JIT inventory management in a Textile manufacturing producing terry towels around 100,000 meters /year

JIT inventory management in a Textile manufacturing producing terry towels around 100,000 meters /yearOperation Management

LETTER OF TRANSMITTALDated: 2nd Dec, 2014.COMMANDER (RTD) AZHAR NISAR(Course Instructor)Operations Production and ManagementBBA 6A (Morning)

Subject: Report SubmissionDear Sir,

With reference to the course of Operations Production and Management, We hereby submit to your esteemed honour our report on the topic:

JIT inventory management in a Textile manufacturing producing terry towels around 100,000 meters /yearWe hope that our efforts will not let down your expectations. Thanking you for your guidance.

Yours Sincerely:M.Shahzaib SubhaniSher AlamUzair BasharatMehboob ur RehmanM.Faisal Khan

CLASS: BBA 6ABAHRIA UNIVERSITY KARACHI CAMPUS (MANAGEMENT SCIENCE DEPARTMENT) PREFACE

Just-in-Time (JIT) inventory management is the process of ordering and receiving inventory for production and customer sales only as it is needed and not before. This means that the company does not hold safety stock and operates with low inventory levels. This strategy helps companies lower their inventory carrying costs.Just-in-time inventory management is a cost-cutting inventory management strategy though it can lead to stock outs. The goal of JIT is to improve return on investment by reducing non-essential costs.

This report on JIT inventory management in a Textile manufacturing producing terry towels around 100,000 meters /year has been prepared for our course Operations Management. We have worked hard to gather all the available information regarding a JIT in Textile manufacturing industry. The report will focus to facilitate the readers in understanding the essential requirements which are needed to be analyzed when implementing JIT in textile manufacturing industry producing towels.

ACKNOWLEDGEMENT

"ALL PRAISE TO ALLAH THE MOST BENEFICIENT THE MOST MERCIFUL"

This Project report is being submitted in the kind supervision of Cdr. (R) Azhar Nisar who has thoroughly gone through the work done and continually provided inputs for improvements.

We would first and foremost like to thanks ALLAH ALMIGHTY who helped us in successfully completing the project.

ContentsLETTER OF TRANSMITTAL1PREFACE2ACKNOWLEDGEMENT3EXECUTIVE SUMMARY5AIMS AND OBJECTIVES OF STUDY6JUST IN TIME INVENTORY MANAGEMENT7DATA COLLECTION7SUMMARIZE PROJECT DETAIL8ADVANTAGES OF JIT9DISADVANTAGES OF JIT9KEY ELEMENTS OF JIT & INVENTORY MODELS10PRODUCTION:11SIMPLIFICATION OR JUST ENOUGH RESOURCES14CONSIDERATIONS15RECOMMENDATIONS15REFERENCES16

EXECUTIVE SUMMARY

This report of JIT inventory management in a Textile manufacturing producing terry towels around 100,000 meters /year is prepared to highlight the overall working and plannings when it comes to implementing JIT.

This report is prepared to deliver insights about the how a company is operating in terms of inventory and operations and how JIT measures are adopted to ensure a continuous and smooth production of 100,000 meters of terry towels in a textile industry per year.

This report is focusing on multiple aspects and successful implementation of JIT, Quality management and responsibility, group efforts and continuous production with consistent quality reduced inventory turnover time etc., which are required to run a successful JIT in a textile industry producing 100,000 meters of terry towel per year.

AIMS AND OBJECTIVES OF STUDY

To accomplish our course requirement of a report on JIT inventory management in a Textile manufacturing producing terry towels around 100,000 meters /year

To learn more comprehensive definition of JIT that can be developed by considering the main elements that are attributed to successful JIT systems. These elements can be separated into two broad categories including attitude and practice. While the elements of attitude can be adopted by any organization, the elements of practice are mainly applicable to companies involved in repetitive manufacturing. From an accounting viewpoint, these are companies that would normally use the process cost accumulation method.

A JIT system requires an attitude that places emphasis on the following:

Cooperation with a value chain perspective, Respect for people at all levels, Quality at the source, Simplification or just enough resources, Continuous improvement and A long term perspective.

A JIT system also incorporates the following practices:

Just-in-time purchasing, Just-in-time production, Just-in-time distribution, Simplified accounting and Process oriented performance measurements.

