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Operations Management & Just-In-Time Production
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With a focus on Toyota, & the auto industry, this looks at operations management in terms of just-in-time (JIT) production. Specifically examined are managerial functions regarding design, operating, controlling, & updating production.... More...
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Paper Abstract:
With a focus on Toyota, & the auto industry, this looks at operations management in terms of just-in-time (JIT) production. Specifically examined are managerial functions regarding design, operating, controlling, & updating production.
Paper Introduction:
Operations Management and Just-In-Time Production
Introduction
Operations management is defined as the performance of the managerial activities entailed in selection, design, operating, controlling, and updating production systems (Chase & Aquilano, 1973). "Selection involves the strategic decision of choosing the process by which some good or service is to be made or performed. For example, in a steel mill that produces railway wheels, the choice may be between forging or casting the wheels. "Design" encompasses the tactical decisions involved in the creation of methods to carry out a production operation. In the steel mill, for example, such decisions would regard the form and content of jobs to be performed and the type of service and control activities
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Consequently, if a defect is found in the next workstation, the run is generally stopped immediately, which averts thepossibility of a whole large run of an item with a given defect, which ofcourse is expensive in terms of waste. The purpose is tomake the handling of small batches of auto parts and componentseconomically feasible, because more production runs are necessary.Specifically, the changing of dies in stamping equipment is facilitated byusing rollers to move them in and out of position by using simplemechanized adjustment devices to fine-tune the settings. With smaller production runs, the source of a defect and/or poorquality work is more easily identifiable. The criteria for such optimization includes parameters like cost, time,quality, productivity, and profitability. In thelatter, manufacturers and suppliers tend to have close workingrelationships, whereby deliveries and orders are closely coordinated. Cambridge, MA: ProductivityPress.Womack, J. Work-in-progress isminimized, inventory turnover increased, and buffer stocks eliminated. In the business area, companies in Japantend to cooperate closely with each other, and often are part of giantconglomerates. At the same time, this processimproves overall quality by limiting defects and scrap. On the onehand, the larger the order, the lower the unit cost of ordering. Similarly, updating a given machine to one that is "state ofthe art" might be counterproductive if it is too complicated to run ormaintain without extensive training. In thesteel company, such activities would range from monitoring and adjustingthe metallurgical characteristics of different temperature steels to theexpediting of orders to meet delivery deadlines. This enables thefirm to eschew the in-house production of many parts and components, whichin turn saves the company large sums in capital investment. However, the results in the US andJapan are generally different because of institutional reasons. Known as "kanban," a prime requisite ofthe system is low machine setup times (Cusumano, 199 ). Just-in-time production necessitates lower machine setup times becauselot sizes and production runs are relatively small and frequent, which isthe opposite of the general US practice (Schonberger, 1982). & Aquilano, N. In the steelmill, for example, such decisions would regard the form and content of jobsto be performed and the type of service and control activities required toensure smooth operation. Inthe railway steel plant, this might encompass the likes of installing newcapital equipment to produce a new alloy or the introduction of a computer-based production control system. Thus, by cutting suchmachine setup times, the manufacturers in Japan can better afford morefrequent and smaller production runs than is the usual practice in the US. By buildingor adapting their own machines, the Japanese enable their workers to changecomponents easily and quickly. After all, if an error is made, its sourceis easily traced, so the individual production worker has a great deal ofresponsibility and incentive to prevent and eliminate defects. Finally,Japan's workers are often highly educated and self-disciplined, whichenables them to take on the multiple tasks in JIT -- such as setting uptheir machines plus their regular tasks on the assembly line.Conclusion In contrast to Japan, US businesses are generally more competitive andless cooperative with each other. In terms of inventory, there is a trade-off between the size oforders, such as components, and the frequency of such orders. By havingdeliveries made frequently, Toyota is able to keep production runs small,which is a vital element of JIT. Also, centralized management is not needed in the quality controlphase of JIT production, because the line workers intrinsically mustmonitor the process themselves. Inaddition, defective parts and components are highlighted in the systemquickly in the next process, preventing the repeat of such errors anddefects. Thus it is economical forToyota to make small production runs cost-effective, enabling the firm todiversify its manufacture of different models quickly and efficiently toconform to market demand. Thus, the aim of the operationsmanager is to balance all of the sub-elements of the production process inorder to optimize them as a whole. (1982). The Machine That Changed the World. Japanese Manufacturing Techniques. A similar result occurred at United Technologies Corporation.Both companies lack the ability to minimize setup time and coordinatedeliveries with their suppliers, as Toyota and many Japanese companies do.These two examples reflect the significant differences in business andculture between the US and Japan. "Controlling" entails the procedures involvedin taking corrective measures as the product or service is created. Of course, absolute JIT performance is neverattained, but a goal to be aimed at nonetheless. NY: Free Press.Taichi, O. For example, compared to General Motors, Toyota produces a car inroughly half the time, its defects per car are about one-third. "Operating" consists of the decisions of planninglong-term output levels in light of the forecast demand and the short-termdecisions of scheduling jobs and allocating workers. Specific operations that comprise "operations management" include suchareas as plant layout, work measurement, demand, forecasting, scheduling,inventory control, job design, quality control, research and development,product design, machine/labor planning, and wage incentive formulation(Chase & Aquilano, 1973). In contrast, large quantitiesand "economies of scale" have been the tradition of industry in the US andWestern Europe historically. In addition, production is more easily halted withsmaller lot sizes. No specialistsare needed for these procedures, enabling the production workers themselvesto perform