Subscribe:

Ads 468x60px

Performance measurements in JIT environment


There are several measures that are highly relevant to JIT operations. Some of them are :

1. Inventory turnover : Those who have installed JIT systems emphasize the extraordinarily high inventory turnover that they now experience, which is the case in most instances. Theturnover levels of such well-known JIT companies as Toyata have been known to exceed 70 per year, as opposed to the levels of 2 to 10 per year that are more common for companies with other types of manufacturing systems. This measure is best subdivided into smaller parts, so that one can determine the turnover levels for raw materials, work in process, and finished goods.
2. Setup time reduction : The average setup time per machine is of great importance as it can be measured periodically and plotted on a trend line. The shortest possible setup intervals are crucial for the success of short production runs, so this is a major JIT measurement. It is best to measure it by machine, rather than in the aggregate, since an aggregate measure does not reveal enough information about which equipment requires more setup time reduction work. 

3. Customer complaints : A JIT system is partly based on the premise that product quality will be superb. Consequently, any hint from customers that there are product problems should be greeted with the gravest concern and investigated immediately. The accumulation of customer complaints and their dissemination to management should be considered a major JIT measure.


4. Scrap : Little waste should be generated by a JIT system, which means that materials scrap should be driven down to exceedingly low levels. The cost of scrap (especially when supported by a detailed list of items that were scrapped) is of particular concern as a JIT system is being implemented, since it helps to identify problem areas requiring further management attention.

5. Cost of quality : One focus of JIT is on creating high-quality products, so it is reasonable to keep track of the full cost of quality (which comprises defect control costs, failure costs, and the cost of lost sales) on a trend line. Managers want to see the details behind this measure, so that they know where the largest quality costs still reside in the company and can then work to reduce them.

6. Customer service : This measure really has several components—delivering products on the dates required by customers, shipping full orders to customers, and not having products returned because of poor quality. This measure can be summarized in a variety of ways or reported at the component level, but the main issue is to measure and post the information for all to see, so that the company focuses strongly on providing the highest possible degree of customer service.

7. Ideas generated : A JIT system works best when employees pitch in with hundreds of suggestions for improvements that, when taken in total, result in a vastly improved, efficient operation. The amount of idea generation going on can be measured by the number of ideas per worker, the number of ideas suggested in total, the number of ideas implemented, or the proportion of ideas suggested that are implemented.

The common theme that unites all the JIT measures just listed is that they are not financial in nature (with the exception of the cost of quality)—they are operational measures that focus attention on the nuts-and-bolts details of creating and running a JIT system. A cost accountant involved in the calculation and reporting of these measures may feel that this is quite a departure from the more traditional cost variance measures, but the end result will be a much more efficient JIT process that churns out and delivers high-quality products.

Related Posts Plugin for WordPress, Blogger...