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JUST IN TIME SYSTEM OF INVENTORY MANAGEMENT:INTRODUCTION:The Just-in-time concept was explored in detail in the preceding chapter. It was pointed out there that, in total, JIT is an operating management philosophy. Based on the total philosophy, a number of specific operating techniques have been developed techniques for manufacturing operations, for production planning, and for inventory management. Those dealing with inventory management are the products of the JIT decisions made in the manufacturing and the planning areas. The operating concept of system is to gear factory output tightly to distribution demand for finished goods, to gear individual feeder production unit tightly together, and to gear the supply of production inventory tightly to the manufacturing demand schedule. This means that all inventories in the systems, including production inventories, are maintained at absolutely minimal levels. It should be a emphasized at the outset, however, that as a practical matter most firm utilizing the JIT concept do so for no more than 5 to 10 percent of the material handled by the purchasing and supply activity, regardless of the extent of the commitment in the manufacturing operation. This means that the production inventories items handled in the JIT inventory system are the primarily high-value A items. All these items are purchased on a long term contractual basis, with small-volume deliveries scheduled as frequently as once or a twice a day up to once or twice a week. To this point, our discussion has covered only the 5 to 10 percent of the firms production material that typically are handled by its JIT purchasing and inventory management system. What about the remaining 90 to 95 percent of the items? As a rule, they are handled in the more conventional manner by one of the other standard systems-namely an MRP or an order point system. From a practical point of view, a JIT inventory system in its purest sense is workable only in the continuous manufacturing and processing operations or in intermittent operations that produce a small number of standard products and, because of the fact, are similar to continuous operations. Most, if not all, of the material handled are depended demand items

Overview:Just in time is a strategic philosophy which is concerned not with inventory level per se, but with promoting an environment in which the way of producing goods can keep improving over time. Drastic inventory reductions are only one tool to this end. If inventories are low, then it will not be a possible to hide badly produced units in the floor inventory. The Japanese use the analogy that bad units are like rock hiding in the water. If the water level is lowered, the rocks will show. Then everyone will be forced to fix the process, rather than to let it slide.

JIT and EOQ:it is often suggested that JIT and EOQ are in conflict, because EOQ suggests a square root balance between setup costs and inventory costs, and JIT suggests inventory should be zero! there is really no conflict, because the two situations are apples and oranges. EOQ is a short run tactical decision. Given a setup K and holding costs h, then order Q**=[2KD/h]^0.5. he Japanese would not disagree with this, but would simply suggested that the tradeoff between a fixed setup and a fixed holding cost is not strategic.

JIT and Kanban:Kanban is simply a practical manual system for implementing JIT, developed by toyato. Kanban uses a system of cards; in fact, the word means card or ticket in japans. The kanban system has been a major factor in making Toyota profitable. A typical system uses two kinds of cards: withdrawal kanbans and production ordering kanbans. The production kanban authorized the manufacturing of a container of a parts. The withdrawal kanban authorizes the withdrawal and movement of those parts. The number of peaces in a container is fixed. When production rates change, containers can be added to or deleted from the system. The idea of safety stock is limited to 10 percent of one days demand. If both the customer and vendor are using the kanban system, the withdrawal kanban becomes the shipping document, while the production kanban at the vendors plant regulates production at that point. Tools

for implementing JIT:-

Overview:JIT is a very ambitious philosophy, which is very difficult to implement. It requires very low inventories, so that something must be done to lower setup costs to make that practical. It requires short lead times in production and in design, so that new approaches must be designed to make that possible. It requires tight coordination between a plant and its suppliers and between the plant and its customers. Again, new techniques must be found to make this work. We discuss some of these techniques in this section.

Setup cost reduction:In our inventory work, we have typically just specified a setup cost K for setting up a machine. In practice, things are a little bit more complicated than that. Suppose that currently time on the machine is valued at $200 an hour, while the person doing the setup has a value of $20 an hour. Suppose the worker spends eight hours setting up the machine, and that nothing else can be produced during this time. Then we might reasonably value the setup cost as K = 8(200+20) = $1760.00.

Time based competition:The term time based competition means to offer the customer shorter lead times as a way of improving the attractiveness of the product. This can be at two levels: Level 1. shortening production lead times-that is, shortening the time from receipt of the order until the final delivery of the order. Level 2. shortening new product development lead times-that is, shortening the time from inception of a new product idea until it is available for sale. The first is tactical, the second is strategic. We talk briefly about the first issue; the second is outside of our scope in this textbook.

