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  • Post -Implementation Analysis on JIT strategy under a MRP Environment

    Abstract code 020-0594

    Post -Implementation Analysis on JIT strategy under a MRP Environment

    Dr. Ravishankar Basappa, Professor& Head, IEM, BMS College of Engineering,

    Bangalore.India

    Gurudatt Lakshminarayana Rao C , Research Scholar, IEM, BMS College of

    Engineering, Bangalore , India.

    Dr. Jayathirtha Rotti, Research Guide, CEO Bulleye Consulting Group , Bangalore ,India

    POMS 22nd

    Annual Conference, Reno, Nevada , USA, April 29 to May 2, 2011 ----------------------------------------------------------------------------------------------------------------

    Abstract: It is clearly demonstrated that JIT impacts all the areas of manufacturing

    management and reduces the waste in the system. The combined effect of all above

    drives the organization slack to zero. This paper focuses on MRP implementation in a

    small- and medium-scale manufacturing firm in India with JIT approach. MRP

    implementation gains are in the form of inventory reduction, thereby reducing working

    capital needs and also reducing the stock obsolescence. There is enough evidence

    available in literature and research applied by various scientists across the world. Here

    an attempt is made on how JIT helps to manage inventory and earn fruitful returns. An

    customizable ERP software "OPTIMISER 10.6" was utilized with BOM explosion and

    also generating net requirements based on existing stocks at the time of MRP runs. This

    study clearly showed the reduction of inventory with MRP implementation with a JIT

    approach. This paper is an extension of our earlier paper 007-0484 .

    Key words; Just-in-time (JIT), Manufacturing Resource Planning (MRP), Implementation.

    Literature review::

    Over the past three decades, Japanese manufacturing practices in general and Just-In-Time

    production in particular have received a great attention from Western researchers and

    manufacturing firms in trial to catch-up in Japan in terms of quality, productivity and lost

    cost. The JIT advocates the elimination of waste by simplifying production processes,

    reductions in set up times, controlling material flows and emphasizing preventive

    maintenance are seen as ways by which excess inventories can be reduced or eliminated and

    resources utilized more efficiently. (Kannan and Tan, 2005)

    Published research papers covered a wide area of JIT. Early papers tried to identify JIT

    elements and whether or not they are associated with Japanese culture and their applicability

  • Post -Implementation Analysis on JIT strategy under a MRP Environment

    22nd-POMS-Reno 2

    in western manufacturing firms. Golhar and Stamm (1991) classified articles associated with

    JIT published in the 1980s as follows: Global productivity comparison articles,

    JIT/MRP/OPT comparison articles, articles on JIT practices, Kanban, cellular manufacturing,

    accounting, Human Resource Management, purchasing and quality.

    Later, emphasize was given to the impact of JIT on both competitive operational and

    financial performances of the firm. These operational practices included total quality

    management, information systems, technology and others. Sakakibara et al (1997) asserted

    that the connection between JIT and manufacturing strategy is rarely discussed in the

    literature covering research on manufacturing strategy as necessary infrastructure for JIT

    production (Sakakibara et al. (1997); Ahmad et al. (2003)).

    The JIT production was described by Taiichi Ohnco, the godfather of Toyota production

    system, as All we are doing at the time line from the moment the customer gives us an order

    to the point when we collect the cash, and we are reducing that time line by removing the

    non-value-added wastes (Liker, 2004). One motivating reason for developing JIT and other

    better production techniques was that after World War II. Japanese people had a very strong

    incentive to develop good manufacturing techniques to help them rebuild the economy

    (Cheng, 1996).

    There are seven forms of waste identified by Toyota engineers: Waste of overproduction,

    Waste of inventory, waste of repair/defects, waste of motion (unnecessary movement), Waste

    of processing, and Waste of waiting and Waste of Transport (Womack and Roos, 1990; Imai,

    1997; Taylor and Brunt, 2001; Liker, 2004).

    There is no agreement on a clear definition of JIT as generally defined concept is as follows

    as per Hallihan et al. 1997and Voss and Robinson (1987) : JIT may be viewed as a

    production methodology which aims to improve overall productivity through the elimination

    of waste and which leads to improved quality. The in the manufacturing/assembly process

    JIT provies the cost-effective production and delivery of only the necessary quality parts, in

    the right quantity, at the right time and place while using a minimum of facilities, equipment,

    materials and human resources. JIT is dependent on the balance between the stability of the

    users scheduled requirements and the suppliers manufacturing flexibility. It is accompanied

    through the application of specific techniques which require total employee involvement and

    team work.

