Just In Time in Ford

Lukman Susanto (2003)

executive summary

In this paper, we are examining the implementation of Just-In-Time methodology in Ford for its latest small car KA; possibly one of the most interesting manufacturing revolution where companies involved in the production are integrated not only in their business processes moreover in their physical plants. The concept has been successfully developed and implemented in Valencia, Spain and is due to be adopted in other Ford production plants. The case study clearly shows how companies can work together in a harmonic and synchronised system meeting probably the most idealistic manufacturing principles (JIT) to produce the best quality product within the shortest time frame with minimum/no wastage and cost-effective to all parties. Careful production planning, cost-benefit analysis, adequate outsourcing plans and customer orientation are being praises as the key success factors of this amazing Just-In-Time concept.

just-in-time (JIT)

JIT is one of the examples of early-landed future manufacturing idealism requires continuous collaborated refinements throughout its supply chain elements. It has been used since 1950s by Japanese automotive industries and yet none of the most developed countries would have even considered this methodology until early 1980s (Karlsson, 1994). Researchers tried really hard to explain JIT concept in a short descriptive sentence and none of them were able to come up with a single answer that represents everyone’s definitions. Those who were trying to bring them together were ended up with another new more complex definition. JIT goes beyond ordinary management theory or a company’s manufacturing procedures; it comprises production planning, HRM, material management, distribution, customer services not only involving individual organisation furthermore requires collaborated cross-companies dedication to continuously refine the business process of one and another.

Svensson (2001) in his journal argued that the basic of JIT is “no non-essential activity should be committed prior, during and after any production phases and wherever beneficial outsourcing is regarded as good as in-house production”. JIT is understood as event driven production concept which has been carefully planned and structured to ensure all its components ready whenever needed. It is also known as inventory-less production method which allows minimum stock level only needed for the current manufacturing phase.

Automotive manufacturing industry has become an ideal example on how JIT methodology may improve the efficiency of the whole production processes (Karlsson, 1994). By involving thousands manufacturing steps, there are always chances for refinement. This is to minimise lead times which in turn will boost the production capacity of the industry as well as its flexibility to response to the market needs. Since this industry requires large stock to meet the production needs, a better inventory management system such as JIT will be helpful in reducing costs (Claycomb, 1999).

Most authors agreed that successful JIT implementation requires five key elements to be considered (Ramarapu, 1995).

Waste reduction: this element is aimed to eliminate all non-value-added tasks (Bowen, 1998). The main problem with traditional production method is due to the focus on producing large number of items. With level of competitiveness and flexibility requirements, this is no longer an appropriate method to be performed.
Value-adding production oriented: This element bring the terminology of “pull-system” which allow customer order to trigger the production process. Pull system requires immediate respond in order to satisfy customer requirement therefore avoiding “the goal of producing large batches” (Bowen, 1998). By grouping products based on their production process similarity, manufacturer may also add-value to the products by lessening production complexity, shortening travel and idle time.
Customer participation in quality improvement: In every business, customer will have the final say therefore the success of the business can be determined based on customer satisfaction. This element heavily emphasis the needs of customer involvement in product development and delivery (Bowen, 1998). Customer may also be included in development team to direct them to the right manufacturing plan.
Employee empowerment: Empowering employees mean dividing problem solving and decision making responsibilities from management level to its individual team directly related with the task. With careful planning and adequate team work, this element will increase quality, productivity and flexibility of the manufacturing process (Bowen, 1998).
Vendor/supplier integration: Undoubtedly, specialised suppliers will normally produce a better product since they can concentrate in a particular thing. By outsourcing to those suppliers, a company will be able to put all its time and resources in its core function which in turn will improve the quality of the final products (Ramarapu, 1995).

ford ka in just in time

Production of Ford latest small car, the Ford KA has been a dramatic improvement compared to Ford previous product, Fiesta (Kochan, 1997). This is a real example of successful JIT implementation with all its outsourcing strategies. The production target of 1,100 KA cars per day has been reached only within 8 weeks since the launch date, compared to 15 weeks required for Fiesta. Ford found that the initial bottleneck was caused by material handling, assembly time and inbound logistic. Some of the components in Fiesta are supplied by various suppliers and these components had to be made, loaded in the container and scheduled for delivery before finally delivered by trucks. This common process is found to be inefficient as every part has to be continuously handled by human and this causes big risks of damages, misplaced and imperfection in quality, especially for cosmetically sensitive and fragile parts such as instrument consoles, electrical wiring and airbags.