Electronic data interchange (EDI):Satellites, fiber optic cable, and sophisticated communications software are increasingly linking various plants with there suppliers, and plant with their customers. These kinds of tighter communication allow more coordinated scheduling, and reduced inventories; that is, in a nutshell, JIT. EDI raises obvious challenges as well. How can the software be written so as to maximize useful communication while minimizing the danger that privacy will be invaded in areas which are not appropriate for the other company to know? A rather different issue which must be resolved is: as companies cooperate more and more automatically via their computers, at what point is competition lessened? This issue is likely to be raised more than once in the near future.

Bibliography
Thomas e. Morton, operations management, inventory system, JIT, I-92 to I-97. Donald w. Dobler, purchasing and supply management, inventory system, JIT, 533.

ARTICLE:JIT and the job shop - Arizona Precision Sheet Metal Inc.'s just- in-time inventory system:Modern Machine Shop, April, 1992 by Tom Beard Find More Results for: "time system of inventory management" Inventory Software... Time to take... Cutting costs with... AIMing to match supply... Most people think just-in-time production is impractical in the unpredictable environment of a job shop. But this sheet metal fabricator shows how the smaller shop can do it too. Is just-in-time (JIT) manufacturing just for larger, product line manufacturers? Although some people may think so, Matt Thul stands ready to prove them wrong. As vice president of manufacturing, Mr. Thul has overseen the successful implementation of JIT at Arizona Precision Sheet Metal, a 120-person job shop in Phoenix. He knows it works, and that other shops can do it too. But he also knows that successful implementation takes a major commitment and a lot of hard work. And it takes a more pragmatic approach than some JIT purists would prefer to sustain a program in the unpredictable environment of a job shop. The first target of Arizona's JIT program was to reduce inventory, and they have surpassed even their own expectations. The eight weeks worth of cushion that they used to keep has been shrunk to less than one, and average sheet metal inventory is now less than three days. Overall, Mr. Thul estimates that they have removed better than fifty percent of the work-inprocess from their shop floor, and the reduction in finished goods is even larger yet.

Advertisement:They've also found a host of other benefits. Quality is better. Leadtimes are way down, and as a consequence, they are much more flexible to customers' changing needs. Best of all, throughput has dramatically increased. The proof: In 1988, Arizona Precision had 160 people and did some $6 million in sales. Last year they did twice the business with a little more equipment, the same space and 40 fewer people. Mr. Thul credits most of these gains to JIT. Managing the change, however, has been no simple matter. JIT has changed virtually every aspect of how Arizona Precision conducts business both on and off the shop floor. Technology is part of the formula, but only a part. It also involves changing the way the shop is structured, the way people approach their work, and the ways the company deals with their customers and suppliers. Here is how it all fits together.

Getting Started:Unlike many companies which launch full scale manufacturing improvement programs, Arizona Precision was not coerced into action by drastically deteriorating business conditions or obtrusive customers. Founded by John Thul (Matt's father) 26 years ago, the company had been a successful manufacturer of precision sheet metal parts of all types, and developed a strong niche in producing cabinets for gaming equipment such as slot machines. What did get the ball rolling was education. In 1988, Matt Thul and engineering manager Dick Doyle attended a JIT seminar put on by Technical Change Associates, a consultant in Salt Lake City that specializes in the management of both technical and behavioral change in manufacturing organizations. (Though intrigued, Mr. Thul hardly new that he himself would one day be an instructor, along with TCA President David Dixon, in traveling JIT workshops sponsored by U.S. Amada of Buena Park, California). After John Thul attended the seminar, and Matt attended several more, Arizona Precision's top management became fully committed to effecting change in their own organization to ensure its competitiveness with any like manufacturer in the world, as that was the standard to which they ultimately would be compared. At first they were thinking about reducing inventory and setup. After a few early successes convinced the managers they were on the right track, they decided to spread out the program. Mr. Dixon was brought in to stage an introductory JIT seminar for suppliers, customers and lead men. This act of inclusion would prove an essential component in the plan, as it would be difficult to achieve Arizona Precision's JIT objectives without the understanding of customers, and impossible without the cooperation of suppliers. Then the training was expanded to include all people in the shop, 16 at a time, in two-day workshops.

