JIT moves UP the supply chain
"We found JIT a necessary means for maintaining business," says John Rog, purchasing manager of supplier manufacturing development at Johnson Controls.; Keeping parts flowing to the line smoothly requires that JCI eliminate any waste or non-value-added tasks in its supply chain.
By Tim Minahan -- Purchasing, 9/1/1998 2:00:00 AM
In the early 1970s, Toyota Motor Manufacturing wowed the business world (and struck fear in the hearts of many American companies) with a new production strategy that used little inventory, shortened cycle times, improved quality, and eliminated waste and costs in the supply chain. This just-in-time manufacturing philosophy, which requires manufacturers to work in concert with suppliers and transportation providers to get required items to the assembly line at the precise time they are needed for production, was embraced by American automakers after their Japanese competitors grabbed big chunks of U.S. market share. The JIT concept then soon spread to other industries, such as computers, and is now firmly entrenched in the manufacturing psyche of most OEMs.
However, after several years of honing their own JIT systems, many OEMs have found that it has become increasingly difficult to squeeze additional inefficiencies, inventory, and costs from their internal operations. While JIT is based on a philosophy of continuous improvement, many manufacturers are looking outside their walls for productivity advances by encouraging suppliers to adopt JIT manufacturing practices and possibly helping them implement JIT systems.
Toyota has held this as a key objective since the mid-1980s. The Japanese automaker offers JIT training to supply partners and assigns cross-functional teams, composed of purchasing, production control, quality, and engineering personnel, to help suppliers implement a JIT system at their own plants.
Such vision is beginning to pay off. Several of the 220 suppliers to New United Motor Manufacturing Inc. (nummi) have adopted JIT manufacturing techniques. Bill Borton, general manager for the decade-old joint venture between Toyota and General Motors in Freemont, Calif., says the results of these efforts have been impressive for all parties involved.
"When suppliers implement JIT at their own sites, they are really an extension of our plant," says Borton. "[JIT] suppliers have much better control on quality and delivery, and their cost of doing business is significantly reduced. Some of these savings are passed on to us."
In addition, Borton says JIT suppliers have few problems keeping up with engineering changes that nummi requests. "The cost of obsolescing a part is minimized with JIT suppliers because they don't build up a lot of inventory of any specific part," says Borton. "Suppliers that aren't on JIT can't be as responsive and they usually have higher costs."
Supply-side JIT
Since JIT got its start in the auto industry, it's not surprising that auto parts makers and assemblers have been among the first suppliers to implement JIT at their own plants. One early adopter, Johnson Controls Inc. (JCI), a $3-billion producer of seat assemblies, headliners, and instrument panels, has been using JIT manufacturing techniques since 1982.
John Rog, purchasing manager of supplier manufacturing development for JCI's Automotive Systems Group, says a JIT manufacturing environment has become a necessity for remaining a competitive tier-one automotive supplier.
"Minimizing inventories has always been our goal," says Rog. "However, with our customers' demanding that deliveries be on time or significant penalties would ensue, we found JIT a necessary means for maintaining business."
Today, the Plymouth, Mich.-based seat supplier has 97 JIT manufacturing facilities located near customer operations in more than 17 countries. Rog says each plant has a local management team and slightly different supply bases, business demands, and practices. However, JCI has made certain that the JIT processes in use at its seat component plant in Linden, Tenn., are the same as those at its seat assembly plant in Milton, Ontario, or any other facility around the globe.
"The goal," says Rog, "is to be able to walk into any JCI plant worldwide and see the same JIT setup and procedures and know exactly what's going on."
Indeed, process standardization is key to JCI's JIT program, which closely resembles the Toyota Production System that caused such a stir nearly two decades ago. According to Rog, all JCI facilities rely heavily on such Toyota-inspired techniques as visual management, kanban, and poka-yoke. JCI has also embraced the Japanese concept of the "five S's"--sort, stabilize, shine, standardize, and sustain--which aim to bring order and conformity to the plant floor.
By adhering to such core JIT concepts--and allowing enough flexibility for local variations--JCI has put its manufacturing operations on a course for continuous improvement, which is the key objective of the just-in-time process. One example: JCI's Lexington, Tenn., plant, which produces a variety of automotive power-seat adjusters, power recliners, fineblanking, and broached products, achieved 100% on-time delivery for three consecutive years through the use of the core JIT principles mentioned above. Over the same period, the site's sales grew 55%.
