supplies would arrive and be used to produce items that are sold immediately to the final customer. A just in time approach should provide a firm with tremendous flexibility as firms produce what is required, when it is required.
JIT production should also reduce costs. With no stocks, the firm does not have to pay for warehousing or security. The firm also avoids the opportunity cost of having money tied up in stocks.
Just in time production should help minimise wastage. If goods are produced and left to accumulate as stocks, they are likely to get damaged, to depreciate, to go out of fashion or be stolen.
Introducing a JIT system is complex and places many demands on a business.
Requirements of JIT
Excellent relationships with suppliers.
Businesses need to be able to rely on suppliers to deliver goods at precisely the right time. They cannot afford delays as this halts production. Also the goods must be perfect quality, as the manufacturer has no stocks to replace faulty supplies. A firm must be able to trust its suppliers completely.
Reliable employees
Because the business does not have many stocks at any stage of the process, the firm cannot cope with stoppages. If strikes occur, for example, the whole production process stops. JIT relies upon maintaining a good relationship between employers and employees.
A flexible workforce
To ensure that production can respond to demand, a firm needs a flexible labour force. This means that, if someone is ill, another employee must be able to cover for them or that, if demand is high in one area of the business, people can be moved around. People must change to meet the demand for different products because JIT is focused entirely on matching supply to customer orders
Introducing just in time production involves:
• Investment in machinery which is flexible and can be changed from producing one type of item to another without much delay
• Training of employees so that they have several skills and can do a variety of jobs (multi-skilling)
• Negotiation with employees so that their contracts are flexible and allow them to move around
• Building relationships with suppliers who can produce Just in Time as well.
Benefits of Just in Time
• Reduce the costs of storage as there is no need for stock.
• Increases productivity as production is always taking place when raw materials are delivered.
• There are frequent deliveries so if any raw materials are faulty, then another batch is supplied quickly.
Problems of Just in Time
Although the just in time process has many advantages, there are several disadvantages as well.
Firstly the system relies on suppliers providing parts and components at exactly the time they are needed. If this type of flexible and reliable supplier cannot be found, the system breaks down. JIT can also cause problems if the suppliers fail to deliver on time. The manufacturer has no buffer stock and so cannot produce. The system also means that the firm is vulnerable to action taken by employees. Any stoppage can be extremely expensive because production is halted completely.
Switching to Just in Time can also lead to an increase in costs because of the extra reordering. Because parts are ordered much more frequently, the firm may lose bulk discounts and will also have more administration.
Case study: JIT
Bianchi bikes are situated in Trevigio, North Italy in Milan.
They are a bike assembly plant, one of Bianchi Bikes main factory with an output of 1200 finished bikes a day.
They have relocated from Milan as there was no room there for expansion. There would be more competition, pollution, congestion and higher costs if they would have remained in Milan. They moved to Treviglio as there was a high rate of unemployment and good communication links. The council also offered the land rent free as they needed economic investment in the area. The land is a large, flat Greenfield site with room for expansion.
The factory has a component input 24 hours a day as the assembly line also operates 24hours a day. Not only does this reduce the costs of storage this enables the assembly line to be operating all the time. As bikes require a number of complex parts, if a batch of parts were faulty they would have to stop the assembly line for a short period of time, as the lead time for the next order is relatively low compared to the lead time of a normal ordering system.
However in 2000, the MD (Managing director) decided that he wanted an increase in the output of bikes and that the head of the factory was to find a suitable way to do this.
His response: to stop making wheels and to use a specialist firm to produce the wheels. The staff that were made available was then placed on the assembly line.
The wheels are made by the specialist firm ‘Fir’. As they are a specialist firm, this made lead to a higher quality products as this is the only line of products they concentrate so any money invested is invested on this product. Fir is also a small company located only 10 miles away and they are a family run business, so any problems will be dealt with quickly and efficiently. They decided to use JIT with these suppliers as they are reliable and close.
Links
http://www.businesslink.gov.uk
http://www.personal.ashland.edu/~rjacobs/m503jit.html
Contributors
Becky White, Emma North, Spring Gowling and Rhys Williams