Restructuring The Shop:Early on, Messrs. Thul and Doyle seized the opportunity to make some bold strokes in the shop. The plant had been laid out largely in functional groupings, with press brakes in one area, welding in another, and so on, For JIT, they rearranged all equipment into three cells where products are produced complete in one continuous process. This layout makes particular sense for the gaming products, since there is a high degree of similarity among the pans. The first cell is dedicated to large cabinet parts. The second is for a family of small parts which typically are geometrically intricate with multiple angles. The third is what Mr. Thul calls their "cats and dogs" cell. A concession to the nature of job shop manufacturing, it handles anything that doesn't fit into the first two cells, and consequently is more traditionally batch-oriented in its scheduling and operation. Within the other two cells, however, work is managed with a "kanban" pull system designed to inherently produce a balanced work flow. A typical part path through a cell is: raw material to a punch press, to fastener insertion, to press brake, to welding and assembly, and then on out to shipping. Rather than trying to push as much material through a workstation as possible, and let it stack up if the next station is behind, the idea here is only to make what the next process needs. The press brake operator, for instance, will not go ahead and process a job until he sees that the assembly kanban .square--the designated

6 staging area for that subsequent operation--is empty and thus ready for the next order. He may, however, go over and help the assembler catch up if that operation is slowing down the flow through the cell, and then return to the brake when the timing is right. This methodology works all the way back through the cell so that a balanced operation-tooperation flow is controlled from within the cell by its work team, rather than through an externally imposed scheduling system

Bibliography
http://findarticles.com/p/articles/mi-m3101/is-n11-v64/ai-12371843/pg_1.

SUPPLY CHAIN MANAGEMENT:INTRODUCTION:SCM:- means managing the flow of information through supply chain order to attain
the level of synchronization that will make it more responsive to customer needs while lowering costs. Supply chain management(SCM) focuses on managing the flow of goods and services and information through the supply chain in order to attain the level of synchronisation that will make it more responsive to customer needs while lowering the total costs. Traditionally, each segment of supply chain was managed as a separate entity focus on its own goals. However, the ability of a company to contain in todays highly competative global market place is determined by the combined capabilities of all members of the supply chain, not just the capabilities of, for example, the producing/manufacturing company alone. All supply chain activities must be a synchronized in order to achieve the maximum competitive benefit. A supply chain is ihe sequence of organisations-their facilities, functions, and activities that are involved in producing and delivering a product or service. The sequence begins with basic supplier of rowmaterials and extends all the way to the final customer facilities include warehouses, factories, processing centers, distributions centers, retail outlets, and offices. Functions and activities including forecasting, purchasing, inventary management, quality assurance, scheduling, production, distribution, delivery and customer service. Supply chains are sometimes referred to as a value chains, a term that reflects the concept that value is added as goods and services progress through the chain. Supply and value chains are typically comprised of separate business organisations, rather than just a single organisation. Moreover, the supply or value chain has two components for each organisation: a supply component and a demand component. The supply component start at the beginning of the chain and ends with the internal operations of the organisation. The demand component of the chain starts at one point where the organisations output is delivered to its immediate customer and ends with the final customer in the chain. The demand chain is the sales and distribution portion of the value chain. THE NEED FOR SUPPLY CHAIN MANAGEMENT:In the past, most organizations did little to manage their supply chains. Instead, they tended to concentrate on their own operations and on their immediate suppliers. However, a number of factors make it desirable for business organization to activity manage their supply chains. The major factors are:1. The need to improve operations. During the last decade, many organizations adopted practice such as lean production and TQM. As a result, they were able to achieve improved quality while wringing much of the excess costs out of their systems.