Such results have earned JCI recognition as one of the nation's best implementers of JIT. In fact, JCI is the leading recipient of the National Association of Manufacturers' coveted Shingo Prize--named for the late Shigeo Shingo, who, along with Taiichi Ohno, created the Toyota Production System--which recognizes manufacturers for continuous improvements in productivity, quality, efficiency, and customer service.
One for all
With little variation between the JIT procedures used at each JCI site, it makes sense to examine only one site in detail. The company's facility in Livermore, Calif., is as good an example as any.
Like its sister JIT sites, the Livermore plant, which produces seat assemblies and headliners, is only a short drive away from its key customer, in this case nummi. Being stationed just 35 miles from the nummi assembly facility allows JCI to significantly trim its response time from order receipt to product delivery. That's critical, considering the Livermore plant provides about 1,450 complete seat sets and headliners on a JIT basis to nummi each day. These assemblies comprise the defining internal characteristics of 14,050 Toyota Corollas, Chevrolet Geo Prizms, and Toyota Tacoma pickups each year. Any prolonged delay in the delivery of these vital assemblies would effectively shut the nummi plant down.
Like all JIT chains, this one begins with a "trigger" from the customer, alerting the supplier that new parts need to be delivered. According to Borton, nummi transmits a detailed build sequence to JCI via electronic data interchange based on which vehicles are moving through the paint shop, their style and color. While nummi does not specify delivery times or windows to JCI, Borton says the supplier is typically working on a four-hour leadtime. Both companies say this leadtime could be even shorter if it didn't include a built-in buffer for any unforeseen delays (most specifically California traffic).
"There's probably an hour and a half of fluff in there in case there's a traffic jam or accident along the highway," says Borton. "After that, we would start running out of seats."
To prevent such a calamity, JCI, which ships between 30 and 32 full truckloads of complete seat sets to the nummi site each day, begins loading trailers from a small finished goods bank it keeps on hand in a staging area near one of four outbound dock doors at the Livermore plant. JCI says this bank, which includes no more than an hour's inventory, allows it to sequence seat sets in the exact order they will be used on nummi's assembly line. This sequencing process requires JCI to "reverse load" the trailer. In other words, the last seat set nummi ordered would need to be the first on the trailer. Short cycle times require JCI to use a similar process for headliners, which are shipped to nummi 14 times per day.
"If we had to wait until we got all the broadcast information [from nummi] to start building the seats, we would burn up too much time," says Phyllis Crume, plant manager at the Livermore site. She says, based on forecasts, previous orders, and constant monitoring of nummi's inventories, JCI can predict in what sequence the seats and headliners will be installed. Says Crume: "We try to keep as much push at the customer as possible."
Making it happen
Inside JCI's Livermore plant, the trigger signal from nummi sets off a chain of text-book JIT activities.
For example, the Livermore plant uses a kanban system to manage many of the 550 parts and materials that go into its products. Items that flow through the kanban system include plastic parts, seat covers, metal stampings, and certain chemicals. Other parts, such as fasteners, are ordered on traditional releases. However, Crume says the goal is to eventually flow all parts through the kanban system.
Kanban, the Japanese word for "sign," is a pull system which uses lot sizes with a single card attached to each. At JCI, barcoded kanban cards attached to reusable containers act as a visual signal that an assembly-line worker or "team member"--as they are called at JCI--wants to consume parts from suppliers. These barcoded cards are collected and scanned every three hours. This information is compiled into an order manifest that informs suppliers that they need to replenish inventories.
The sourcing strategy to support this process is similar to those used at other JIT manufacturers, such as Toyota. JCI's goal is to source parts from a manageable number of core suppliers and, when possible, use suppliers located nearby its manufacturing facilities. However, the seat maker is flexible enough to understand that this localization strategy should only be implemented where it makes sense and is most cost-effective.
"We're always trying to get the best quality suppliers at the best prices," says Rog. "We always take into account the effort it takes to get those parts to the JIT plant but, there are some things that just make sense [to source centrally] for the greater good of Johnson Controls. For example, chemical suppliers are worldwide, so there's only a handful we can deal with. Others, such as our seating structure suppliers, do such a good job that we source them globally as well."
The Livermore site uses just 50 suppliers, eight of which are located within an hour's drive. Most of the remaining suppliers are scattered throughout the eastern United States, Canada, and Mexico. A few components come from Europe and Japan.
Gary Waters, technical support manager at JCI's Livermore site, says how often a component is picked up from a supplier is determined by the critical nature of the component and how likely demand is to vary from nummi.
