The just-in-time production methodology is used in companies that use the total quality model as a procedure to manage and reduce the time in the production of their finished products.
The Just In Time production methodology aims at continuous processing, without production interruptions. Achieving this objective means minimizing the total time required from the start of manufacturing to the invoicing of the product.
Ideal system. In an ideal just-in-time production system, the total time for a product equals the process time
Just-in-time approach to the concept
The total time for any manufactured product can be represented as:
| (+) Preparation time |
| (+) Processing time |
| (+) Waiting time |
| (+) Inspection time |
| (+) Internal transport time |
| (=) Total time |
From the above it can be deduced that the total time is equal to the time of all the activities that add value to the product plus all those that do not.
Basic structuring of just-in-time
This methodology arises from the weaknesses of the traditional valuation system, from the delays in the manufacturing process when producing quantities of products in excess of current demand, due to the use of models based on the determination of economic order quantities.
The just-in-time philosophy has a dynamic vision of how to optimize production, basing its foundations on minimizing the tasks that do not add value without worrying much about the optimization and size of production batches. This has as a consequence within these parameters that inventories are seen as a form of carry-overs, leading to the idea that "higher inventories are the need to protect production stages from poor quality or from uncertain production and supply"
For the aforementioned and for the application of this methodology, the companies that adopt a total quality program are the ones that can most efficiently apply the just-in-time model, since in them the quality problem disappears and the possible failures or tasks that do not add value are eradicated in a large percentage. It should also be taken into account that since there are no technical problems within the production stage, it is not necessary to maintain a considerable stock of inventories to protect against inadequacies of poor production quality, thus eliminating a large quantity of products in process.
In the just-in-time application, production times are considerably reduced, since when producing in small batches, defective parts are easily detected in each of the departments that enter the production process, thus carrying out a control that allows any time modify the process that is causing the deviation.
The work that adds value to the production, is the one that during the processing on the materials and components represents one more aggregate of the final product.
Just-in-time benefits
- Decrease investments to maintain inventory Increase inventory turnover Reduce material losses Improve overall productivity Lower financial costs Save production costs Less storage space Avoid quality problems, neck of bottle. Coordination problems, unreliable suppliers etc. Rationalization in production costs Obtaining little waste Effective knowledge of deviations Making decisions at the right time Each operation produces only what is necessary to satisfy demand There are no random processes or The components involved in production arrive just as they are used.
Just-in-time application environment
The Just in Time methodology as a productive management and management procedure can be used in any type of company, both industrial and services.
Any process can be examined in order to determine the operations that do not add value and the causes for the work to be interrupted, facilitating the detection of anomalies, eliminating ineffective tasks that impede a good development of the organization.
The philosophy that frames just-in-time production is to produce only the necessary quantities of product and at the time that customers require.
Just in time vs. Traditional production
The main differences that arise from the Just in Time model and the traditional production methodology are summarized below:
Decrease in inventories
The Just in Time system seeks to reduce inventories to very low levels, while in the traditional system, materials are supplied and transferred to the next process regardless of the level of existing demand.
Production cells
In traditional production, products are moved from a group of identical machines to another department with machines that perform other specific work, Just in Time replaces this pattern with one of production cells in which the machines are grouped into families and They are arranged in such a way that a series of sequential operations can be carried out. Each cell is installed to produce a group of products or one in particular.
Interdisciplinary workforce
In the traditional methodology, workers specialize in managing a single machine in a single department, the JIT model seeks that all workers know how to operate the entire set of machines creating an interdisciplinary environment.
Total quality management
The Just-in-Time system cannot be implemented in a company that does not have a clear commitment to Total Quality Management, because if a production process is not found without deficiencies, the reliability on which the model is based cannot be created.
Decentralization of services
For the application of Just-in-Time, easy and fast access to support services is required, which means that service departments must be decentralized and their personnel assigned to work directly to support production, which is not the case in the traditional system.
The following table summarizes the above.
Differences between just-in-time and traditional production
| Just in time | Traditional production |
| 1. Pull-through system. | 1. Push-through system. |
| 2. Negligible inventories. | 2. Significant inventories. |
| 3. Production cells. | 3. Departmental structure. |
| 4. Interdisciplinary workforce. | 4. Specialized workforce. |
| 5. Total Quality Control. | 5. Acceptable Quality Level. |
| 6. Decentralized services. | 6. Centralized services. |
The application of a Just-in-time model can minimize by a large percentage the costs that the company traditionally assigns to its production departments, increasing the possibility of giving financial managers a better vision for management and decision-making
It is intended to analyze how the Just-in-Time production model changes the perspectives of the company compared to the traditional model in terms of its operational part as a measure of performance and productivity, moving away from guidelines such as the analysis of efficiency or deviations as a standard for processes productive.
