Business Logistics
Introduction
A firm Jim Ballenger and specializing in motor homes aims at adopting the Just In Time (JIT) system of production. The company is located in Kalamazoo, Michigan with their largest components being the trucks and van chassis. The company uses purchased components to assemble their products. The management of the company aims at adopting a cost effective system of production that will cater for the expanding market. Markets for the firm have increased from local Midwest to national wide and stretches to New England and Southern California. The JIT system is easy to employ conceptually and the basic assumption is that everything takes place just-in-time. However, achieving this could prove difficult in real practice. The manufacturing operation components conceptually arrives just-in-time to be used in the production. This implies that a company would eliminate any inventory of production components and they would henceforth be brought just-in-time. Similarly, finished goods could be produced just-in-time and be handed to a potential customer. So, at a conceptual extreme, JIT has no need for inventory or stock, either of raw materials or work in progress or finished goods. The company, by adopting the JIT system will be able to achieve an expanded market through the cost effective framework as will be discussed in this paper.
Purpose of the paper
This paper aims at analyzing the cost, process as well as result implication of the firm adopting the JIT system in its production. The paper will analyze the fundamentals involved in implementing this system for instance, the cost cutting methods and changes in terms of inventory.
Overview of the paper
The Kalamazoo firm adoption of the JIT is likely to cut costs of production for the purpose of expanding the market. This is likely to bring about changes in stock and other costs. The company has to deal with another major problem since it only manufactures a few of the components used in the production while most are purchased brought from outside (Holl et al, 2010 p 527). In the attempt to cut down component part expenses, the firm considers implementing the JIT system. The JIT is a system developed by Toyota designed in order to control the quality, supplier and distributors’ relationship while minimizing inventory (Wagner et al, 2011 p5716).
Just in Time in Kalamazoo
According to Holl et al (2010 p 526) the JIT system of production is based on the rationale that requires maximum elimination of waste. To achieve this items are produced only when they are required, that is Just in Time. Consequently the “automation” principle is applied whereby inspection is a key component of production, and it involves human attention. When a defect is detected in this case, the system is stopped and production only proceeds after the problem has been fixed. In this system stock is also considered as an unnecessary waste. Sources of waste that should be eliminated include overproduction, time spent waiting, transportation, processing time, inventory, and defects.
The basic challenge in for Jim, if he has to adopt JIT would be the high cost involved in transportation of small amounts of equipment. Having to bring in materials in several small shipments would raise the cost especially from distant suppliers. On the other hand, he hopes to take advantage of to the volatile motor home market to make purchases of components from manufacturers that were going out of business (Wagner et al, 2011 p5715).
There are several considerations for the firm to make before adopting the JIT system. First the cost of effectiveness of the JIT as compared to the current system. The total annual cost of maintaining the components inventory under the present system is shown in the tables 1 and 2 below (Bortolotti et al, 2013 p1119).
| Item | Average distance from vendor (in miles) | Number of units used each week | Current lot size purchased | Unit cost | Average freight cost per unit |
| Gas range | 1,145 | 10 | 200 | $100 | $20 |
| Toilet | 606 | 10 | 240 | $80 | $18 |
| Pump | 26 | 56 | 125 | $16 | $3 |
| Refrigerator (large) | 22 | 6 | 120 | $110 | $20 |
| Refrigerator (small) | 22 | 7 | 15 | $95 | $15 |
| Foam cushion | 490 | 675 | 1,500 | $8 | $2 |
| CB radio (type D) | 1,800 | 9 | 24 | $136 | $11 |
| Dome lights | 3 | 824 | 1,720 | $2 | None |
| Awning bracket | 48 | 540 | 1,200 | $4 | $1 |
| Insect screen | 159 | 570 | 1,240 | $7 | $1 |
Table 1
| Item | Safety Stock (Unit) | Avg. Inv.