"Items such as seat covers are very high value and very sensitive to style and color requirements [of nummi]," says Waters. "Those types of items we pick up most frequently. Other [components] that are not color or style sensitive are picked up once or twice a day."
JCI has contracted all its inbound trucking to Mesilla Valley, a New Mexico-based truckload carrier, to handle dedicated loops or "milk runs" between supplier sites and the Livermore facility. For critical components, Mesilla Valley makes scheduled milk runs as often as five times a day. This is the case for seat covers produced in Stockton, Calif., by TechnoTrim, a joint venture of JCI and Tokyo-based Tach-S Co. Some components, such as seat frames built by a JCI plant in Georgetown, Ky., are picked up six or seven times per week, depending upon customer orders. Other milk runs, such as those to Canada, the Midwest, and the Oakland Bay area, include pickups from several suppliers.
Parts and materials, which are typically pre-sequenced by suppliers, are delivered to one of the seven dock doors earmarked for incoming shipments at the Livermore plant. Waters says JCI tries to unload parts directly from inbound trailers to the assembly line to eliminate "double handling."
"The thought process behind this is that we don't want to bring in whole trailer loads of components," says Crume. "This milk-run scenario allows us to go around and pick up from several different suppliers before returning to the plant. That way we're bringing in a little bit of everything instead of a whole lot of one thing."
Managing the flow of incoming parts allows JCI to keep less than a day's worth of inventory on site at the Livermore plant at any given time. Upshot: Like most JCI seating plants, the Livermore facility boasts about 250 inventory turns per year.
Inspection-free quality
Establishing such a well-oiled JIT system is no easy task. In fact, Rog says getting suppliers to implement the proper kanban techniques has been one of JCI's biggest challenges.
"Once you start working with the kanban system, you get into the suppliers' efficiencies and their ability to make parts on time without defects," says Rog.
Getting suppliers to produce defect-free parts is crucial to JCI's success. Keeping parts flowing to the line smoothly requires that JCI eliminate any waste or non-value-added tasks in its supply chain. Like many JIT manufacturers, JCI has targeted incoming parts inspections as a time-consuming and unnecessary task. As a result, the company has shifted the onus of quality onto its suppliers.
"We are paying suppliers to ship us quality goods," says Waters. "We do not have a receiving inspection function or area, so suppliers are responsible for ensuring that only quality components reach our line."
This doesn't mean JCI is ignoring the quality issue. On the contrary, suppliers to JCI must pass a rigorous pre-approval process during which a cross-functional team, comprised of members of JCI's materials management, technical support, manufacturing, quality, and engineering groups, does an on-site audit, rating suppliers in several categories, including defects-per-million and on-time delivery performance.
"All suppliers must pass our pre-production approval process where we visit their sites and actually sign off on things like their manufacturing quality measurements," says Crume. "We actually walk through their processes and watch them do their production trail runs."
By spending a significant amount of time up front identifying and qualifying suppliers, JCI can confidently allow parts to flow directly to its production line. Crume says the inspection process at the Livermore plant basically occurs on the line.
"If a team member finds a defective part, we notify our quality personnel who do a spot check on the entire lot of parts," says Crume. Because part lots used in JCI's manufacturing environment are so small, quality problems can be identified and resolved quickly. Using larger lots would open up the potential for defective parts to affect more of the production run.
JCI guarantees quality in its own processes through a series of standardized work procedures. Following the poka-yoke ("mistake-proof") concept developed by Japanese manufacturers, JCI has crafted description sheets that use both illustrations and written narrative to detail the proper assembly and work processes for each station along the production line. Standardized work procedures help eliminate variance and drastically reduce mistakes or defects during the assembly process. To ensure these pre-established procedures are being implemented properly, JCI regularly audits actual work on the line.
At the Livermore plant, quality technicians or team coordinators audit various stations along the assembly line to verify that workers are following the standardized work procedures.
Another level
After 16 years, JCI is still trying to fine-tune its JIT system. However, Rog says future advancements will have to come from the supply base.
"We've probably gotten to a point [with JIT] where we're not seeing as large a bang for our buck anymore," says Rog. "But our suppliers can certainly see the same level of improvement as we did four years ago. We're trying to show them that if they move toward a JIT facility, they'll reduce their inventory holdings and be a better supplier for it. We're trying to help the supply base with the same techniques we've learned."
