Jean-Pierre NORDMANN 26/11/2011
Just-in-time
Traditional cost control system focused on cost containment rather than cost
reduction. Today, modern cost management and strategic management
accounting focuses on process improvement and the identification of how
processes can be more effectively and efficiently performed to result in cost
reductions and value improvement.
1. Description of Just-in-time.
Just-in-time is a productive organisation applied internally and with suppliers. The
goal is to reveal problems inhibiting a continuous and regular flow at the origin of
waste in time, workmanship, materials, energy, tools and space. In addition,
employment relationships motivate workers to reduce standard time spent within
each workstation by making salary and promotion dependent on the
accomplishment of management goals.
Just-in-time is part of a strategy called “permanent cost reductions at a constant
volume”, or the Toyotan model. The aim of the strategy is to reduce costs
continuously and in all circumstances. This has been Toyota’s strategy since
1950`s.
To be implemented, the “permanent cost reductions at a constant volume”
requires a product policy that chooses to ignore innovative models because of
their high financial risk. It also requires a constantly evolving productive
organisation that is not based on technological take-offs so as to eliminate
“waste” of all sorts, as well as employments relationships that tolerate continuer
reduction in the number of workers at constant volume, whether workers
contribute to it or not.
The Toyotan model answers to these demands with product policy that aims at
satisfying average demand in each large segment of market. This is accomplished
by offering models whose commercial characteristics are well grounded, have
little excess in diversity, and are planified quantitatively so as to grow regularly.
This is why Toyota implemented the Just-in-time, and this guarenteed firm`s
competitiveness up to 1990`s.
2. How Just-in-time seeks to achieve cost reduction and value
improvement.
Just-in-time means to produce the exact quantity and quality requested, when
the demand pull it. The Just-in-time is a “pull” strategy, and then it means the
firm must be able to produce what the “down” ask.
To be implemented, Just-in-time requires fiability in the response delay, fiability
of products and machines, reduction of the size of the batches, polyvalence of
workers, flexibility of production tools, and an adapted information system to
start production.
Just-in-time is based on the Kanban system. It is an information system that
enables the firm to produce when the demand ask for the product. There are two
flows in the same time: the product flow which goes down production chain to the
customer, and following the same steps, an information flow which goes up the
production chain.
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Jean-Pierre NORDMANN 26/11/2011
The Kanban system has five goals. The “zero delay” is the diminution of
production time to increase reactivity. The “zero default” is the increase of
quality. The “zero stock” is the consequence of the need to produce different
products, and not to keep old products in stock; “zero breakdown” means no
problems during the production process, avoiding cost of these problems
(disorganization) and delay. The “zero paper” tends to limit formalisation that
taylorian methods obliged to implement. A bigger autonomy is then given to
workers (conditioned by their efficiency).
The technique of Kanban ensures a dynamic regulation of the production allowing
a good reactivity, without stock of finished products and few products "work-in-
progress". It always does not apply successfully.
The study of the manufacturing processes in their dynamics tries to find solutions
adapted to each case. The criterion unceasingly selected is that of reduction of
the duration of the cycle of production. In the workshops tayloriens, this period of
manufacture is primarily made up of waitings between working stations. The
organization shortens the cycle of production. For example, the size of the batch
of transfer between working stations is a fundamental component of waitings.
Each part of the batch must wait until the other parts are machined to pass to the
following station. By reducing the size of the batches of transfer, one reduces the
deadlines, without transforming the process.
Among the tools of organization of the production, the software of simulation of
the productive processes shows the objectives clearly. This software simulates
the operational operation of the workshops, part after part, by taking account of
the risks of the request, the variety of the production, the operational ranges,
times of machining at each station, and of the possibly associated risks, the
breakdowns of machines, and so on. We can know the performance of a
workshop in terms of capacity and duration of the production cycle. All the
combinations of process and organization can thus be tested before being
implemented. The measurement of the deadlines and cost are essentials. Costs
and times are in the heart of the study of the new organizations of the
workshops.
3. Difference between Just-in-time and traditional cost
containment.
To understand this difference, we can focus on the autmotive industry and three
strategies: “volume”, “volume and diversity”, “reduction of costs at a constant
volumes”. These different strategies are known as the Fordian, Sloanian, and
Toyatan models.
The “volume strategy consists in distributing costs among the largest number
possible of vehicles. Costs are therefore not immediately adjustable to demand.
The productive organisation is standardized, continuous, and strongly integrated,
based on mechanized and rhythmic displacement of the product, task breakdown
into elementary operations redistributed among work stations with the sole
purpose of saturating cycle time periods; and employment relationships
guaranteeing workers lacking required skills a fixed salary that is not dependent
on profit.
As the demand needs differentiation (economic, social, geographic standpoint),
the volume strategy faced difficulties in the 1920`s and 1930`s. General Motors
implemented the “volume and diversity” strategy, by having different models
share a maximum number f invisible parts among them, thus reducing diversity
to one only perceptible by the customer. This was followed by the “Sloanian”
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product policy, which is multi-brand, offering parallel ranges whose similar
models share the same platform while offering a number of versions and options.
In these two strategies, cost control systems focused on cost containment. The
volume, and then the diversity enabled firms to reduce costs relatively.
The Toyotan model (to which Just-in-time belongs) is a real process of cost
reduction, as without any change in volume, it reduces cost and improves value.
Bibliography
http://www.uqtr.ca/INRPME/pdf/GlobaPME1.pdf
http://www.univ-evry.fr/labos/gerpisa/lettre/numeros/142/142.pdf
http://www.sciencesdegestion.com/elearning/gestionprod/nimes/plan.html#Intro
http://panoramix.univ-paris1.fr/GREGOR/2000-04.htm
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