JUST IN TIME INVENTORY MANAGEMENT

Just-in-time (JIT) can be defined narrowly as a production or inventory scheduling technique. JIT is more appropriately thought of as a philosophy because, even though it includes a variety of techniques, it is much more than a collection of management practices. Although a precise, or operational definition of JIT has not been developed, it basically involves the elimination of waste and excess by acquiring resources and performing activities only as they are needed by customers at the next stage in the process. For example,

Inventory buffers are viewed as an evil in that they hide problems such as defective parts, production bottlenecks, long machine set-ups and competitive behavior within the company.

DATA COLLECTION

Primary Source: The information is taken from various sources the main source was visit to Afroze Textile Industry through observation of operations and functions including JIT management and rest of was taken through miscellaneous questions necessary for data collection for Primary source.

Secondary Source: Secondary data is mostly taken from the internet.

SUMMARIZE PROJECT DETAIL

It is becoming extremely difficult for the organizations to catch up with profitability in the wake of increasing global competition. Keeping an eye on competitor's product, price, quality is very important but the most important thing which should be kept in mind is the strategies which are built to get the competitive edge, it can be related to anything, either how to get the maximum output through increasing the sales volume or increasing the maximum profit by reducing cost or any other. Nowadays different organizations are focusing on varying concepts which are helping them to minimize the cost of product they make. Just in Time (JIT) is one model which is used for minimizing the cost of the product through various techniques and maximize the best possible outcome.JIT is a pull production system which is based on manufacturing of material when it is required whereas Batch system is a push system which is based on bulk manufacturing and stocking. There are number of elements on which both the systems can be compared such as, In batch system functions are grouped together where as in JIT teams are multifunctional. Employees are independent in batch system where as they are interdependent in JIT on previous function, there is no access to inventory information in batch system where as computer on a work station give the detail information about the inventory in JIT. Buffer stock is kept in successive operations where it is limited in JIT, raw material inventory is delivered to stock room and placed in assembly kits.It also helps to minimize the storage cost and reduces the cost of reprocessing of defected inventory. Various studies have also shown that there is a significant relation between JIT implementation and financial growth from savings.

INDEPTH ANALYSIS OF OUR PROJECT

ADVANTAGES OF JIT

The use of just-in-time inventory has the following advantages: There should be minimal amounts of inventory obsolescence, since the high rate of inventory turnover keeps any items from remaining in stock and becoming obsolete. Since production runs are very short, it is easier to halt production of one product type and switch to a different product to meet changes in customer demand. The very low inventory levels mean that inventory holding costs (such as warehouse space) are minimized. The company is investing far less cash in its inventory, since less inventory is needed. Less inventory can be damaged within the company, since it is not held long enough for storage-related accidents to arise. Also, having less inventory gives materials handlers more room to maneuver, so they are less likely to run into any inventory and cause damage. Production mistakes can be spotted more quickly and corrected, which results in fewer products being produced that contain defects.

DISADVANTAGES OF JIT

Despite the magnitude of the preceding advantages, there are also some disadvantages associated with just-in-time inventory, which are: A supplier that does not deliver goods to the company exactly on time and in the correct amounts could seriously impact the production process. A natural disaster could interfere with the flow of goods to the company from suppliers, which could halt production almost at once. An investment should be made in information technology to link the computer systems of the company and its suppliers, so that they can coordinate the delivery of parts and materials.KEY ELEMENTS OF JIT & INVENTORY MODELS

1. Stabilize and level the Master Production Schedule (MPS) with uniform plant load:It creates a uniform load on all work centers throughConstant Daily Productionto prevent changes in the production plan for certain period of time andMixed Model Assemblyproduce roughly the same blend of products each day using.

2. Reduce or eliminate setup times:With better planning, process redesign, and production design to eliminate setup times to single digit (less than 10 minutes).

3. Reduce manufacturing and purchase lot sizes:Since more frequent deliveries will be requires, close cooperation with suppliers is necessary to achieve reduction in order lot size for purchased items.

4. Reduce production and delivery lead times:Production lead times is reduced by moving work station closer, applying group technology and cellular manufacturing concepts, reducing number of job waiting to be processed, and improving the coordination and cooperation between processes. Delivery lead time is reduced through closer cooperation with suppliers.

5. Preventive maintenance:To use machine and worker break time to maintain equipment in order to stay away from mechanical breakdown.

6. Flexible work force:Worker is trained to be able to operate several machines, such as to perform maintenance tasks or to perform quality inspection.

