PRODUCTION PLANNING & CONTROL, 1997, VOL. 8, No.

4, 406-412

Implementation of just-in-time in a small company: a case study

A. GUNASEKARAN and J. LYU

Keywords JIT implementation, SMEs, case study, future research

large-scale manufacturing companies allover the world have implemented JIT in their production systems with the objective of improving their competitiveness. Nevertheless, small and medium enterprises (SMEs) playa major role in the national economy. However, JIT has not received serious attention from SMEs. Realising the importance of improving the performance of SMEs, a case study is presented to motivate practitioners to implement JIT in their SMEs. In addition, future research directions in the areas of implementing JIT in SMEs are presented.

Abstract. This paper deals with the implementation ofJIT in a small company in Taiwan that produces different kinds of automobile lamps such as rear combination lamps and front turn signal lamps. JIT systems have tremendous effects on all operations of a firm, including design, accounting, finance, marketing, distribution, etc., and thus are of interest to all levels of a firm's management. Realizing the success of JIT,

Authors: A. Gunasekaran, Department of Manufacturing and Engineering Systems, Brunel University, Uxbridge, Middlesex UB8 3PH, United Kingdom: J. Lyu, Department of Industrial Management Science, National Cheng Kung University, Tainan, Taiwan, RO.C.

A. GUNASEKARAN is a senior lecturer of production/operations management in the Department of Manufacturing & Engineering Systems at BruneI University, UK He was awarded a PhD. in industrial engineering and operations research from Indian Institute of Technology, Bombay (India). Dr Gunasekaran has been a research fellow in the faculty of management at the University of Toronto, a post-doctoral fellow at Laval University and Concordia University (Canada), and an assistant professor at the University of Madras (India) and University of Vaasa (Finland). He has published over 50 articles in journals such as International Journal of Production Research, International Journal of Systems Science, International Journal operations and Production Management, Production Planning & Control, Computers in Industrial Engineering: An International Journal, European Journal of operational Research, Journal of operational Research Society, International Journal of Production Economics. Computers in Industry: An International Journal,

International Journal of Quality & Reliability Management, and International Journal of ComputerIntegrated Manufacturing. He has presented over 30 papers in conferences and given a number of invited talks in Finland, Sweden, Denmark, UK, India, Brazil, Austria, Canada,japan, Thailand, Singapore, US, France, Australia, New Zealand and Taiwan. He is on the editorial board of a number of journals which includes the InternationalJournal of Systems Science, InternationalJournal of Quality & Reliability Management, and International Journal of Production Planning and Control He has edited special issues for a number of international journals. His research interests include manufacturing strategy, computer-integrated manufacturing, agile manufacturing and business process reengineering.

J. LYU is an associate professor in the Department of Industrial Management Science at National Cheng Kung University, Taiwan. His qualifications include a bachelor's degree in engineering science and a master's degree in industrial management, both from National Cheng Kung University, and a PhD degree in industrial and management engineering from the University oflowa, USA. He has participated in many projects supported by the National Science Council, China Shipbuilding Co., Taiwan Power Co., and private companies. He has also published several papers in international journals and written a book entitled Management Information Systems. His research interests are in the areas of global quality management, business internet applications, and intelligent production planning and control systems.

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Implementation of ]IT in a small company

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1. Introduction

Just-in-time (}IT) stimulates new directions of planning and perfonning activities in manufacturing systems: its effects are significant in improving the overall performance of the whole organization. Conceptually, JIT is an approach, that combines apparently conflicting objectives of low cost, high quality, manufacturing flexibility and delivery dependability. In short,JIT is a system that produces! the required item at the time and in the quantities needed.

Since the excellent work by Schonberger (1982) on Japanese manufacturing techniques and Monden (1983) ott the Toyota production system, tremendous progress has been made on the methods and techniques related to the applications of the JIT philosophy. A number of articles have been published on the practice, JIT, however, most of them deal with large-scale industries. However, SMEs playa significant role in a national economy. Therefore, there is a need to help these companies to improve their competitiveness and hence to iimprove the national economy. Realizing the importance of SMEs and their performance, various productivity and quality improvement programmes have been implemented in the past. However, JIT has. not received much attention from SMEs who fear that JIT requires new investments of capital in labour, materials, and equipments to implement JIT. However, experience shows that JIT requires change in the management of various production operations, but not necessarily investment of capital resources such as automation, new equipment and workforce. In order to motivate other SMEs, a case study conducted in a small company in Taiwan is presented. Some of the observations fromthe case study may be useful to practitioners for motivating their efforts in implementing JIT in SMEs.