2. Increasing levels of outsoaring. Organizations are increasing their level of outsourcing, buying goods or services instead of producing or providing them themselves. As outsourcing increases, organizations are increasing amounts on supply-related activities. 3. Increasing transportation costs. Transportation costs are increasing, and they need to be more carefully managed. 4. Competitive pressures. Competitive pressures have led to an increasing number of new products, shorter product development cycles, and increase demand for customization. And effort to reduce lead times. 5. Increasing globalization. Increasing globalization has expanded the physical length of supply chains. A global supply chain increases the challenges of managing a supply chain. 6. Increasing importance of e-commerce. The increasing importance of e-commerce has added new dimensions to business buying and selling and has presented new challenges. 7. The complexity of supply chains. Supply chains are complex; they are dynamic and they have many inherent uncertainties that can adversely affect the supply chain, such as inaccurate forecasts, late deliveries, substandard quality, equipment breakdowns, and canceled or changed orders. 8. The need to managed inventories. Inventories play a major role in the success or failure of a supply chain, so it is important to coordinate inventory levels throughout a supply chain. Shortages can severely disrupt the timely flow of work and have far-reaching impacts.

Supply chain management:Product design often plays an important role in supply chain management. Many products come in different varieties meeting global demand for variety by holding multiple Stock Keeping Units (SKUs) of similar products can require vast inventories. By redesigning the product so that more inventory can be held in a customizable, "lowest common denominator" form, inventory can be reduced. This powerful supply chain management strategy is known as "postponement", or "risk pooling"; postponement of the point of product differentiation, or pooling of the risk of specific SKU forecast error. On the left side of the figure below, the product is built for a specific country market before it is even shipped out of the factory (a costly decision if the unit does not sell, and particularly so if there are shortages of a similar product in other countries). On the right, the product has been redesigned so that localization can occur as close as possible to the local market.

Module SCM106 provides an in-depth example of postponement, which lowers the inventory/service tradeoff curve (covered in module SCM101), allowing you to maintain (or enhance) service levels with less finished-goods inventory. A recent study1 concluded that companies using postponement strategies in their supply chains typically showed significant improvements in the following performance measures:

More accurate demand forecasting Reduced inventory costs Higher customer satisfaction Increased revenue

BENEFITS OF EFFECTIVE SUPPLY CHAIN MANAGEMENT:Effective supply chain management offers numerous benefits. And effective supply chain management helped Wal-Mart because largest and most profitable retailer in the world! Generally, benefits of effective supply chain management include lower inventories, lower costs, higher productivity, greater agility, shorter lead times, higher profits, and greater customer loyalty.

SUPPLY CHAIN FOR SERVICES PROVIDERS:Supply chain management is just as important for services providers as it is for manufactures. Services must purchase the equipment, suppliers, and services they need to produce their own services. An airlines supply chain provides soft drinks, peanuts, in-flight meals, and airsickness bags as well as maintenance and repair items such as engine part and motor lubricants. Generally, a service providers supply chain must be design so that the right resources and tools are available to perform service. In this regarded, the services supply chain focus on providing the appropriate supporting inventories acquiring and scheduling the human and capital resources and fulfilling customer order to satisfaction. Supply chain offers services providers the opportunity to increase their competitiveness.

INFORMATION IN THE SUPPLY CHAIN:-

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Information technology can provide the following functions to improve supply chain management:Centralized coordination of information flows Integration of transportation, distribution, ordering, and production Direct access to both domestic and global transportation and distribution channels Locating and tracking the movement of every item in the supply chain Consolidation of purchasing from all supplier Intercompany and intracompany information access Data interchange Data acquisition at the point of origin and point of sale Instantaneous updating of inventory levels in real time chain management include electronic business, electronic data interchange(EDI), bar coding, the internet, and the world wide web.

ELECTRONIC BUSINESS:E-Business refers to the replacement of physical processes with electronic ones. It applies to the interactions between different companies as well as to the interactions between individuals and companies. In e-business, transactions are conducted via a variety of electronic media, including EDI, e-mail, electronic funds transfer (EFT), electronic publishing, image processing, electronic bulletin boards, shared database bar coding , fax, automobile voice mail ,CD-ROM catalogues, the internet, website, etc.

ELECTRONIC DATA INTERCHANGE:Electronic data interchange (EDI) is a computer to computer exchange of business document in a standard format, which has been established by the American national standard institute (ANSI) and the international standards organization (ISO). It describes the capability And practice of communicating information between two organizations electronically instead of buy traditional form- mail, courier or fax. It create data exchange at allows trading partner to ship electronic transactions instead of paper when performing purchasing, shipping, and other business.

Bibliography
Ballou, R. H. 1992. Business logistics management, prentice hall, Englewood cliffs, NJ, Third edition. Roberta Russell, Bernard Taylor, operation management, pg_265, fourth edition.

