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Financial

regulatio
n
Clawbac
k
v
t
e
Just in
time(JIT)
is a
production
strategy
that
strives to
improve a
business'r
eturn on
investment
by
reducing
in-
processin
ventoryan
d
associated
carrying
costs. To
meet JIT
objectives,
the
process
relies on
signals
orKanban
(
?
,
Kanban)b
etween
different
points,
which are
involved in
JIT relies
on other
elements
in the
inventory
chain as
well. For
instance,
its
effective
application
cannot be
independe
nt of other
key
component
s of alean
manufactur
ingsystem
or it can
"end up
with the
opposite
of the
desired
result."
[1]
In
recent
years
manufactur
ers have
continued
to try to
hone
Contents
[hide]
1

P
h
i
l
o
s
o
p
h
y
2

T
r
a
n
s
a
c
t
i
o
n

c
o
s
t

a
p
p
r
o
a
3

E
n
v
i
r
o
n
m
e
n
t
a
l

c
o
n
c
e
r
n
4

P
r
i
c
e

c
h
a
n
g
5

Q
u
a
l
i
t
y

v
o
l
a
t
i
l
i
t
6

D
e
m
a
n
d

s
t
a
b
i
l
i
t
7

S
u
p
p
l
y

s
t
a
b
i
l
i
t
8

J
I
T

i
m
p
l
e
m
e
n
t
a
t
i
o
n

d
e
s
i
8
.
1

E
f
f
e
c
t
s
8
.
2

B
e
n
e
f
i
t
s
8
.
3

P
r
o
b
l
e
m
s
8
.
3
.
1

W
i
t
h
i
n

a

J
I
T

s
y
s
8
.
3
.
2

W
i
t
h
i
n

a

r
a
w

m
a
t
e
r
i
a
l

8
.
3
.
3

O
i
l
9

B
u
s
i
n
e
s
s

m
o
d
e
l
s

f
o
l
l
o
w
i
n
g

9
.
1

V
e
n
d
o
r
-
m
a
n
a
g
e
d

i
n
v
e
n
t
o
r
9
.
2

C
u
s
t
o
m
e
r
-
m
a
n
a
g
e
d

i
n
v
e
n
t
o
1
0

E
a
r
l
y

u
s
e

o
f

a

J
I
T

s
1
1

S
e
e

a
l
s
1
2

R
e
f
e
r
e
n
c
e
s
1
3

F
u
r
t
h
e
r

r
e
a
d
i
n
Philosoph
y[edit]
The
philosophy
of JIT is
simple:
the
storage of
unused
inventory
is a waste
of
resources.
JIT
inventory
systems
expose
hidden
cost of
keeping
inventory,
and are
therefore
not a
simple
solution
for a
company
to adopt it.
The
company
must
follow an
array of
new
methods
Inventory
is seen as
incurring
costs, or
waste,
instead of
adding
and
storing
value,
contrary to
traditional
accounting
. This
does not
mean to
say JIT is
implement
ed without
an
awareness
that
removing
inventory
exposes
pre-
existing
manufactur
ing issues.
This way
of working
encourage
s
businesses
In short,
the Just-in-
Time
inventory
system
focus is
having
the right
material,
at the right
time, at
the right
place, and
in the
exact
amount,
without
the safety
net of
inventory.
The JIT
system
has broad
implication
s for
implement
ers.
Transactio
n cost
approach[
edit]
JIT helps
in keeping
inventory
to
minimum
in a firm.
However,
a firm may
simply be
outsourcin
g their
input
inventory
to
suppliers,
even if
those
suppliers
don't use
Just-in-
Time (Naj
1993).
Newman
(1994)
investigate
d this
effect and
found that
suppliers
in Japan
charged
JIT
customers,
on
Environm
ental
concerns[
edit]
During the
birth of
JIT,
multiple
daily
deliveries
were often
made by
bicycle.
Increased
scale has
required a
move to
vans and
trucks
(lorries).
Cusumano
(1994)
highlighted
the
potential
and actual
problems
this
causes
with
regard
togridlock
and
burning
offossil
fuels. This
violates
three JIT
1
.

T
i
m
e

w
a
s
t
e
d

i
n

t
r
a
f
f
i
c

j
2
.

I
n
v
e
n
t
o
r
y

s
p
e
c
i
f
i
c
a
l
l
y

p
i
p
e
l
i
n
e
3
.