With the new developed JIT system supported with sophisticated aerial tunnels connecting Ford with its suppliers, production lead times can be minimised, product quality can be improved, responsiveness towards customer demands can me boosted and the most important thing is inventory, space requirements, handling and transportation cost can be dramatically reduced (Kochan, 1997). Ford is now connected with more than 50 suppliers in Valencia with specifically designed aerial tunnels. These tunnels are also very useful to transport bulky and heavy items such as seats and fuel tank. The brain of this amazing system is DAD (direct automated delivery) which will integrate the whole processes virtually as one extended manufacturing warehouse. DAD will enable a smooth manufacturing process by applying Ford scheduling system so that all the supplied components being delivered right on time they are needed. In addition, DAD and its tunnels enable the integration of manufacturing equipment so that the component being delivered can be immediately installed with the main body or other components in Ford factory.

Summary of Ford Valencia manufacturing system prior JIT implementation:

· Minimum of 15 weeks to reach full production capacity

· Required at least 3,000 parts to be assembled for each car

· Very small outsourcing involve for car components

· All parts from suppliers are delivered on trucks

· Stock must be kept at certain level to assure the continuity of production

· Parts are often damaged during packaging, handling or delivery

· Spent over $6 million for inefficient delivery system (250+ trucks per day)

· 80 per cent automation in overall

· Manual seats and battery placement and this may cause injury for employee

In a dynamic market trends, pre-JIT system clearly is not responsive enough as an answer. There are minor inefficiencies throughout the system which accumulate into serious problem that may cause Ford being less competitive in the market.

Improvement Process analysis

The main objectives of JIT are obtaining low-cost high quality products and on-time production as well as eliminating waste and stagnant stock (Svensson, 2001). Even though most of JIT implementation has similar aim and purposes, the strategies involved may differ from industry to industry or company to company. Ford has smartly chosen the right methods and strategies by reducing the barriers in relation with its suppliers.

Through JIT, Ford is achieving the highest efficiency in car manufacturing industry. Its plant in Valencia has become the standard and being adopted in its other plants in many other countries. Apart from its tangible benefits such as saving on transport costs, stock/inventory costs, quicker manufacturing process and minimised risk/wastage, JIT will also bring immediate intangible benefits such as improved customer satisfaction through immediate responses and shorter timeframe to respond towards market trends.

Improvements being achieved through JIT implementation:

· Only 8 weeks required to reach full production capacity

· Only 1,200 parts need to be assembled, the rest have been done by its suppliers

· All the outsource-viable production parts are outsourced

· Automatic delivery system and aerial tunnels are developed to minimise transport

· There is barely any stock required as most parts are made to order

· The whole manufacturing process including the suppliers are working as one system

· The need of conventional truck delivery is minimum

· 98 per cent automation

· Seats and battery placement are being done by automated high-precision machines

There is not enough detail to measure the benefit of JIT implementation against the pre-JIT system, however from rough analysis Ford will gain the benefit immediately and get the investment back in virtually no time.

JIT cost/benefit analysis for Ford Valencia

COSTS

BENEFITS

· Extending outsourcing (losing control)

· $500 million pilot plan and analysis

· Speed-up production process 8 weeks

· Smaller number or manufacturing parts

· Concentrating on core business functions

· 25% shorter time production time needed

· Accuracy of production on plan

· Building aerial tunnels

· Setup Direct Automated Delivery DAD

· $16 million delivery system

· Less handling = less damages / costs

· Less conventional transport dependent

· Time saving

· Manufacturing seamless integration

· Further interest from more suppliers

· Saving $6+ million per year on transport

Figure 1

Conclusion

In this paper, we examined the implementation of Just-In-Time methodology in Ford for its latest small car KA; possibly one of the most interesting manufacturing revolutions where companies involved in the production are integrated not only in their business processes moreover in their physical plants. JIT has shown it success to produce the best quality product within the shortest time frame with minimum/no wastage and cost-effective to all parties. Careful production planning, cost-benefit analysis, adequate outsourcing plans and customer orientation are being praises as the key success factors of this amazing Just-In-Time concept.

References

G. Svensson, Just-in-time: the reincarnation of past theory and practice, 2001

Focus on management history, Management Decision 2001 866-879

C. Claycomb, Total system JIT outcomes: inventory, organisation and financial effects, 1999

International Journal of Physical Distribution & Logistics Management Vol 29 No 10

N. Ramarapu, A comparative analysis and review of JIT implementation research, 1995

International Journal of Operations & Production Management, Vol 15 No1

A. Kochan, Ford – Valencia: just in time and just on site, 1997

Assembly Automation, Vol 17 No 1

D. Bowen & W. Youngdahl, Lean service: in defence of a production-line approach, 1998

International Journal of Service Industry Management Vol 9 No 3

C. Karlsson, Total Effectiveness of Just-In-Time System, 1995

International Journal of Operations & Production Management, Vol 14 No 3