The organization of this paper is as follows: Section 2 deals with the background to the research. The details of the case study conducted at a small company in Taiwan are presented in Section 3. Future research directions in the areas of implementing JIT in SMEs are: discussed in Section 4. Section 5 concludes the paper.

2. Background to the research

There is no standard to implement JIT other than continuous progress towards the ultimate objective of deliveryas wanted, with a smoothly synchronized continuous ~ow (purchasing and production) keyed to final demand.with perfect quality of incoming materials, goodsin-process, and finished products.]IT is a concept that, for

thern6st part, is not culturally based. The most notable aspect of the suggestions is that it is clearly possible to implement JIT in an automated facility that utilizes a relatively small amount of direct labour in its processing operation. Gupta (1987) conducted a feasibility study of JIT-purchasing system implementation in a manufacturing facility. This helps the JIT implementation process considering the flexible production systems. Richmond and Blackstone (1988) reviewed the applicability of JIT concepts in the plastics industry, focusing on three aspect areas: quality management; technological requirements; and raw material purchasing practices. Crawford et al. (1988) presented JIT implementation and operating problems through a survey of industries in US. Because of the limited amount of research that has been conducted in the area of JIT operations, they were not able to provide closed-ended questions about implementation and operating problems. Nevertheless, JIT manufacturing demands better forecasting, much tighter control of work-in-process and near perfect quality.

Barker (1993) presented a case study and results are an implementation in a JIT environment in the electrical switchgear industry. The competitive pressures being placed on Western manufacturing organizations require new restructuring models, which take account of value-adding capability investment. Time-based manufacturing strategies offer a framework to develop the total input/output chain in solution of selling price. This method can be used successfully in batchmanufacturing companies to reduce the throughput time and conversion cost - the method is non-capitalintensive and involves the total company and people's commitment.

Clarke and Mia (1993) investigated the adoption of JIT manufacturing and the design of appropriate accounting information systems. Several factors that appear to be important in the successful implementation of JIT managemen t systems in Australia include the close geographic proximity of suppliers and customers, the existence of a highly competitive market, a broad product range, small to medium firm size, the existence of flexible manufacturing technology, large inventory holdings as a part of total assets, the use of JIT by dominant industry members, and a low degree of vertical integration in the firm. Industry type is also an important factor.

The ideal goal of a JIT system is to have the entire production-of-business cycle operate without interruption and without non-value-added time costs. JIT is much more than just another system of methods of improvement. It is a philosophy that can apply to any company, regardless of whether the company· is a manufacturer, distributor, or virtually any types of

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A. Gunasekaran and]. Lyu

business, including a service enterprise. One secret to a successful lIT operation is in ensuring that everyone is involved. lIT should be viewed broadly as a procedure for helping companies to manage and reduce total processing times. There are five steps or phases involved in the implementation of JIT into a company's operations: (i) cleaning up the operations; (ii) effecting a company-wide culture change; (iii) preparing logistics for JIT; (iv) implementing the programme; and (v) reviewing and monitoring the system after implementation (Tucker and Davies 1993).

The major benefits of implementing lIT manufacturing to the small manufacturing firm include smaller inventories, improved quality, and shorter lead times. Directly related are potential improvements in both future competitiveness and current cash flow. Once the decision to adoptJIT is made (the optimal starting point is internal production factors' especially layout revision) schedule stability and the development of relationships are a result of factory reform, not an implementation technique. The small firm literature agrees with this view. The implementation of the lIT philosophy assumes the willingness and ability of a firm to address each relevant element (Brown and Inman 1993).

According to Bondi (1994), the implementation of JIT practices may potentially bring to the surface such critical issues in employee relations as number of job classifications, width of job description, and the employee training and development. A broad range of firms that have implemented lIT was examined to identify managerial perceptions of how JIT implementation had affected human resource management. A sound strategy for implementation includes a commitment on behalf of the organization to the education and involvement of all levels of employees. The training and development, both technical and behavioural, of managers and production workers are critical to the success of a JIT programme. Most of the co-operation and commitment are through training and development programmes.

Materials constitute much of the cost of construction.

Akintoye (1995) presented a survey of JIT production systems and application and implementation issues for the control of material inventory in building construction. Imp Ie men tation of lIT building material management in construction has the potential to realize the same far-reaching benefits experienced in manufacturing. The key elements for successful implementation of lIT strategies have been addressed, with particular emphasis on the importance of top management commitment and employee involvement in this process (Bandyopadhyay and jayaram 1995).

The majority of the articles on implementation of

lIT in manufacturing are conceptual and related to large-scale industries. Hence there is a need to identify the critical variables associated with each basic lIT philosophy in SMEs. These studies typically used a small sample size, are industry specific or collected data from the effectiveness of the JIT implementation. However, there is a need to investigate the major factors involved in the implementation of lIT in SMEs. Also, there are not many reports that deal with the implementation of JIT in SMEs. To provide insights into the implementation and benefits of JIT in SMEs, a case study conducted in a small company in Taiwan is presented in the following section.

