As we know, Lean Manufacturing is about reducing the Lead Time and cost, while complying with customer specifications. This is achieved by eliminating waste wherever it is. One of the most important steps in the implementation of Lean Manufacturing is JIT.
Just in time is about not having anywhere in the plant or outlet, more row materials, sub-assemblies or products than the minimum required for a fluent operation. Toyota considers this as One of the Two most important strategies for their success. The other being:
Storage is usually a hidden enemy of a healthy operation. When raw materials, sub-assemblies or finished products stay anywhere they represent a part of the capital of a company that is NOT generating any profits. In addition to that loss of profit, it is at risk. Floods, fires, market depreciation, and design obsolescence, are just some of those risks. In some cases, raw materials used in products that have not moved, could have been used to manufacture other products that would've sold faster.
The NASSCO case
A giant manufacturer in the U.S. West Coast used to produce large volumes of pipe spools for their products, with apparent big savings because of the "serial" production of these sub-assemblies. It was quite frequent, though, that they had to modify the spools because the main design had changed, other cases were even worse, when the spool was obsolete all together. Today they are working on a day by day basis, finishing a spool just a few hours or even minutes before it has to be integrated into the main product. Other problems that were solved at the same time, were: storage space, transportation, eventualities like scratches or other kinds of damages, plus savings of the money invested in the raw materials and labor that in the past was not being immediately cashed into the main product.
Unless you are in the business of storage and wholesale, buying large volumes of raw material may not be the best that you can do with your money. Your suppliers can become more efficient and give you the same good prices if you reach an agreement of buying all your requirements from them. The automobile industry has established in many cases agreements for hourly or daily delivery of some materials and parts. This can allow for them to operate in more compact areas, reducing time and movement in the process.
A Real Case in Temecula, CA
A manufacturer of medical equipment in California had a receiving and storage system in a traditional warehouse of more than 20,000 square feet, in average a quarter mile distance to the diverse production lines. Now they operate with five mini-receiving areas of just 400 square ft. each, located just a few yards from each production line. The average storage time for the raw materials came down from 48 days to a little less than two days, they are still thinking of reducing that time. It is just a matter of developing a very good relationship and assure the reliability of the suppliers and scheduling the deliveries in a very precise manner. This is easy with the computer systems now so accessible.
This concept, when continued throughout the full operation will also allow for each work cell and department of the the plant to deliver products at the right pace to the customer, (some times another department within the same facility).
Improving the Internal and External Supply Chain
We can see today's supermarkets operating with practically no storage areas. The manufacturers of the products take care of shelving their products at the pace required by the consumers. The manufacturers or distribution companies are the ones who take care of the storage and distribution, while the supermarket is in the business of promoting the sales and collecting the cash from the customers. The JIT - Just in Time process gives them the advantage of having fresh products all the time, delivered where, when and in the amount they are needed. This is true in all the extent of the supply chain. By the way, this is the most clear understandable example of a "pull" system, since there is room on the shelf just for a number of pieces per product, so only when it has been sold it will be replaced. Although in this particular case it is JIT - Just in Time delivery, but with imagination the concept can be transferred to JIT - Just in Time production.
The JIT - Just in Time process has to be thoroughly coordinated with all the involved parties, and its implementation should be done gradually. This planning and coordination will take most of the effort, but the results will be impressive. No Production Cell or Lean Manufacturing implementation will be complete without JIT.