S
c
r
a
p

f
u
e
l

b
u
r
n
e
d

w
h
i
l
e

n
o
t

p
h
y
Price
change[ed
it]
Because
Just-In-
Time
manufactur
ers do not
store raw
materials,
they can
be
affected
more
drastically
by the
effects of
changing
prices.
Quality
volatility[e
dit]
JIT
implicitly
assumes
that input
parts
quality
remains
constant
over time.
If not,
firms may
hoard high-
quality
inputs. As
with price
volatility, a
solution is
to work
with
selected
suppliers
to help
them
improve
their
processes
to reduce
variation
and costs.
Longer
term price
agreement
s can then
be
Demand
stability[e
dit]
Karmarker
(1989)
highlights
the
importance
of
relatively
stable
demand,
which
helps
ensure
efficient
capital
utilization
rates.
Karmarker
cost
production.
Supply
stability[e
dit]
In the
U.S., the
1992
railway
strikes
caused
General
Motors to
idle a
75,000-
worker
plant
because
they had
no supply.
JIT
implemen
tation
design[edi
t]
Based on
a diagram
modeled
after the
one used
by Hewlett-
Packards
Boise
plant to
accomplish
its JIT
program.
1
)

D
e
s
i
g
n

F
l
o
w

P
r
o
c
e
s
s
F Redesign/relayout for flow
L Reduce lot sizes
O Link operations
W Balance workstation capacity
M Preventive maintenance
S Reduce setup Times
2
)

T
o
t
a
l

Q
u
a
l
i
t
y

C
o
n
t
r
o
l
C worker compliance
I Automatic inspection
M quality measures
M fail-safe methods
W Worker participation
3
)

S
t
a
b
i
l
i
z
e

S
c
h
e
d
u
l
e
S Level schedule
W Establish freeze windows
UC Underutilize Capacity
4
)

K
a
n
b
a
n

P
u
l
l

S
y
s
t
e
D Demand pull
B Backflush
L Reduce lot sizes
5
)

W
o
r
k

w
i
t
h

V
e
n
d
o
r
s
L Reduce lead time
D Frequent deliveries
U Project usage requirements
Q Quality expectations
6
)

F
u
r
t
h
e
r

R
e
d
u
c
e

I
n
v
e
n
t
o
r
y

i
n

O
S Stores
T Transit
C Implement carrousel to reduce motion waste
C Implement conveyor belts to reduce motion waste
7
)

I
m
p
r
o
v
e

P
r
o
d
u
c
t

D
e
s
i
g
n
P Standard production configuration
P Standardize and reduce the number of parts
P Process design with product design
Q Quality expectations
Effects[edi
t]
A
surprising
effect of
JIT was
that car
factory
response
time fell to
about a
day. This
improved
customer
satisfaction
by
providing
vehicles
within a
day or two
of the
minimum
economic
shipping
delay.
Also, the
factory
began
building
many
vehiclesto
order,
eliminatin
g the risk
they
would
not be
sold. This
improved
the
company's
return on
equity.
Since
assembler
s no
longer had
a choice
of which
part to
use, every
part had to
fit
perfectly.
This
caused a
quality
assurance
crisis,
which led
to a
dramatic
improveme
nt in
product
quality.
Eventually,
Toyota
redesigned
every part
of its
vehicles to
widen
tolerances,
while
simultaneo
usly
When a
process
or parts
quality
problem
surfaced
on the
productio
n line, the
entire
productio
n line had
to be
slowed or
even
stopped.
No
inventory
meant a
line could
not
operate
from in-
process
inventory
while a
productio
n
The result
was a
factory
that has
been
studied
worldwide
. It has
been
widely
emulated,
but not
always
with the
expected
results, as
many
firms fail
to adopt
the full
system.[3]
The just-in-
time
philosophy
was also
applied to
other
segments
of
thesupply
chainin
several
types of
industries.
In the
commercia
l sector, it
meant
eliminating
one or all
of the
warehouse
s in the
link
between a
factory
and a
retail
establishm
ent.
Examples
in sales,
marketing,
and
customer
Benefits[e
dit]
Main
benefits of
JIT
include:
R
e
d
u
c
e
d

s
e
t
u
p

t
i
m
e
.

