Supply Chain Management Journal

Implementation of Just-In-Time in Romanian Small Companies Adina NEGRUSA University “Babes-Bolyai”Cluj-Napoca [email protected] Abstract This paper focuses on the advantages and possibilities of Just-in-Time implementation process into the Romanian small companies. JIT is a modern production system that shows its benefits for large companies with complex manufacturing process. If at the beginning this process did not been attractive for SMEs, due to mangers’ and entrepreneurs’ attitudes and ideas, in time, some of them adapted JIT to their context with surprising results. The flexibility and interactive communication process of SMEs, constituted some advantages for implementation of JIT system. The paper also presents some steps and ways for implementation of JIT in small companies. Key Words: Just-in-Time, small companies, implementation model.

Introduction The economic reforms applied in Central and East European countries have to emphasize on the role of SMEs because them are able to create an important number of new jobs, to stimulate competition for larger firms alike, to create a diversified and flexible industrial environment, to stimulate innovation, to improve industrial relations and to provide a superior working environment for employees inside of a national economy. Based on these features, the SME sector was considered a key factor for assuring the restructuring of the old centralized economies and maintaining economic dynamism. After 1989, the Romanian economy restructuring should be understood in the general context that of the transition from a state owned economy to a decentralized economy. This was possible only by stimulating a large number of entrepreneurs which increased the competition for the large companies, have implemented innovations and contributed in this manner to a more performing industry. For this reason the development of the Romanian SME’s can be considered a key issue for economic development of the country and provided a starting point in this paper.

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During the recession time the Romanian SMEs were strongly influenced, being registered a deterioration of their profitability, stability in the market and rate of investments and innovations. The efficiency and production flexibility became a must for small companies and many of them tried to apply different practices for achieving this goal. In this way, JIT could be an important alternative for running a business in a more feasible way. Just-in-time inventory systems let small business owners produce products after they receive a request from customers, rather than having already assembled products on the shelves waiting for purchase. This inventory system was established by Toyota in the 1970s, and is still used by various small businesses today. 1. Evolution and analysis of Romanian manufacturers SMEs Before the financial crisis start in 2008 the SME sector in entire Europe had registered a strong growth and proved to be an important element for the economy dynamic.

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Figure 1. Number of SMEs in Europe

The development can be identified at the number of SMEs, between 2002 and 2008 the number increased with 2.4 million, but also at the number of

employees, during the same period of time the employment increased with 9% per year.

Tabel 1. Evolution of the number of SMEs between 2002 and 2009

Source:Institutul National de Statistica, Raport annual al sectorului IMM, editiile 2007-2009 Between 2000 and 2009 the Romanian SMEs sector had registered an average grew of 52%, as the figures from the table no.1 show. After 10 years of continues growth Romanian economy had a negative economic growth in 2009 (-7%) due to a set of factors from which demand and exports decreasing, were essentials.

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The evolution of Romanian SMEs was strongly affected by the economic crisis in 2009 and 2010. The revenue for SMEs sector had decreased with an average of 7% and the profit with 5%. Besides the demographic changes in this sector and economic results, the crisis also influenced the attitude of entrepreneurs towards investments and risks taking.

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Supply Chain Management Journal

Figure 2. The evolution of number of SME by sector

Source: Institutul National de Statistica, Raport annual al sectorului IMM, editiile 2007-2008 Managers and entrepreneurs had to adapt and learn how to deal with new and challenging situations, characterized by shortages or discontinuities of cash, deterioration of contractual relations and less both at individual and organizational consumption. The most affected sectors by economic changes were industrial and construction, from which manufacturing companies had faced to unfavorable conditions. 2. JIT advantages for SME sector For a company in today’s market became vital the cost, quality and flexibility of the manufacturer process. Large manufacturing companies have been achieving efficiency improvements for many years using the lean production system or JIT process. SMEs didn’t pay much attention to JIT philosophy just because they believed that in general JIT requires new investment of capital resources such as: automation, new equipment and workforce. Just in Time (JTI) can be defined as an integrated set of activities designed to

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achieve high-volume production using minimal inventories and to eliminate waste in production effort. The objective of JIT is the production or provision of defect-free goods in the required amount at the right time. The JIT philosophy evolved from a number of principles such as the elimination of waste, reduction of production cost, total quality control and recognition of employees’ abilities. JIT system founded by Toyota, has been focused elimination of waste and improving customer satisfaction through the quality of products. It is a production system that focusing continuous flow within supply chain by eliminating all wastes and performing continuous improvement towards production perfection. The system imposes a set of principles, philosophies and business practices. The first element of the JIT system is the idea of using small lot production with minimal buffers and rapid feedback when the system required. The consequences came in the facilities where there are small end-of-process rework areas. Raw materials and components are

