Just-in-Time Manufacturing

in the Indian Automotive

Industry

Introduction:

Just in Time manufacturing is a philosophy of manufacturing based on planned elimination of

waste and continuous improvement of productivity. It encompasses the successful execution of
all manufacturing activities required to produce a final product, from design engineering to
delivery and including all states of conversion from raw material onward. The primary elements
of Just-in-Time are to have only the required inventory when needed; to improve quality to zero
defects; to reduce lead times by reducing setup times, queue lengths, and lot sizes; and to
accomplish these things at a minimum cost. It is a manufacturing system whose goal is to
optimize processes and procedure by continuously pursuing waste reduction.

Today, JIT is commonly viewed as a Japanese innovation, because Toyota popularized this
approach two decades ago. The Toyota automobile factory, where the notion of JIT may have
started, is the best example of the use of JIT in repetitive manufacturing. In these factories, the
continuous flow of products makes planning and control rather simple. The basic idea of JIT is to
drastically reduce work in progress inventories throughout the production system. In this way,
products flow from suppliers to production to customers with little or no delays or interruptions
beyond the amount of time they spend being produced at work centers in manufacturing. JIT
does not come free; certain changes to the factory and the way it is managed must occur before
the benefits can be realized. These changes are:
 • Stabilize production schedules

• Increase production capacities of manufacturing work centers

• Improve product quality

• Cross-train workers

• Reduce equipment breakdowns through preventive maintenance

• Develop long-term supplier relations to avoid interruptions to material flows

Benefits of Just-in-Time Manufacturing:

• Inventory levels are drastically reduced

• Set up times are significantly reduced in the factory.

• Product quality is improved

• Cost of scrap is reduced.

• Promotes teamwork among workers.

• Manufacturing operations are streamlined and problem free.

Indian Automotive Industry:

The automotive industry in India is the ninth largest in the world, with an annual production of
over 2.3 million units in 2008. In 2009, India emerged as Asia's fourth largest exporter of
automobiles, behind Japan, South Korea and Thailand.
Following the economic liberalization in India in 1991, the Indian automotive industry has
demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions.
Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and
Mahindra, expanded their domestic and international operations. India's robust economic growth
led to the further expansion of its domestic automobile market which attracted significant India-
specific investment by multinational automobile manufacturers. In February 2009, monthly sales
of passenger cars in India exceeded 100,000 units.

The strong global competition left the Indian automotive industry with no option but to focus on
adopting new technologies, which enabled manufacturers to improve their processes and
products. Major initiatives in the automotive industry include just-in-time (JIT) manufacturing,
mass customization, "zero error production", and reduced cycle time. To accomplish these,
automotive manufacturers increasingly rely on information technology to help manage
processes. Although the Indian Automotive Industry has made great strides in various aspects,
supply chain management is one area where there is tremendous scope for improvement.

Just-in-time (JIT) as a philosophy is good in most environments, including India. Its core
philosophy is identifying and eliminating waste and continuous improvement. This is important
in a country like ours where resources are scarce. There are auto component companies in India
that have excelled in implementing the JIT concept. Inventory management using JIT has been
used by many companies in the inbound (supply side) part of the supply chain. Through the use
of JIT inventory management, the automobile industry has been able to achieve significant gains
in productivity.

JIT in Maruti Udyog Limited:

Suzuki brought a whole new manufacturing culture that included participative management,
team work, communication and information sharing, open office system, Kaizen (continuous
improvement), multi-skilling of operators, flat hierarchy, and most important of all, the concept
of Just-in-Time manufacturing. Many of these characteristics had been bruited about earlier in
India as relating to typical Japanese manufacturing culture but Maruti was the first Indian
company where the practices were actually implemented from top to bottom. The Maruti factory
at Gurgaon near Delhi can be a culture shock for a visitor. Not a wet or oily patch to be seen, no
shavings or cuttings strewn on the floor, all tools and parts and stock - in-progress neatly in
place, gauges free of dust, piping sans leaks, cover plates all in place, no peeling paint on the
machines, walkways clearly marked, adequate lighting and a clean atmosphere.

Maruti is going about the task in the typical Japanese methodical fashion of Plan, Do, Check and
Action. First, the overall targets were fixed by the top management, which was then broken
down into factors and elements and mini-projects worked out to achieve these. The eight typical
wastages at each operational point (over-production, man movement, material movement, idle
time of operator, work-in-process, machine availability, waiting time and needless processing)
have been measured by observation and even videography. The bottlenecks have been identified
and a lot of work has been done to streamline the process. In 1995, when Maruti had 4,800
employees, it was producing at the rate of 730 cars a day. Today, with 4,500 employees, the
plant is producing at the rate of 1,700 cars a day.