7. Require supplier quality assurance and implement:

Since there are no shields of excess parts, errors leading to defective items must be eliminated.PRODUCTION:While discussing about the production plan it is to be noted that Production in textile industry should be as follows; at full capacity, maximum utilization of hours as to meet the high demands keep the quality up to the standards by following the current concepts of JIT systems, which are: 6 working days. 8 hours/day. For 500+ workers factory 3 leaves/month should be allowed only. QC will be there at each dept. in order to check, control and maintain quality standards which is described by customer. Strong coordination should be there in each and every department in order to fulfill the demand of customer. All the inventory should be stored under computerized system along with the coordination of supplier also which automatically indicates how much inventory is required and when? Apply and implement KAIZEN THEORY of continuous improvement.

Following are the process phase thorough which the raw materials are processed and converted into finished goods; FLOW CHART

SIMPLIFICATION OR JUST ENOUGH RESOURCES

A goal of JIT systems is to achieve zero work in process inventory buffers so that products flow continuously through the system. JIT also includes the goal of zero ending finished goods inventory. This reflects the idea that JIT is a demand pull system rather than a speculative push system. Customer orders drive production. The process starts with the final consumers who place demands on the sales force, who place demands on the production facilities, who in turn place demands on upstream activities throughout the system. A JIT system also emphasizes simplification and zero excess (waste) in all areas of business. The objective is for the company to acquire just enough resources including vendors, human resources, and capacity. This is a very different concept from the idea underlying traditional systems where excess resources are planned just-in-case (JIC) they are needed. The JIT view is that excess of any kind hides problems such as low quality raw materials and unreliable vendors, employees and equipment. Remove the excess and the problems become visible.

CONSIDERATIONSJIT may be a good way to introduce continuous improvement or quality management, but it is very difficult to implement as a stand-alone process. Managers in charge of ordering or purchasing may need to familiarize themselves with alternative shipping methods. This may even require coordinating with other companies operating within the area, as in an industrial park. Personnel managers need to communicate with staff, stressing the importance of JIT to providing quality products and services and reducing costs, as well as convincing staff of the benefits in rounding out skill sets by taking on different tasks. However, a carefully planned and systematically executed JIT system can eliminate waste and encourage higher-quality output.

RECOMMENDATIONS

Almost every developing nation has textile manufacturing which is among the first industries to be established. Pakistan is consider as one of the main country in the world who fulfill the demand of various countries including US, EU, African and Gulf countries, in order to become well known exporter of textile manufacturing goods in all over the world our textile industry should adopt and implement the all current JIT systems which we have mentioned above; it will minimize the waste and carrying cost also which will ultimately leads towards more profit maximizations rather than cost reductions.

REFERENCES Allen, Donald S, 1995, Changes in Inventory Management and the Business Cycle,economist at the Federal Reserve Bank of St. Louis.Allen, Donald S, 1997, Vol.1, 51-59. Becker, Dan M, Stanley,Stephen, 1992, Evidence of Improved Inventory Control,Economic Review. January/February. Chiu,Lee-in Chen, 2007, The Policy, Institution And Market Factors In The Development Of Taiwans Textile/Garment Industry, Chung-Hua Institution for Economic Research75 Chang-Hsing Street, Taipei, Taiwan 106, Republic of China, Working Paper SeriesNo.2007-2. Devaraja, Dr.T.S, 2011, Indian Textile and Garment Industry, Department of Commerce,University of Mysore, Hassan, India. Islam,Md.Mazedul, Khan,Adnan Maroof, Islam,Md.Monirul, 2013, Textile Industries in Bangladesh and Challenges of Growth, Department of Textile Engineering, Daffodil International University, Bangladesh, Research Journal of Engineering Sciences, Vol.2(2), 31-37. Lancioni, Richard, A & Howard Keith, 1978, Inventory Management Techniques, International Journal Of Physical Distribution & Logistics Management, Vol 8, ISS:8, pp. 388,428. Mwansele,HA, Sichona,FJ, Akarro,RRJ, Determination of Inventory Control Policies at Urafiki Textile Mills Co Ltd ,Dar-es-Salaam, Tanzania, Business and Economics Journal,Volume 2011: BEJ-23. Ondiek,Gerald Ochieng, 2012, Assessment of Materials Management in Kenyan Manufacturing Firms, University of Nairobi, Odhiambo Odera, Masinde Muliro16