    Many researchers have tried to identify the main elements of JIT. However, there is little

    consensus among researchers regarding the relative importance of these elements in the JIT

  • Post -Implementation Analysis on JIT strategy under a MRP Environment

    22nd-POMS-Reno 3

    implementation process (Ramarapu et al., 1995). However the potential synergic benefits are

    not fully realized until all elements of a JIT system are integrated (goyal and Deshmukh,

    1992).

    Research has shown several benefits obtained by implementing JIT production. According to

    Hay (1998), JIT not only provide companies with great increases in quality of their

    manufactured goods, but also help a company to cut response time to market by as much as

    90 percent. The most cited JIT benefit is cost reduction. Other benefits included: inventory

    reduction, increased quality and productivity levels, improved relationship with suppliers,

    improved customer service, reduced lead time, reduced work in process and raw materials,

    increased inventory turnover, downtime reduction, workspace reduction (Mehra and Inman,

    1992; Sohal et al., 1993 Markham and McCart 1995; Yasin and Wafa 1996; Sriparavastu and

    Gupta, 1997; Imai, 1997).

    1.0: Organization: This study was conducted in an SME automotive engineering firm. The

    organization was following conventional manual planning systems and inventory

    management was mostly on thumb rules developed over a long period of time. Fabrication

    and assembly facilities were on functional basis and use of computers were limited to

    financial accounting. It was a common practice to have higher buffer stock to decouple

    fabrication and assembly production stoppages due to stock outages. The company has

    several specialized products, out of which the following are the fast moving ones. 1. Bearing

    2. Assembled Drive Shafts 3. Assembled Tapered Shafts. The following are the requirements

    from the different customers. It should be noted that a lead-time of 20 days is required to

    accept orders.

    Customer A

    Particulars Quantity Order Date Delivery date

    Bearings 10000 10th Jul 09 30th Sep 09

    Assembled Shafts 4500 10th Jul 09 30th

    Sep 09

    Customer B

    Particulars Quantity Order Date Delivery date

    Assembled Shafts 6250 10th Jul 09 10th Oct 09

    Tapered Shafts 8450 14th Jul 09 11th Oct 09

    Customer C

    Particulars Quantity Order Date Delivery date

    Assembled Shafts 2350 14th Jul 09 30th

    Sep 09

    Tapered Shafts 900 14th Jul 09 21st Oct 09

    Customer D

    Particulars Quantity Order Date Delivery date

    Bearings 1250 10th Jul 09 30th

    Sep 09

  • Post -Implementation Analysis on JIT strategy under a MRP Environment

    22nd-POMS-Reno 4

    Assembled Shafts 165 10th Jul 09 10th

    Oct 09

    Tapered Shafts 230 10th Jul 09 11th

    Oct 09

    Table 1.1: Order Information

    Customer A Customer B Customer C Customer D

    Particulars

    Order No:

    3130

    Order No:

    3131

    Order No:

    3132

    Order No:

    3133 Total Order Qty

    Bearings 10000 0 0 5550 15550

    Assembled Shafts 4500 2350 6250 165 13265

    Tapered Shafts 0 900 8450 230 9580

    Table 1.2 Complete Order information

    1.1 Selling Prices:

    Sl No Particulars EOQ Cost/unit

    1 Assembled Shafts 500 4500

    2 Tapered Shafts 250 4916

    3 Bearings B103 350 452

    4 Eccentric Shafts --

    5 Engine Casing Assembly --

    6 Piston Rings Assembly --

    Table 1.3: Component cost and EOQ details

    2.0: Problem: Currently the firm does not use MRP methodology and also do not have any

    system of enterprise level planning. Each location works like an independent factory with its

    own production planning and delivery logic. Issues of delivery slippages, quality,

    planning and tight co-ordination issues had cropped up due to sub-optimal utilization of

    production resources both manpower and machines. Since the planning was manual and

    based on thumb rules for inventory management, it was felt there was excess inventory in the

    production system in the fo

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