Simultaneously, the supply chain system is being honed. A delivery instruction system places
orders with the vendors for the next day's production target. Maruti is now working with an
inventory of four hours maximum for local items and six days average for imported materials.
The inventory to sales turnover ratio, on the scale of 100 in 1999-2000, is now down to 41.
Maruti has also started working with its vendors to reduce their cost of production so that its own
cost of bought outs can be reduced. It has also launched a quality enhancement scheme recently,
called as the Quality Gate system.

With so many MNC’s entering the Indian automotive market, there will be a push towards lean
production. Maruti has implemented JIT for some of its major suppliers. Some others are in the
process of doing so. There is a stress on quality in this highly competitive industry. However, the
success of JIT depends not only on the efforts of the assemblers, but also on the suppliers and on
institutional and cultural factors. The bargaining power of suppliers of some components is high,
because of capacity constraints. This makes them accept only large orders, and therefore makes it
difficult for assemblers to implement JIT
Problems faced by the Indian Automotive Industry in
implementing JIT:

Several Indian firms have either initiated steps towards JIT implementation or claim to have
already implemented many aspects of JIT. However, the Indian Automotive Industry faced a few
problems in implementing the JIT manufacturing systems, they are:

• The Size of the Industry in India is either medium or small compared to multi-national
corporations. Hence the type of concerns and nature of efforts could be different.
• The Indian economy is characterized by Government controls and intervention, and there
is a lack of long term stability in Government policies.
• Conceptual details of JIT and other such approaches to manufacturing are well known to
Indian firms. However there is a lack of internalization of these concepts, leading to lack
of clarity at the time of implementation.
• To evolve to a pull inventory system, manufacturing needs to be organized through cells.
The introduction of such systems would involve substantial rearrangement of facilities
and demand greater managerial effort.
• Indian Automotive Manufacturers have not made significant progress towards supplier
development.
• The quality circles concept was introduced in India during the early 80’s. Though it
started with much fanfare, it did not produce the expected results as reported in Japan.
Hence, the Indian automobile manufacturers were skeptical of adopting them.
• The Indian automotive companies have overlooked the importance of viewing the supply
chain as a whole. They need to have their supply chains streamlined for effective
implementation of JIT.
• It is not easy to implement JIT in a situation where there is a need to manage inventory in
a short duration with a lot of uncertainty in the system.
 • The supply unreliability and the uncooperative attitude of transporters have affected the
successful implementation of JIT.
• Indian automotive manufacturers tend to have a management style that is highly
centralized. Decentralized and professionally managed companies would stand a better
chance of implementing JIT.
• There is lack of efficient transport services, unavailability of suppliers, severe bottlenecks
in transport and communication infrastructure.

Suggestions for implementation of JIT manufacturing:

Keeping in mind the above issues, a 3 step approach is recommended; which can be used to
implement JIT manufacturing systems. The first step involves changing attitudes towards
purchasing and achieving improvements which would help prepare for the drastic changes that
would take place. The second step involves initiating a pilot programme with a handful of
suppliers and parts. This step aims to identify the problems and eliminate them. The third and
final step involves modifying the organizational set-up so that there are distinct departments
handling logistics, materials handling and control and supplier up gradation.

• The first and foremost step is to obtain top management support and the support and
involvement of all the employees in the programme.
• The Indian Automotive Industry has to take steps to increase the supply chain efficiency.
• The Indian Automotive Industry needs to understand that certain system level changes
are inevitable; which may include introduction of Kanban, Set-up time reduction
exercises.
• Managing continuous supply-demand matching and optimization.
• Achieving efficient use of materials and other resources.
• Managing demand and customer expectations.
• Technology and Infrastructure up gradations.
• Investment in training and human resource development.
• Maintain good relations with suppliers
 • Encourage automation

Conclusion:

Just-in-time manufacturing can be a positive influence on a company. However there are many
risks associated with attempting to implement JIT manufacturing techniques. When looked at it
appears to be a very simple, quick, and easy thing to do. In reality it is a very complicated
technique that takes long term commitment and an initial cost with no guarantee of success. If
implemented successfully it would eliminate waste, make the company more productive and
more efficient. It does this through shorter transportation and increased communication.
Although there are many companies that are successful, many companies are not. Even though
there are enormous risks many still consider implementing JIT for it many advantages.

To summarize, there is a great need for transition from traditional manufacturing to Just-in-Time
manufacturing, but several aspects of the industry are not very conductive to JIT implementation
as there are many constraints. However, by taking appropriate action, it should be possible to
move smoothly towards implementing an efficient JIT system.