Operations Management & Just-In-Time Production

Operations Management and Just-In-Time Production

Operations management is defined as the performance of the managerial activities entailed in selection, design, operating, controlling, and updating production systems (Chase & Aquilano, 1973). "Selection involves the strategic decision of choosing the process by which some good or service is to be made or performed. For example, in a steel mill that produces railway wheels, the choice may be between forging or casting the wheels. "Design" encompasses the tactical decisions involved in the creation of methods to carry out a production operation. In the steel mill, for example, such decisions would regard the form and content of jobs to be performed and the type of service and control activities required to ensure smooth operation. "Operating" consists of the decisions of planning long-term output levels in light of the forecast demand and the short-term decisions of scheduling jobs and allocating workers. In the railway plant, this activity would range from forecasting to the growth in rail car sales for the next five years, to determining which order process first out of the array of orders on hand. "Controlling" entails the procedures involved in taking corrective measures as the product or service is created. In the steel company, such activities would range from monitoring and adjusting the metallurgical characteristics of different temperature steels to the expediting of orders to meet delivery deadl

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e unit cost of ordering. But conversely, carrying charges increase because of the larger inventory on hand; such costs apply to the business in terms of the lost space, and can extend to the lost interest on the capital used to purchase the inventory. Through the famous Economic Order Quantity (EOQ) mathematical formula, the optimum balance can be determined. However, the results in the US and Japan are generally different because of institutional reasons. In the latter, manufacturers and suppliers tend to have close working relationships, whereby deliveries and orders are closely coordinated. This in turn lowers purchase costs and allows for more frequent deliveries of small orders. In the US (and Western Europe), this is not generally the case, which militates for emphasis on larger order sizes in order to cut unit purchase costs. Essentially, this is why JIT production in Japan is more successful in Japan than in the US. Just-in-time production necessitates lower machine setup times because lot sizes and production runs are relatively small and frequent, which is the opposite of the general US practice (Schonberger, 1982). By building or adapting their own machines, the Japanese enable their workers to change component

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