This is followed by a video showing the differences between just-in-time production and traditional production, showing the application of just-in-time in a British car manufacturer.
Economic impact of just-in-time
The economic impact of the just-in-time model can be analyzed from three general points of view, first from the cost of the products, secondly by the allocation that is made of the general costs of production and finally the maintenance of inventory.
Total security? No methodology can ensure the future well-being of companies one hundred percent, but Just-in-Time is a good tool to eliminate possible production problems within the company
The cost of the product in the Just in Time
The companies that spend most of their production time in developing a single product do not have a major problem in determining their costs because they are assigned directly to the product, this is the advantage offered by the application of the methodology of the just in time since by having specialized production by product or by product group, it is easier to allocate costs to articles.
Allocation of overhead costs in the Just in Time
According to JIT guidelines such as production in production cells, interdisciplinary labor and decentralized activities, the allocation of costs is much easier, since costs are assigned only to the item that is being produced on the line.
This is explained by the fact that in a Just-in-Time production model, many of the costs that were formerly considered indirect, become direct compared to the production line due to the direct relationship they take in the process. Below is the clear change that occurs in the allocation of the different cost elements for a company in which the traditional production system was used with one that applies Just-in-time.
| Cost elements | Traditional production | Just in time |
| Direct raw material | Direct | Direct |
| Direct labor | Direct | Direct |
| Repair and Maintenance | Indirect | Direct |
| Materials handling | Indirect | Direct |
| Energy | Indirect | Direct |
| Supplies | Indirect | Direct |
| Supervision | Indirect | Direct |
| Insurance and taxes | Indirect | Indirect |
| Amortization | Indirect | Indirect |
| Depreciation | Indirect | Direct |
| Services | Indirect | Indirect |
Taking into account the above, a company that implements a Just-in-Time production model will have minimum inventories of products in process and finished, thus having an advantage to distinguish the costs of the product since there are no costs related to the maintenance of inventories stocks costs are attributable only to the productive period.
Just-in-time and inventory maintenance
In traditional production, material inventories are kept so that a company can take advantage of quantity discounts, due to the eventual rise in the prices of supplies or possible shortages in raw materials. The JIT methodology can achieve that the previous approaches are met without the need to maintain a large amount of inventories in the possession of the company, then the ways in which the Just in Time proposes the ways to have a minimum of inventory complying with the needs that the company requires:
- Negotiate long-term contracts with a few local suppliers Select suppliers that are as close as possible to the production plant Buy from companies that guarantee the quality of the materials supplied Demand compliance in the delivery of materials by vendors. Seek the best performance in business transactions Minimize the cost of maintaining raw materials Avoid waste as much as possible.
Attributing costs that are and are not production to product lines, produces more accurate product costs and better information for control and decision making
New insights for measuring performance
The JIT methodology begins by changing the measures with the implementation of a production model based on Total Quality Control (CCT), establishing a formulation of continuous improvement of the elements that enter the production process and the establishment of minimum inventories or null.
The company, when changing production from a traditional model to a Just-in-Time model, can present many drawbacks with the measures used in the performance evaluation, since the old ones do not accommodate the new system. The practice that was previously used is no longer sufficient for the new measures that have been taken, which is why measures such as the standard cost that relates the real yields against the budgeted ones, the efficiency reports and the analysis of deviations change their perspective compared to to management.
From this it can be concluded that the changes that the JIT intends to make in the new production system compared to the standard cost is to avoid:
- Analysis and dysfunctional behaviors that affect the effective functioning of the processes, this is revealed when the people in charge of making the purchases of materials to achieve the standards acquire low-quality raw material in order to obtain favorable price indices. From a labor perspective, deviations in efficiency may encourage workers to produce more than is necessary to achieve budgeted efficiency levels or to avoid a favorable deviation in volume. Deviations in overall production costs are also detrimental to the business, as avoiding preventative maintenance to ensure positive budget deviation can result in unreliable equipment for production.
Significant changes. Companies that adopt a JIT production system, alter the role of standard cost as a management tool
The perception of just in time in the face of new production standards
In the new production model, it must be taken into account that standards change, now they are used to identify levels of efficiency, determine activities that do not add value to production processes and to evaluate the success of the company in the falls below these levels.
The accounting system of the company must make a distinction between the costs that add and those that do not add value, in order to take the necessary control measures to eliminate the dysfunctions found, this to seek a value-added standard that has a zero cost.
The JIT model seeks to specify ideal standards based on the principle of continuous improvement of activities, which can be modified with the appearance of new technologies, new knowledge and other innovations that change the productive objectives of the company and therefore raise new opportunities for improvement.
Finally, it is worth noting that the implementation of a Just-in-Time system has to be coordinated by all the component parts that intervene in the production process, for this reason it is vitally important that all are committed to its establishment and to the fulfillment of their responsibilities.
