FACULTY OF MANAGEMENT & IT BB209
OPERATIONS MANAGEMENT MAY-AUGUST 2011
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SUBJECT NAME: Operations Managemen
SUBJECT CODE: BB209
LECTURER: Mr. Ho Min Yoong| DEADLINE : 20TH JULY 2011
TOPIC: Just in Time
TITLE: Benefits and Challenges that Organizations face in implementing just in time system.
STUDENT ID 1000820502
STUDENT NAME Sari Burhan Al Hasan
I certified that this is my own work, completed in accordance with University and School’s regulations on plagiarism and fair practice.
STUDENT’S SIGNATURE SUBMISSION DATE 20th July 2011
Assignment on operation management Topic: Just in Time
Title: Benefits and Challenges that Organizations face in implementing just in time system
i. The objective of this study is concerned with identifying some of the benefit and challenges that an organisation may find in implementing just in time system.
ii. To fulfil the requirement of this module, Introduction to operation management
iii. To gain extra knowledge on operation management in logistics industries that will help me now and in the future. Scope The first step concerns of explaining the benefits that the company get from implementing just in time systems, such as the reduction of inventory cost, save time and increases job satisfaction. Secondly try to examine on the other hand the challenges that a firm may face in the process of implementing just in time system in the company such as initial cost, and demand fluctuations. Introduction
Just in Time is a system or strategy that is used to improve business by reducing inventory and carrying costs of goods. In today’s competitive business environment, quality is not the only thing that matters for the customers, but high quality at minimum costs is what customer demands. Normally, for the company to decrease cost, the company needs to use just in time system. For example, Toyota Motors Corporation, annual sales over 9 million trucks and cars is the largest vehicle manufacturer in the world.
Two techniques, just in time and the Toyota production system have been instrumental in this growth. Toyota with wide range of vehicles compete head to head with successful long established companies in Europe and in the US One of the primary objectives of just in time is to eliminate all manufacturing waste by getting the right quantity of row material to produce the right quantity without any extra or shortage, in this way the company might save cost and time and minimize any chance of manufacturing mistakes.
Just-in-time is originally a Japanese concept that aims at minimizing inventory level of the company in order to cut cost of storing row materials or finished goods, such inventory can cause the revenue of the company to decrease. So just in time concept concerns about getting the inputs just when the company needs it. This saves the company from the expenses of maintaining the inventory level. Recently, the usage of just in time system has become widespread because of the advantages concerning production and manufacturing which helps companies to improve and cut cost at the same time.
I. The benefits of implementing Just in Time The main benefits of just in time manufacturing system are the followings:
1. Time savings
It has been said that in today’s business environment that time is money. So using efficient time can become a competitive strategy. Just in time system helps the firm to reduce the cycle time of manufacturing and administrative process. In using Just in Time, companies can respond faster to customers and reduce waiting customer time. So companies can become more flexible in dealing with marketplace changes.
Just in Time has many objectives or aims to improve productivity such as time savings. Just in Time aims is to reduce waste, because when waste and defect are reduced then the company can save time of reproducing the same product again. So just in time helps the firms to improve quality of product. One of the best qualities of just in time includes the elimination of production Defect, because when the product are only produced according to customer demand, then there will be less waste and greater customer satisfaction.
2. Reduces costs
One of the best benefits of Just In Time include the minimization of storage costs because of the non pre-production process before order, which means that the company wait the order to be received before starting the process of production. And secondly, the company which uses just in time only purchase that materials or components which the firms needs to proceed in producing the current order without purchasing extra row materials for the future production, in order to minimize the amount of money tied up in stock.
The best thing with just in time is that good are not over produced without customer requirement. So when goods are over produced, then goods need to be transported to a storage facility and then stored until customer order them which is extra cost to the company. Most of the companies have inventories to keep the stock to be able to prevent stock out which can cause the company to some customer and business lost. So when the company is using just in time system, the company can save the funds and use elsewhere such investing to enlarge the business or keep the fund to use in later time investment.