3. A case study

The company (Daioku Company) considered for case study is located in Tainan, Taiwan. The major products of the company include different kinds of automobile lamps. Since the world market of lamps is moving towards high variety and low quantity, and both the life cycle of the lamps and the lead time available from customers' orders to the delivery of lamps are getting shorter, top managers of Daioku Co. have been under great pressure to improve the overall competitive position of the firm by improving quality and productivity. In 1990, the executive manager at Daioku started promoting aJITsystem, with the hope that the inventory level can be reduced and productivity can be improved. This will help Daioku to become more competitive in offering internationally acceptable quality lamps at competitive prices.

3.1. The process ofimplementation.

One of the major objectives in implementing a lIT system is to achieve a common goal of the whole company. The main thing to start with in implementing lIT in any company is to improve the level of education and training, and to encourage suitable incentive schemes and promotions. In Daioku Co. three middlelevel managers were selected to participate in a Total Productivity System seminar organized by K-Company. With this background, the managers taught the whole company what they have learnt from K-Company. A committee consisting of the manager of each department was also established to plan and implement the JIT system so that they could discuss and learn from what was going on and could plan for the future programme.

The basis of JIT is 5S: (i) Seiri: classify materials on the shop floor based on its usefulness; (ii) Seeton: place the value-added materials in handy positions, (iii) Seize:

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clean up the non-value-added materials; (iv) Seiketsu: maintain the factory in good looking shape; and (v) Shitsuke: let the employees have good habits and follow the rules. Thus is the most important task to start with although it has been ignored by most academic researchers. With 5S activities, the working environment in Daioku was cleaned up to improve the safety, quality and productivity. Since beginning to implement the jl'I'system, Daioku continuously improved the quality of education and training, and activities based on 5S activities .. In 1991, a 'red card war' was proposed. The managers of each department form an improvement committee to look after the implementation of JIT in differen t areas of the company, especially the shop floor. All unnecessary materials are posted with 'red card' and deposited for further rework. Thus, all materials have been identified in terms of their names, places, quantities, etc. The concept of visual management, that is management simply by eye sight has been strongly motivated and encouraged. Activities related to 5S have become routine to everyone in the company in Daioku. With this, the Daioku company has laid down a solid foundation for the JIT system so that the production system can be operated smoothly to improve safety, quality and productivity over the years.

The emphasis on TQM activities has also played an important role in implementing the JIT system. With quality cost control activities, teamwork spirit and techniques to learn quality control are highlighted. The encouragement of employee suggestion schemes has also been established to help people on the shop floor to solve their problems by themselves and giving them the motivation to continuously improve their working environments. Other activities related to the JIT system included are as follows.

Standardization

Men, imachines and materials are integrated efficiently using standardization of various processes and material flow path so that the results of the implementation ofJIT and maintenance of any improvement project can be realized without wasting any resources in the whole process.

Total prei},entative maintenance activities

From the cleaning up of the simplest equipments, every w~rker learns to inspect, lumping and other related qFtivities so that equipments on the shop floor cal). tota~ly be under a self-maintained situation. The

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breakdown rate of equipments has therefore been

greatly reduced and they are made available all the

409

time. This is certainly helpful to implement an effective JITsystem.

Since July 1990, the top managers of Daioku have started implementing the Kanban production system - moving from the traditional push-type production management to pull-type production management. It is much more complicated than they expected and some of the major problems include:

(i) Combining the information and material flows instead of separating them.

(ii) Post the products, its store and manufacturing process instead of a flow without any post.

(iii) Changing the Lshape assembly line into Uehape assembly line. A number of new techniques and new equipments, although not necessarily the newest are required to be developed or purchased.

(iv) All other departments, such as R&D and transportation are required to participate in the JIT project. Every department has been instructed to investigate how to make the shop floor operate in a simpler and more efficient way.

Since beginning the implementation ofJIT, many difficulties have occurred. For example, although suppliers (subcontractors) have been trying to co-operate with Daioku, there exist many problems in practice. For example, every supplier is required to collect the 'Kanban' back from the order-post and ship their materials based on the information in the Kanban. This is certainly different from the traditional ways of shipping materials based on the pre-determined plan. In 1992, numerous discussions and meetings took place. Also, Daioku sent experts in helping suppliers to solve their problems gradually. The inventory of parts in Daioku was therefore reduced dramatically in this year.