(Unit) |
Total Inv. (Unit) | Total Inventory ($) | Inventory Cost ($/yr) | Investment ($/yr) |
| Gas range | 40 | 100 | 140 | $16,800 | $3,360.0 | $62,400 |
| Toilet | 40 | 120 | 160 | $15,680 | $3,136.0 | $50,960 |
| Pump | 56 | 62.5 | 118.5 | $2,252 | $450.3 | $55,328 |
| Refrigerator (large) | 6 | 60 | 66 | $8,580 | $1,716.0 | $40,560 |
| Refrigerator (small) | 7 | 7.5 | 14.5 | $1,595 | $319.0 | $40,040 |
| Foam cushion | 1350 | 750 | 2100 | $21,000 | $4,200.0 | $351,000 |
| CB radio (type D) | 36 | 12 | 48 | $7,056 | $1,411.2 | $68,796 |
| Dome lights | 824 | 860 | 1684 | $3,368 | $673.6 | $85,696 |
| Awning bracket | 540 | 600 | 1140 | $5,700 | $1,140.0 | $140,400 |
| Insect screen | 1140 | 620 | 1760 | $14,080 | $2,816.0 | $237,120 |
| $96,111 | $19,222.1 | $1,132,300 |
Table 2
The total annual cost of maintaining the components inventory under the JIT system is shown in the tables 3 and 4 below (Bortolotti et al, 2013 p1121)
| Item | Average distance from vendor (in miles) | Number of units used each week | Current lot size purchased | Unit cost | Average freight cost per unit |
| Gas range | 1,145 | 10 | 10 | $105 | $22 |
| Toilet | 606 | 10 | 10 | $100 | $18 |
| Pump | 26 | 56 | 7 | $15 | $4 |
| Refrigerator (large) | 22 | 6 | 6 | $113 | $25 |
| Refrigerator (small) | 22 | 7 | 1 | $85 | $15 |
| Foam cushion | 490 | 675 | 75 | $7 | $3 |
| CB radio (type D) | 1,800 | 9 | 3 | $130 | $26 |
| Dome lights | 3 | 824 | 36 | $4 | 0 |
| Awning bracket | 48 | 540 | 60 | $5 | $1 |
| Insect screen | 159 | 570 | 50 | $7 | $2 |
Table 3
| Item | Safety Stock (Unit) | Avg. Inv.
(Unit) |
Total Inv. (Unit) | Total Inventory ($) | Inventory Cost ($/yr) | Investment ($/yr) |
| Gas range | 40 | 5 | 45 | $5,715 | $1,143.0 | $66,040 |
| Toilet | 40 | 5 | 45 | $5,310 | $1,062.0 | $61,360 |
| Pump | 56 | 3.5 | 59.5 | $1,131 | $226.1 | $55,328 |
| Refrigerator (large) | 6 | 3 | 9 | $1,242 | $248.4 | $43,056 |
| Refrigerator (small) | 7 | 0.5 | 7.5 | $750 | $150.0 | $36,400 |
| Foam cushion | 1350 | 37.5 | 1387.5 | $13,875 | $2,775.0 | $351,000 |
| CB radio (type D) | 36 | 1.5 | 37.5 | $5,850 | $1,170.0 | $73,008 |
| Dome lights | 824 | 18 | 842 | $3,368 | $673.6 | $171,392 |
| Awning bracket | 540 | 30 | 570 | $3,420 | $684.0 | $168,480 |
| Insect screen | 1140 | 25 | 1165 | $10,485 | $2,097.0 | $266,760 |
| $51,146 | $10,229.1 | $1,292,824 |
Table 4
Conclusion
The Just In Time system is based on elimination of waste and this is achieved through a number of ways. Items are produced only when they are required, Just In Time. The autonomation principle is applied whereby inspection is key component and involves human attention. When a defect is detected in this case, the system is stopped and production only proceeds after the problem has been fixed. In this system stock is considered as an unnecessary waste. Sources of waste that should be eliminated include overproduction, time spent waiting, transportation, processing time, inventory, and defects. In general, the JIT system focuses on cutting costs through what it deems unnecessary cost to achieve effectiveness and increase production.
Lessons Learned and Recommendations
Achieving such a conceptual extreme would probably be difficult in real-life. However, the extreme to a great extent does illustrate that, perhaps, an existing system can move towards a system with more of the JIT element than it currently adopts. The system is aimed basically at reducing the cost of running the production and is also sometimes called adopting a lean production system. The firm should consider adopting the JIT system as this will enhance the cost cutting that will boost expansion. This should, however be guided by several considerations on the part of inventory and extra costs that are likely to arise in this system, for example the freight expenses.
References
Bortolotti, T., Danese, P., & Romano, P. (2013). Assessing the impact of just-in-time on operational performance at varying degrees of repetitiveness. International Journal Of Production Research, 51(4), 1117-1130.
Holl, A., Pardo, R., & Rama, R. (2010). Just-in-Time Manufacturing Systems, Subcontracting and Geographic Proximity. Regional Studies, 44(5), 519-533.
Wagner, S. M., & Silveira-Camargos, V. (2011). Decision model for the application of just-in-sequence. International Journal Of Production Research, 49(19), 5713-5736.
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