In addition, some of the areas that the company was using to store inventories can be used for other more productive uses such renting to others companies. And also Just in Time appeals to many companies because it helps prevent manufacturers from being stuck with inventory that may become obsolete.
3. Competitive advantage
Now a day, competitive advantage is the only means to stay in business and survive the market competition. In terms of competitive advantages, the Just in time system helps the company to become more flexible in term of business by reacting quickly to markets demands and changes.
And also just in time allow the company to better understand and deal with the customers by communicating with the customers, such as waiting customers orders to produce that which the customers prefers and wants. In addition, just in time might be a way to strengthen customer’s relation and loyalty. Just in Time makes production operations more efficient, cost effective and customer responsive
4. Improved job satisfaction Generally, when employees are satisfied with the job, then employee can be more productive and perform better.
So just in time can also help employees to become more satisfied with the job by increasing employee’s skills, and raises employees’ morale and helps reduce staff turnover. In terms of skills, employees who are working under Just in Time system are multifunctional and are required to perform different tasks to maximize workers skills and minimize any mistakes. Workers are therefore kept motivated by the goals, targets and even reward systems that may be in place to ensure that employees continuously strive to effect improvement in all aspects of their work. II. Challenges of implementing just in time . Implementation challenges Just in Time has many strong points, but it has also some weakness. Some of the weakness consists of implementing just in time in the organisation, because it is very costly to change the business from a traditional stocking business to one that uses just in time. In addition the process of changing the procedure of traditional stocking business can result some business disruption and losses. Actually, implementing just in time involves large initial cost with no short terms returns or profits, but the benefit can be seen in long term.
1. Stock out
The second challenges consist of the supply chain of the company, which means that when the company do not have any stock of backup, then any small disruption of the supply might cause the company to face serious problem including stock out which can result the whole process of manufacturing to shutdown because of non supply.
2. Demand fluctuations
Normally, market experience seasonal demand fluctuations as well as fluctuations due to demand from unforeseen events. So companies using Just in time delivery have little inventory as the holiday season approaches to meet the customers’ demands.
Relying solely on Just in Time systems would leave supply chains in shock due to the overwhelming seasonal market demand at different times of the year for seasonal products.
3. Transportation cost
Companies which uses traditional business stocking buy at once all its supply to keep in the inventory to avoid the cost of transportation, in the other hand firms which uses just in time systems buy only the supply which the firms needs to produce the current order, resulting high transportation cost in term of supply and delivery.
So Transportation cost is another major challenge in just in time system, because the firms do not have any inventory and depend only by getting the supply from the supplier whenever needed which causes the transportation cost per unit to increase. In just in time system, there is no spare finished product available to meet unexpected orders, because all products are made to meet actual orders of the customers, and that can cause customers and business lost.
And finally, the usage of just in time system in manufacturing might increase job stress because of the complexity of the job. Conclusion, In conclusion, Just in Time is another approach of improving effectiveness, competitiveness, efficiency, and flexibility of the company in order to best suit the customer’s needs. Just in Time system is a tool which can help a company to minimize its errors or mistakes of production, to meet customer’s requirement and to attain customer’s satisfactions.
With just in time system, companies also become more competitive and productive by minimizing total costs and improving product quality. Meanwhile, there are plenty of advantages of implementing Just in Time system in the company such as, reduction of cost, savings of times and raising the quality of products; whereas it has so many disadvantages concerning the implementation cost, uncertainty of successfulness and transportation cost. etc… References 1. Tutor2u, JIT advantages, 2010, http://tutor2u. net/business/production/just-in-time. html 2. Inbound logistics , JIT advantages , 2010, http://www. inboundlogistics. com/articles/viewpoint/viewpoint0803. shtml 3. Wikispaces, JIT disadvantages, 2006, http://ccit205. wikispaces. com/Just-in-TimeProduction 4. Accounting for management, , JIT advantages and disadvantages, , 2009, http://www. accountingformanagement. com/just_in_time. htm 5. Business Link, disadvantages of JIT, 2010, http://www. businesslink. gov. uk/bdotg/action/layer? topicId=1074404580 6. Jay H. ; Barry R. Principles of operation management. Eighth Edition 2011