3.2. The implementation methodology adopted at the Daioku plant

Since 1990, intensive education, training and promotions have been organized to lay the foundation for JIT implementation. This training was further extended to every small plant within the company in 1991. The JIT implementation committee selected assembly works in rear lamps plant to start with. The have (i) used standardization to eliminate overproduction and waiting time of materials; (ii) provided a rational level of parts to eliminate unnecessary spare parts and allow the packaging and moving of materials smoothly; (iii) implemented a single-person and multi-machine scheme on some cells and reviewed the fast-change-

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moulding activities together with some training. A small batch production procedure has been implemented and the efficiency of the plant is much improved.

Other plants therefore followed the footsteps of the rear lamps plant to implement the JIT system. The committee also extended the scope of the JIT system from each cell to each buffer and store so that every area has been carefully planned and the location of every part of product is clearly identified. The 5S activities that were introduced in the previous year have come to be very useful in this stage. In the long run, each cell is operated as a small module of a large system and the whole JIT system is therefore accomplished.

To prevent the production of unnecessary products (including parts, products and documents), many 'idle facilities' are created. Every check point in the company is created with this kind of facility so that workers would not carry out unnecessary tasks accidentally.

The current layout of the plant in Daioku company is shown in Figure 1. The production system is established as an endless loop - from the transfer of Kanban of suppliers, product manufacturing Kanban, part manufacturing Kanban, and part purchasing Kanban. The system is working smoothly and synchronized very well. The idea of aJIT production system is that it produces the necessary items of products at the necessary time with necessary quantities-this has finally been achieved in Daioku Company.

3.3 Discussion on the results of the implementation

Tremendous resistance from suppliers and workers was faced during the early stage of developing the JIT system. High level commitments oftop manager, determination of pushing JIT system and suppliers' involvement have helped to achieve JIT material flow. A major success in the implementation of the JIT system is the reduction in the amount of inventory and workers. The work-in-process inventory level has reduced from a market value of 30 million NT to 5 million NT, parts inventory has reduced from 130 million NT to 60 million NT, and the number of workers has reduced from 580 to 520 during the past three years - where the growth rate of the company is 5-10% per year. Besides the physical outcomes from operating a JIT system, a major advantage is allowing every worker to have improvement motivation and ability. From this, quality and productivity problems 'under the water' have shown up and are solved. This kind of cycle can strengthen the organization and spirit of the Daioku Company so that it can be more competitive in the long run.

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4. Future research directions on the implementation issues of JIT in SMEs

The following are some future research directions to motivate the researchers and practitioners in the implementation issues of JIT in SMEs.

(i) A systematic methodology to evaluate the performance of the JIT implementation process over time would certainly add the advantage of knowing if there is any bottle-neck in the implementation process of JIT in SMEs. There is an obvious need to measure the level of JIT success with reduction in inventory cost, and productivity and quality improvements.

(ii) A systemic framework should be provided for determining the level and type of training required for implementing JIT in SMEs. Also, suitable incentive schemes should be established to promote teamwork for an effective implementation of JIT in SMEs.

(iii) The factors critical to the successful suppliercustomer relationship development should be identified in SMEs.

5. Concluding remarks

In this paper, a case study is presented with the objective of discussing the implementation issues of JIT in SMEs. In addition, an overview of the JIT implementation issues and future research directions concerning SMEs are presented. Continuous improvement is a key goal for a healthy company. JIT is a holistic approach that needs the involvement of all people in the company. Improvement activities are required to be carried out to survive in a highly competitive international market. Emphasis should be placed on reductions in throughput time and elimination of unessential activities and simplification of essential activities while implementing a JIT system. Most of the companies in Taiwan are currently facing the impact of entering GATT and other international competition and so they are under great pressure to improve their competitiveness. Daioku proves that with the JIT system and other improvement projects, the company can survive with lower manufacturing costs and higher quality. Multimedia can be used in educating the workers about JIT concepts and their implementation issues. The following are the lessons learned from the case study:

(i) The implementation ofJIT in SMEs should start with layout revision, schedule stability, and the development of long-term supplier-customer relationships.

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(ii) A new purchasing philosophy supporting frequent purchases of small lot sizes may help SMEs in implementing a JIT system.

(iii) Education and training of workers in SMEs about JIT concepts and their high leverage opportunities would tremendously support the implementation of JIT in SMEs. In order to implement JIT in SMEs, workers must be crosstrained, highly skilled and very disciplined.

(iv) Identifying the value-added and non-valueadded items in shop floor activities are important to implementJIT in SMEs.

(v) Top management commitment is necessary to ensure the effectiveness and success of implementingJIT in SMEs.

Acknowledgements

The authors would like to thank Mr Charles C. Lin, the President of Daioku and Mr Y Chang, Production Manager at Daioku for their co-operation in this research project.

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