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Efficiency and Accuracy

Just-in-time (JIT) manufacturing, involves a production process that operates

solely on customer demand. In traditional manufacturing, goods are produced,

assembled and stored based on a companys estimate of market demand. In JIT

manufacturing, the production process begins at the time an order for goods is

received.

As we know the definition of Just In Time is an inventory strategy companies

employ to increase efficiency and decrease waste by receiving goods only as they

are needed in the production process, thereby reducing inventory costs. This method

requires that producers are able to accurately forecast demand. Especially in a car

manufacturer that operates with very low inventory levels, relying on their supply

chain to deliver the parts they need to build cars. The parts needed to manufacture

the cars do not arrive before nor after they are needed, rather do they arrive just as

they are needed. This inventory supply system represents a shift away from the

older "just in case" strategy where producers carried large inventories in case higher

demand had to be met.

JIT manufacturing reduces company inventory costs because inventory isacquired upon customer demand. This relieves the financial burden of stocking

inventory for future use, reduces the need for expansive storage solutions, and

reduces the risk of maintaining stock that expires or becomes out-dated.

The notion of JIT production was described by Taiichi Ohno, the godfather of

Toyota production system, as All we are doing at the time line fromthe moment the

customer gives us an order to the point when we collect the cash, and we are

reducing that time line by removing the nonvalue-added wastes (Liker, 2004).

Nonvalue-added here means that we should take care of the costs that involved in

the manufactured car. The company has to do and estimate an accurate cost in

producing car. That why all of car Manufacture Company applied value engineering

technique to align target cost and perceive value. Value engineering is the

systematic, interdisciplinary examination of factors effecting costs to devise a means

of achieving cost, quality and functionality at the target cost.

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Others, there are also able to accurately forecast demand of the product

which is the market demand. Relating to the cases in Mercedes Benz M-Class they

are also has doing the function groups contribute the most important categories. This

is meant the company also doing research the need of customer towards their

products. Therefore, they will know what kind of part in car that most important and

they can prepare all the materials before, after or during the processing in making

car. With make an accurately estimate the costs involves in manufactures car it will

make the process of the manufacture car become more efficient. As the result

company can produce a high quality of car.

Therefore, as the definition in first paragraph Just in In Time is more refer to

the management of inventory. In manufacturing we know that the most importance

thing is the management of inventory this is because Just In Time are used to make

the production with the effective costs. To have an effective cost we need to make

sure the inventory needed for the production with manage the inventory well, where

the management should know when the need of the inventory supply.

Kaplan and Atkinson (1989) revealed that the JIT philosophy revolves around

four major points: the elimination of activities that do not add value to a product 26

PAMIJ 12, 2 2007 or service; a commitment to a high level of quality; a commitment

to continuous improvement in the efficiency of an activity; and an emphasis on

simplification and increased visibility to identify activities that do not add value.

Furthermore, JIT manufacturing allows companies to utilize cash for other operating

expenses because the necessity of maintaining stored inventory levels is eliminated.

The benefit of not restricting cash flow to inventory allocations increases efficiency

reduces capital expenditures and secures a competitive advantage for the business.

Besides that, under current costing systems, fixed overhead recovery is

based on machine or direct labor hours. This allocation encourages the company to

produce as much as possible in order to recover all of its overhead. Also,

manufacturing plants tend to organize production processes into cost centers. These

cost centers strive to increase their own production goals, and they are not

concerned if defective items are passed on to other departments. Both of these

factors go against JIT goals. JIT systems also attempt to simplify accounting

procedures.

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A negative aspect to JIT manufacturing is the stress on-demand production

places on equipment. Under normal operating conditions, machines are used

systematically and controlled to operate with set production requirements. This

allows mechanics and operators regular time to perform system checks and repair

any deficiencies in the equipment. JIT manufacturing does not present an

opportunity for routine equipment processes, as it is often impossible to predict when

orders will be demanded and the quantity of items that must be produced.

Then, in reducing the costs involved the company should maximize space.

The time employees spend walking from one area to another every day decreases

the efficiency levels of the manufacturing process. Cut back on the amount of steps

your employees take each day by putting commonly used equipment and machines

closer together or reorganizing the job functions of the employees.

JIT was highly needed especially in the automotive industry thats why Toyota

was the first company to use it. In order to have an efficient production system in the

automotive industry, there were many issues that needed to be solved. The main

problem was that the automotive industry is a typical mass production assembly type

where each vehicle is assembled from several thousand parts that have undergone

numerous processes. On the other hand, it can easily fall into the condition of having

excessive equipment and surplus of workers, which is not conformable to Toyotas'

recognition. In order to avoid such problems as inventory unbalance and surplus

equipment and workers, Toyota recognized necessity of schemes adjustable to

conform to changes due to troubles and demand fluctuations.