Indeed, much like Toyota and other automakers lend assistance to tier-one suppliers, JCI has developed a training program to help its supply base implement JIT, kaizen, lean manufacturing, and other manufacturing techniques. The company also sends cross-functional teams into supplier sites to help suppliers develop and/or improve their own JIT manufacturing environments.
"We go in and try to figure out where the supplier is and what it needs," says Rog. "We show them the resources we can make available to them, but the decision of where the supplier wants to go and what techniques it wants to implement really comes from the supplier."
Getting suppliers to implement JIT at their own plants has paid off for JCI as well as the supplier. For example, TechnoTrim, which supplies seat covers to several of JCI's plants, has improved inventory turns by 24% per year and increased labor productivity by 7% per year.
JCI is hoping that results like that will inspire other suppliers to implement JIT manufacturing practices at their own plants.
"JIT is so critical in today's environment and we are dependent on our suppliers to support [JIT initiatives]," says Rog. "To maintain our JIT status in the industry, we have to develop a relationship with our suppliers that's going to pull them along with us."
Automotive suppliers, while leaders, won't be alone in their quest for JIT. As managing the total supply chain becomes more common, OEMs are going to put more pressure on suppliers to operate more efficiently. As a result, more and more suppliers will begin implementing the core JIT principles discussed above.
JIT speak
JIT: Short for just-in-time, JIT is a manufacturing process aimed at getting the right quantity of quality parts to the assembly line at the exact time they are needed for production.
Kaizen: The Japanese word for "improvement," kaizen techniques target and eliminate waste in production processes.
Kanban: The Japanese term for "sign," kanban uses standard lot sizes and, often, returnable containers with a card attached. These kanban cards, which are pulled as assembly-line workers use parts, alert suppliers that part levels need to be replenished.
Poka-yoke: Loosely translated from Japanese as "mistake-proof," this process involves establishing standardized work procedures, such as assembly activities, to prevent errors from occurring.
The five S's: Representing sort, stabilize, shine, standardize, and sustain, the five S's aim to bring order and conformity to the plant floor.
NUMMI at a glance
What it is:
New United Motor Manufacturing Inc. (nummi) is a joint venture between Toyota and General Motors.
Where it is:
Fremont, Calif.
Established:
1984.
What it makes:
Toyota's Corolla sedans and Tacoma pickups. Chevrolet's Geo Prizms.
Facility size:
4 million square ft.
Operations:
Stamping, body and weld, paint and assembly.
1997 Production:
Corolla: 149,041
Tacoma: 147,930
Geo Prizm: 60,838
Total vehicles: 357,809
SOURCE: TOYOTA MOTOR MANUFACTURING, NORTH AMERICA INC.
JCI recognized for JIT prowess
To JIT insiders it should come as no surprise that Johnson Controls Inc. (JCI) is so heavily featured in a discussion on just-in-time manufacturing. The Plymouth, Mich.-based producer of seat assemblies, headliners, and instrument panels has repeatedly been recognized as a leader in JIT by the National Association of Manufacturers (NAM) and the College of Business at Utah State University, who award the annual Shingo Prize for Excellence in Manufacturing.
JCI has been the leading recipient of the nine-year-old Shingo Prize, which is named for the late Shigeo Shingo, creator of the original Toyota Production System on which JIT is based. This year, JCI's Lexington, Ky., facility, which makes power-seat adjusters, recliners, and other seat components, won the Prize for achieving 100% on-time delivery performance, a 55% sales increase, and significant enhancements in quality and productivity between 1995 and 1997.
In 1997, four of the nine Prize winners were Johnson Controls plants. Here's a rundown of why they won:
* Georgetown, Ky. (metals and trim): Cut inventory costs, created a mistake-proofing system for welded products, increased employee team involvement by 350% in three years.
* Jefferson City, Mo. (seating): Reduced raw-material repair costs by 60%, increased productivity by 8%, and cut volatile organic compound emissions by 27% over the past five years.
* Linden, Tenn. (seat parts): Increased productivity by 20%, cut inventory levels by 44%, and "significantly reduced" customer rejection rate.
* Pulaski, Tenn. (polyurethane foam): Decreased customer returns by 96%, improved productivity by 10%, and reduced plant scrap by 60% in three years.
TechnoTrim, a joint venture of JCI and Tokyo-based Tach-S Co., also received a Shingo Prize last year. The Livonia, Mich.-headquartered producer of automotive seat covers was recognized for improving inventory turns by 24% per year, increasing labor productivity by 7% per year, and improving its safety index by 32% per year.
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