C
u
t
t
i
n
g

T
h
e

f
l
o
w

o
f

g
o
o
d
s

f
r
o
m

w
a
r
e
h
o
u
s
e

t
E
m
p
l
o
y
e
e
s

w
i
t
h

m
u
l
t
i
p
l
e

s
k
i
l
l
s

a
r
e
P
r
o
d
u
c
t
i
o
n

s
c
h
e
d
u
l
i
n
g

a
n
d

w
o
r
k

h
o
u
I
n
c
r
e
a
s
e
d

e
m
p
h
a
s
i
s

o
n

s
u
p
p
l
i
e
r

r
e
l
S
u
p
p
l
i
e
s

c
o
m
e

i
n

a
t

r
e
g
u
l
a
r

i
n
t
e
r
v
M
i
n
i
m
i
z
e
s

s
t
o
r
a
g
e

s
p
a
c
e

n
e
e
d
e
S
m
a
l
l
e
r

c
h
a
n
c
e

o
f

i
n
v
e
n
t
o
r
y

b
r
e
a
k
i
Problems[
edit]
Within a
JIT
system[ed
it]
Just-in-
time
operation
leaves
suppliers
and
downstrea
m
consumers
open
tosupply
shocksand
large
supply or
demand
changes.
For
internal
reasons,
Ohno saw
this as a
feature
rather
than a
bug. He
used an
analogy of
lowering
the water
level in a
river to
expose
the rocks
to explain
Very low
stock
levels
means
shipments
of the
same part
can come
in several
times per
day. This
means
Toyota is
especially
susceptible
to flow
interruption
. For that
reason,
Toyota
uses two
suppliers
for most
assemblies
. As noted
in Liker
(2003),
there was
an
exception
to this rule
that put
the entire
company
Within a
raw
material
stream[ed
it]
This
section
contains
wording
thatprom
otes the
subject in
a
subjective
mannerwi
thout
imparting
real
informatio
n.Please
remove
or replace
such
wording
and
instead of
making
proclamat
ions
about a
subject's
importanc
e, use
facts and
As noted
by Liker
(2003)
and
Womack
and Jones
(2003), it
ultimately
would be
desirable
to
introduce
synchronis
ed flow
and link
JIT
through
the entire
supply
stream.
However,
none
followed
this in
detail all
the way
back
through
the
processes
to the raw
materials.
With
present
Because
of this,
almost all
value
chains are
split into
a part
made-to-
forecast
and a
part that
could, by
using JIT,
become
make-to-
order.
Historicall
y, the
make-to-
order
part has
often
been
within
the
retailer
portion of
the value
Note that
the
advent of
themini
millsteel
making
facility is
starting
to
challenge
how far
back JIT
can be
implemen
ted, as
the
electric
arc
furnaces
at the
heart of
many
mini-mills
can be
started
and
stopped
quickly,
Oil[edit]
It has
been
frequently
charged
that the oil
industry
has been
influenced
by
JIT.
[5][6][7]
The
argument
is
presented
as follows:
T
h
e

n
u
m
b
e
r

o
f

r
e
f
i
n
e
r
i
e
s

i
n

t
h
e

U
n
Beside the
obvious
point that
prices
went up
because
of the
reduction
in supply
and not for
anything
to do with
the
practice of
JIT, JIT
students
and even
oil and
gas
industry
analysts
question
whether
JIT as it
has been
developed
by Ohno,
Goldratt,
and others
is used by
the
petroleum
industry.
Companie
Finally, as
shown in
a pair of
articles in
the "Oil &
Gas
Journal",
JIT does
not seem
to have
been a
goal of
the
industry.
In
Waguespa
ck and
Cantor
(1996),
the
authors
point out
that JIT
would
require a
significant
change in
the
Business
models
following
similar
approach[
edit]
Vendor-
managed
inventory[
edit]
Vendor-
managed
inventory
(VMI)
employs
the same
principles
as those
of JIT
inventory,
however,
the
responsibi
lities of
managing
inventory
is placed
with the
vendor in
a
vendor/cu
stomer
relationshi
p.
Whether
its a
manufact
urer
An
advantage
of this
business
model is
that the
vendor
may have
industry
experience
and
expertise
that lets
them
better
anticipate
demand
and
inventory
needs.
The
inventory
planning
and
controlling
is
facilitated
by
application
s that
allow
vendors
access to
their
Another
advantage
to the
customer
is that
inventory
cost
usually
remains
on the
vendor's
books until
used by
the
customer,
even if
parts or
materials
are on the
customer's
site.
Customer-
managed
inventory[
edit]
Withcust
omer-
managed
inventory
(CMI), the
customer,
as
opposed
to the
vendor in
a VMI
model,
has
responsibi
lity for all
inventory
decisions.
This is
similar to
JIT
inventory
concepts.
With a
clear
picture of
their
inventory
and that
Early use
of a JIT
system[ed
it]
A type of
JIT was
used
successfull
y in the
UK by
Perkins to
supply F3
engines to
Ford from
1957 until
1964.
See
also[edit]
B
a
c
k
f
l
u
s
h

a
c
c
o
u
n
t
i
n
C
O
N
W
I
P
D
e
m
a
n
d

f
l
o
w

t
e
c
h
n
o
l
o
I
n
d
u
s
t
r
i
a
l

e
n
g
i
n
e
e
r
i
n
I
n
v
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n
t
o
r
y

p
r
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p
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t
i
o
n
a
l
i
t
J
u
s
t

i
n

c
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e

m
a
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a
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i
J
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S
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L
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n

c
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s
u
m
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a
n

m
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t
u
r
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L
i
q
u
i
d

l
o
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i
s
t
i
c
O
r
g
a
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a
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R
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T
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Reference
s[edit]
This
article
includes
alist of
reference
s, butits
sources
remain
unclear
because
it has
insuffici
entinlin
e
citations
.Please
help
toimprov
ethis
article
byintrodu
cingmor
e
precise
citations.
(March 2008)
1
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Condie,
Allan T.
"Fordson
Dexta
957E's
1957-
1964"ISB
N 0-
907742-
71-8
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