them. Or taxconsiderations, as determined by the accounting department, might affectthe choice of machinery, or whither to use labor versus machinery,regardless of what would minimize manufacturing cost. In addition, they tend to have close ties to theirgovernment in Tokyo, which has given rise to the term "Japan, Inc." Also,the Japanese work force tends to be team-oriented, which helps promote the"quality circles" that are an integral part of JIT production. (199 ). al.,199 ). Essentially, this is why JIT production in Japan ismore successful in Japan than in the US. Inventory, purchasing, machine setuptime, scrap, quality, an worker motivation particularly are impacted byJIT. Thisin turn lowers purchase costs and allows for more frequent deliveries ofsmall orders. Operations Management and Just-In-Time ProductionIntroduction Operations management is defined as the performance of the managerialactivities entailed in selection, design, operating, controlling, andupdating production systems (Chase & Aquilano, 1973). GE Appliances found that the lowinventory levels required of JIT detracted form satisfying customer demandpromptly. NY: MacMillan. (199 ). As a result, at Toyota, the time required to change diesis as low as three minutes, whereas in the US and Western Europe, it rangesfrom two to six hours generally. Thus, operations management does not function in avacuum, but in an aggregate corporate environment.Just-In-Time Production Just-In-Time production (JIT) originated in Japan as a method ofimproving productivity. Specifically, parts and componentsare delivered to the assembly line in containers. Finally, operations management, which of course deals with theproduction function, must be coordinated with the company as a whole interms of its other functions -- such as marketing, advertising, accounting,finance, engineering, and others (Chase & Aquilano, 1973). JIT production tends to minimize scrap waste because, with smaller lotsizes, the workers tend to notice defects earlier and more easily(Schonberger, 1982). Thus, what works well in termsof project management in Japan does not necessarily work in the US. Smaller quantities are emphasized inorder to minimize inventory and idle time. In addition, Toyota's suppliers work closely with the company in thecoordination of delivery times and orders (Taichi, 199 ). Forexample, minimizing the production time for the railway wheel cited earliermight result in lower cost, but also lower quality, and possible workerdiscontent. Thus, the goal of JIT isto produce and deliver one unit at a time and keep steady the flow of workat the factory, which in turn minimizes work in process.JIT and Operations Management JIT impacts various facets of production while minimizing inventoryand idle time (Schonberger, 1982). "Design" encompasses the tactical decisions involved in thecreation of methods to carry out a production operation. The theory behind it is to produce and delivergoods just in time to be sold -- subassemblies just in time to be assembledinto finished goods, fabricated parts just in time to go intosubassemblies, and purchased materials just in time to be transformed intofabricated parts (Schonberger, 1982). Such self-developed machines tend to belight-weight, easily moveable, and adaptable. Finally, "updating: isthe implementation of major revisions of the productive system in light ofchanges in demand, organizational goals, technology, and management. & Roos, D. In contrast, the Japanese automanufacturer has been able to keep attuned to its market by its ability tomake a wide variety of models with quick and efficient changes in itsassembly line.Bad Examples of JIT Just-in-time production has been tried in the US with less successthan in Japan generally (Taichi, 199 ). Butconversely, carrying charges increase because of the larger inventory onhand; such costs apply to the business in terms of the lost space, and canextend to the lost interest on the capital used to purchase the inventory.Through the famous Economic Order Quantity (EOQ) mathematical formula, theoptimum balance can be determined. In running the aggregate production process, themanager attempts to coordinate all such production areas in an optimum way. "Selection involvesthe strategic decision of choosing the process by which some good orservice is to be made or performed. Finally, JIT production increases worker motivation (Schonberger,1982). In the US (and Western Europe), this is not generally thecase, which militates for emphasis on larger order sizes in order to cutunit purchase costs. (199 ). In addition, the worker in thenext station does not want to be blamed for such a defect or poor quality,so such production workers intrinsically must perform better.Toyota: A Good Example of JIT The Toyota Motor Corporation of Japan is one of the foremostpractitioners of JIT production. The point is, in thefinal analysis, total corporate profitability, particularly long-term, isthe ultimate criterion. Homewood, IL: Irwin.Cusumano, M. Ingeneral, Toyota has been able to defy the traditional economic principle of"economies of scale" which states that lower unit costs are achieved bylong production runs of uniform products. Consequently, US and European plants needto manufacture lots of sizes equivalent to thirty days' supply and resetequipment at a minimum of every other day. Optimizing theproduction function might result in lower sales, for example, if customersare more interested in product design or quality than price. As each container isemptied, it is returned to the previous step in the manufacturing process,which in turn is the signal to make more parts. Production and Operations Management. Thus,"kanban" at Toyota is a way for the firm to be flexible with respect toproducing a maximum of models in order to satisfy customer demand. This contrasts with Toyotamanufacturing lots equivalent to only one day's supply, while resetting thestamping equipment three times a day on average. Given low machine setup times and close coordination with suppliers,Toyota's "kanban" system makes for steady auto production with small lotsof parts and components (Taichi, 199 ). This contrastswith US auto manufacturers, which generally integrate vertically in orderto ensure the control and supply of key parts and components. BibliographyChase, R. Toyota'sinventory levels are at two hours, and at GM they are about two weeks. In the railway plant,this activity would range from forecasting to the growth in rail car salesfor the next five years, to determining which order process first out ofthe array of orders on hand. Jones, D. Similarly, American workersare more individualistic than their Japanese counterparts, which detractsfrom the team approach that is part of JIT. (1973). This detracts from the necessary closecollaboration needed for JIT with respect to deliveries of parts andcomponents, especially from outside suppliers. The Japanese Auto Industry.Schonberger, R. It is more than optimizing eachindividual facet of production, because trade-offs invariable arise. Toyota Production System. The "bottom line" is that Toyota's productivity and quality controlare extremely high in comparison to its competitors (Womack, et. For example, in a steel mill thatproduces railway wheels, the choice may be between forging or casting thewheels.
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