Copyright © Daniel Cullinane CPA.
DIFFERENCES BETWEEN LEAN MANUFACTURING & JIT
Lean manufacturing and "just in time," or JIT, are often treated as two different phrases for the same thing, but they are not identical concepts. Just-in-time manufacturing is focused on efficiency, while lean manufacturing is focused on using efficiency to add value for the customer. Just-in-time manufacturing can be practiced on its own or as one step in the lean manufacturing process.
Before JIT was introduced by Toyota, most manufacturers kept large amounts of inventory available just in case they needed it. Taiichi Ohno of the Toyota corporation developed a production system in which parts would be ordered in small quantities based on short-term needs. The process was designed to ensure that a part would arrive just in time to be used, eliminating the need to keep it in inventory. Toyota found that the just-in-time system reduced lead time on orders by one third and reduced production costs by 50 percent, and the system eventually spread to many other companies.
Lean manufacturing takes the concept of JIT and reexamines it from the perspective of customer value. The first step in the lean manufacturing process is to consider what aspects of the product add real value for the customer. For instance, if a customer is buying a stereo speaker, he might be looking for sound quality, durability and affordability. The first principle of lean manufacturing is that every step in the production process must add something of value that the customer actually wants.
The Value Stream
The next step in the lean process is to examine every activity involved in manufacturing a product to identify which activities add value and which do not. The manufacturing process is then redesigned to remove activities that don't add value wherever possible. For instance, if a customer shopping for a stereo speaker is looking for affordability, sound quality and durability, using high-quality parts would add value by improving the durability and sound quality of the product. Transporting parts from a distant warehouse to the manufacturing plant would not. Switching to a just-in-time manufacturing process would reduce transportation and warehousing costs, making the speakers more affordable. The new process adds value by increasing efficiency.
Flow and Pull
Once everything that does not add value has been removed from the value stream, the manufacturing process should flow more efficiently. At this stage in the process, lean manufacturing and just in time are identical. The next step in leaning manufacturing is to only manufacture what the customer orders or requests so that customer demand or "pull" drives company production. This is similar to just in time in that new parts are ordered based on short-term requirements, but the driving force behind the efficiency of the process is customer value rather than cost reduction. As the company learns more about what customers really want, it repeats the process over and over again with the goal of creating the perfect product at the perfect price.
Daniel Cullinane CPA
25 Plaza 5 25th fl Jersey City NJ phone 732-516-1648 fax 732-516-9778
2500 Plaza 5 25th fl Jersey City NJ 07311 phone 732-516-1648 fax 732-516-9778