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delivered just-in-time, minimizing work in process, reducing the likelihood of large batches of faulty materials and reducing in-process waste (Cusumano, 1985). The second element is Kaizen or the continuous improvement of work practices. Workers are responsible for identifying and analyzing quality problems found on the production line. For doing this they are organized in teams to enhance multi-skills (Rothenberg, 2004). The third element is determined by the attitude of workers toward work itself: their commitment, skills and motivations to successful operations. This attitude could be oriented by efficacy human resources policies like employees selection policy stressing on ability to work in team and cooperation skills, rewarding policy focused on performance and efforts to reduce status barriers between managers and workers (Pil &MacDuffie, 1999). Small business owners turn to just-in-time system to save money and reduce waste, while still providing their customers with the products they want and need. If at the beginning they adopted just as an employees training program in short time identified essential advantages for the overall activity. Some of the benefits include: smaller inventories, waste reduction, shorter lead time and production cost, improved quality of the products and production process. Some researchers suggested that in general small companies have more benefits in comparison with larger ones, due to the general characteristics of SME like flexibility, general purpose equipment, multifunctional workers, closer relationship between management and workers. In Romania, there are a small number of companies which implemented JIT in their production system or elements related to it. Those SMEs which have implemented were involved in export activity or in partnership with foreign manufacturers, suppliers and had to adopt this system in order to be more efficient and for improving production quality and.

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3. Implementation process of JIT In order to compete successfully in today’s business environment the Romanian companies must rethink about the role of their production cost and quality. Thus, they need continuous progress in improving quality and decreasing manufacturing costs and lead times. Just-in-time (JIT) offers a means of continuous improvement. For implementation of JIT in small companies there were identify (Finch, 1986) a number of differences like: lack of clout with suppliers to effect changes in delivery schedules, limited resources to make the required operational changes in delivery, lack of exposure on the part of top management to JIT which influence the process. Also resulted that could be formed 2 groups of elements related to implementation: those that are independent of the firm size (focus factory, reduced setup times, group technology, cross-trained employees and kanban) and those that are related to the firm size (stable, uniform workload, and just-intime delivery and purchase). Consequently small companies could focus in implementation on a smaller set of elements, without a full-scale implementation. There is no JIT implementation standard other than continuous progress towards the main objective of delivery as wanted, with a smoothly synchronized continuous flow (purchasing and production) linked to final demand, with perfect quality of incoming materials, goods-in-process and finished products. Researchers (Lee, C.Y. (1997), White, R.E, Pearson J.N and Wilson J.R. (1999) stressed on the idea that SMEs should start with minimal financial investment on JIT practices such as: Kanban, 5S and others (Heron, C. and Braiden P.M. (2007) had pointed out five basic practices as a stepping stone for developing: - employees involvement; - quality circle; - standardization; - 5S; - set up reduction.

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Supply Chain Management Journal

CUSTOMERS

RETAIL STORES

DISTRIBUTION

APPAREL PLANTS

Spinning, weaving, dying, printing

TEXTILES PLANTS

RAW MATERIALS

Figure 3. JIT model for a small textile company

Accessories

For implementing of JIT system into a company it is required to be follow 7 steps: 1. Design a flow process. The first step is concentrate on designing the flow process. This step involved analyzing their process, rearranging their facility into work cells, reducing setup times, reducing lot sizes, emphasizing preventive maintenance, linking operations and balancing workstation capacities. 2. Implement total quality control. The second area of attention is total quality management. Companies have to train workers in problem-solving methods, improvement reams and process control. 3. Stabilize the schedule. The third area of application is to make a real planning of production activity. They have to plan the production level, frozen their master schedule and institute under capacity scheduling. 4. Introduce kanban pull. This results in reductions in lot sizes. 5. Work with vendors. The objectives that should be followed are: reducing lead times, projecting requirements, make more frequent deliveries and meet quality expectations. 6. Reduce inventory. 7. Improve product design. Conclusion The small improvements in efficiency can easily justify the efforts to implement JIT philosophy. The paper highlight specific pattern of implementation of JIT in small companies based on the experiences described and analyzed in literature review. Also in the

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paper are presented the benefits of JIT implementation for SMEs and which are the elements that are significant for starting an implementation process. References Cusumano, M (1985). The Japanese automobile industry: Technology&management at Nissan&Toyota.Cambridge, MA:Council of East Asia Studies Finnch, B.J. (1986), Japanese management techniques in small manufacturing companies: a strategy for implementation. Production and Inventory Management Journal, 27, p.30-38 Heron, C. and Braiden P.M. (2007), Defining the foundation of lean manufacturing in the context of its origin, Agile manufacturing, ICAM, p. 148-157. Lee, C.Y. (1997), JIT adaptation by small manufacturers in Korea, Journal of Small Business Management 35 (3), p. 98-107 Pil, F, K. , MacDuffie J.P. (1999). What makes transplats thieve: Managing the transfer of best practice at Japanese auto palnts in North America,Journal of World Business, 34(4), p.372-393 Rothenberg, S, Cost, F. (2004). Lean manufacturing in Small and medium sized printers. Research Monograph of the printing Industry Center at RIT White, R.E, Pearson J.N and Wilson J.R. (1999), JIT Manufacturing: A\survey of implementations in small and large US manufacturers, Management Science, 45 (1), p.1-14 *Institutul National de Statistica, Raport annual al sectorului IMM, editiile 20072009

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