ARTICLE:-

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Three keys disaster:-

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Healthcare Purchasing News, Dec, 2005 by Paul A. Dimitruk Find More Results for: "supply chain management" What you need to know... Office depot... Environmental... Warehouse management... Some of the quickest emergency assistance to victims of Hurricane Katrina did not come from the American Red Cross or FEMA. It came from Wal-Mart. Millions of people were displaced or otherwise affected by the Gulf Coast calamity. Many waited for days as agencies struggled to provide assistance. Wal-Mart moved faster than traditional emergency aid groups because the retail giant has mastered logistics and supply chain management, according to a study by the University of Arkansas. Supply chain management involves more than delivering products to a destination. It requires orchestrating the transportation, distribution, storage and timely delivery of inventory, while minimizing costs and serving the maximum number of consumers. It is a desperate balancing act when human life is at stake. Wal-Mart can be commended for its rapid response to Hurricane Katrina, because consumer goods like food, water and other supplies are important to recovery efforts. But "big box" stores do not carry medical supplies. When it comes to saving lives in a disaster, hospitals and other medical agencies are on the front lines.

ADVERTISEMENT:Hurricane Katrina exposed the weaknesses of government agencies and relief organizations when it comes to delivering emergency supplies and equipment. The overwhelming number of victims and widespread destruction exacerbated the coordination effort. It is now clear that hospitals and their group purchasing organizations (GPOs) must carefully develop their own supply chain management (SCM) strategies and infrastructure to ensure essential provisions are available during a natural disaster or terrorist attack. Today, most hospitals are often unable to acquire and deploy the resources needed to respond to a large-scale disaster effectively, according to a 2003 Government Accountability Office report on hospital bioterrorism preparedness (1). Senior federal officials from the investigative arm of Congress conducted an exercise that highlighted serious weaknesses in the medical response system. The exercise simulated a bioterrorism attack that infected a community with pneumonic plague, a highly contagious sickness that must be treated with antibiotics within 24 hours. Untreated, the mortality rate is near 100 percent.

12 Three days after the disease's simulated release, 500 people had symptoms and there were shortages of antibiotics and ventilators. Two days later, 800 cases were reported, with 100 dead. Medical care was shut down because of insufficient resources. About 3,700 cases of plague were reported after a week, with between 950 and 2,000 deaths. The hospitals did not have the equipment to handle the increased patient load. Half of the hospitals studied in the report had fewer than six ventilators per 100 staffed beds, three or fewer personal protective equipment suits and fewer than four isolation beds. Of course, it is impossible to keep on hand enough supplies or equipment to be ready for every disaster and mass casualty event a hospital may face. That is why collective and regional planning is necessary. For example, states can access resources like the CDC's Strategic National Stockpile of antibiotics, antidotes and other materials.However, according to testimony in 2004 before the House of Representatives, most states have not developed plans to access the Stockpile, and only about a third have outlined how they would distribute the resources. Fortunately, the lessons learned from Katrina and Rita are being collected in an unprecedented effort to capture and disseminate hard-won know-how. These lessons learned are being incorporated into best practices by a variety of means, including expert systems software. These systems can act as a mentor and guide before, during, and after a crisis and can be configured for a specific facility, customized for a specific incident, and can be accessed as "soft ware on demand." In the case of SCM, these systems can help develop the SCM component of your Disaster Management Plan (DMP), provide supply chain related job action sheets, and support SCM interaction with your GPOs and local public health and safety agencies (PHSAs). Relevant data can be captured, analyzed and tracked to ensure that important action steps are not over looked. Due to recent developments, the systems are cheaper and more flexible to build and maintain than ever before. They can help assure that best practices are brought to SCM and, critically, that your hospital can satisfy the disaster program requirements necessary to meet the accreditation standards of the Joint Commission (JCAHO). So what do best practices for SCM entail? There are three primary components that hospital administrators need to consider before a crisis hits: * The required supplies and equipment for general and specific threats. * Whether "disaster response supplies and equipment"--we'll call them DRSEs--are best kept on site or elsewhere. * The role of GPOs and PHSAs. Identify DRSEs.

Bibliography
http://findarticles.com/p/articles/mi_m_OBPC/is_12_29/ai_ni 596581/pq_2.