1) Traditional Method:
Quality: Quality has cost.
JIT: Quality is free Do things right first time. It leads to good quality an also lowers cost. TQC and total employee involvement.
2) Traditional Method:
Workers Mangers – Engineers Relationship: Managers – engineers are experts Workers execute their orders.
JIT: Workers are experts. Managers and engineers are facilitators.
3) Traditional Method:
Errors: Errors are to be eliminated by inspection.
JIT: Stepping stones to success. One must learn from them. They are not to be repeated. Closer to the concept of zero defects.
4) Traditional method:
Inventories: Always in stock to keep production process continuous.
JIT: Inventories hide out inefficiencies. Low inventories (does not necessarily mean zero-inventory). Practise. JIT selectively for big budget items and not for all items.
5) Traditional Method:
Lot size: Mass production, Large lot production:
JIT: Small lot sizes, preferably one. It means do a little bit of everything everyday. Study set-up times and reduce them. Modify some equipments.
6) Traditional methods:
Queue: Queues at work production stations lead to better machine utilization.
JIT: Against queue formation. Small lot sizes and low inventories result in small or no queues.
7) Traditional method:
Automation: Substitutes labor.
JIT: Preferred or consistency in quality.
8) Traditional methods:
Cost reduction: Tools: High machine utilization, High rate of production, labor reduction.
JIT: Tools: Accelerated flow of products to reduction in lead times.
9) Traditional method:
Lead times: Increase in delivery lead time: JIT: decreases delivery lead time.
10) Traditional methods:
Flexibility: There is flexibility to the cost of excess capacity, general purpose equipment, accumulation of inventories, and overheads.
JIT: Flexibility by reducing all lead times.
11) Traditional method:
Line and staff functions: Separated:
JIT: Line workers perform the minimum staff functions like maintenance, Job rotation.
12) Traditional method:
Labor: Retrenchment when demand falls: JIT: Relocation to other areas e.g. sub-contracting.
13) Traditional methods:
Breakdowns: Accepted as routine.
JIT: Preventive maintenance.
14) Traditional method:
Procurement: From multiple vendors.
JIT: Development of one vendor. Participation in vendor development process.
15) Traditional method:
JIT: Purchase in small lots. Supplier evaluation is stringent. Makes inspection on arrival redundant.
16) JIT: Over-specifications are avoided. Delivery time insisted upon. Minimum paper work. Packaging in small standard containers with required quantity. Simple purchase agreement.
17) Traditional method:
Implementation: Depends on attitude towards work:
JIT: Depends on attitude towards work.
Case let: Kanban system of inventory management in Japan
In this system, there is ‘just in time’ inventory arrival – the inventory arrives just a couple of hours before it is needed for production process. It is in other words zero inventory system, eliminating carrying costs altogether and making the industry highly competitive. This system was developed by Tiichi Ohno, vice president of the Toyota Motor Co. However the system which operates successfully in Japanese environment may not prove effective in other environments. This system failed miserably in General Motors, USA. The factors like the spread of vendors over vast geographical expanse, the failure of vendors to adhere to strict delivery deadlines, the transport bottlenecks affected the system’s successful implementation. In a country like India, which is a shortage economy in terms of raw material availability, power and other infrastructural inputs, this Japanese system may not be successful in JIT application.
What do you think about the implementation of Kanban in India?
How to use EOQ?
Costs are not the same; While applying EOQ, it is observed that the cost components are not same all items and all supplies. In case one order has many deliveries, the costs can be computed per delivery. But here the cost of a first order is certainly not the same as that of repeat order placed on an established vendor. One order may contain several times, thus reducing the effective number of orders. For critical items, the organization banks upon several suppliers, and so the number of orders is more. Low value items are covered by single supplier contracts and no orders are placed. Although the receiving costs may be the same, one cannot apply a uniform rate for delivery costs since inspection and testing fluctuate in either direction. In short, the ordering costs are not the same for all items and all suppliers
The inventory Holding Cost in engineering industry depends not only on value of the item but also on its weight, volume and nature.
There are special cases like impending price rise, closure of suppliers, change in import policy etc where materials are ordered in bulk (much higher than EOQ). Some vendors give frequent deliveries. Large vendors prefer to deliver goods in bulk. In pres, critically of an item overrides all other considerations.
There are instances when EOQ should not be applied. If the requirements are known but irregular, the technique of Material Requirement Planning (MRP) is issued. In such a case, flexible ordering is followed depending on the Master Production Plan.