Requirements for Just-in-Time Production Systems in Japanese

Manufacturing Companies

@POM2006April 29, 2006

Yoshiki Matsui, Yokohama National UniversityPhan Chi Anh, Yokohama National UniversityOsam Sato, Tokyo Keizai UniversityHideaki Kitanaka, Takushoku University

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ObjectiveTo empirically discuss1. what requirements should be satisfied for

the development of JIT production systems2. whether JIT production leads to improved

practices in other operations management areas and high competitive performance

based on the relevant measurement scales on just-in-time production and the data collected from manufacturing companies through questionnaires.

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Analytical Framework of HPM

Competitive Performance

OrganizationHuman Resource Management

New Product DevelopmentTechnology DevelopmentManufacturing Strategy

Quality ManagementTPMTOC

JIT Production

Supply Chain Management

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Menu of Analysis1.Measurement Scales for JIT production2.Relationship between JIT production and

Competitive Performance3.Requirements for JIT production and the

impacts of JIT production (interrelation between JIT production and other operations management areas)

Part I

Measurement Scales for JIT Production

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Data35 Japanese plants from machinery, electrical & electronics, and automobile industriesData collected in late 2003 and 2004 18 world class plants and 17 randomly sampled plantsRespondents are 19 persons per plant:plant manager, plant superintendent, plant accountant, human resource manager, inventory manager, information systems manager, production control manager, process engineer, quality manager, member of new product development project, supervisors and direct labor

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Measurement Scales1. Daily schedule adherence2. Equipment layout3. Just-in-time delivery by suppliers4. Just-in-time link with customers5. Kanban6. Repetitive nature of master schedule7. Setup time reduction8. Small lot size9. Synchronization of operations

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Daily schedule adherence (DSA)

assesses whether there is time for meeting each day’s schedule including catching up after stoppages for quality considerations or machine breakdown.

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Daily schedule adherence (DSA)

Our schedule is designed to allow time for catching up, due to production stoppages for quality problems.We usually meet the production schedule each day.There is no time in the schedule for machine breakdowns or production stoppages.Our daily schedule is reasonable to complete on time.We usually complete our daily schedule as planned.

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Equipment layout (EL)

measures use of manufacturing cells,elimination of forklifts and long conveyers, and use of smaller equipment designed for flexible floor layout,

which are all associated with just-in-time manufacturing.

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We have laid out the shop floor so that processes and machines are in close proximity to each other.

We have organized our plant floor by means of manufacturing cells.

We do not have many long conveyers to move materials.

Our machines are grouped according to the product family to which they are dedicated.

The layout of the shop floor facilitates low inventories and fast throughout.

Our processes are located close together so that material handling and part shortage are minimized.

We tend to use smaller equipment which is movable and flexible.

Equipment layout (EL)

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Just-in-time delivery by suppliers (JDS)

measures whether vendors have been integrated into production in terms of using kanban containers, making frequent or just-in-time delivery and quality certification.

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Our suppliers deliver to us on a just-in-time basis.We receive daily shipments from most suppliers.Our suppliers are certificated, or qualified, for

quality.We have long-term arrangements with our

suppliers.Our suppliers deliver to us on short notice.We can depend upon on-time delivery from our

suppliers.Our suppliers are linked with us by a pull system.

Just-in-time delivery by suppliers (JDS)

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Just-in-time link with customers (JLC)

assesses whether the plant has applied the just-in-time delivery concept and the pull system concept in the operational link with customers .

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Just-in-time link with customers (JLC)

Our customers receive just-in-time deliveries from us.Most of our customers receive frequent

shipments from us.We are expected to supply on short notice to our

customers.We always deliver on time to our customers.We can adapt our production schedule to sudden

production stoppages by our customers.Our customers have a pull type link with us.

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Kanban (KAN)

measures whether or not the plant has implemented the physical elements of a kanban/pull system.

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Kanban (KAN)Suppliers fill our kanban containers, rather than filling purchase orders.Our suppliers deliver to us in kanban containers, without the use of separate packaging.We use a kanban pull system for production control.We use kanban squares, containers or signals for production control.Working with suppliers of equipment is critical to our plant’s success.

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MRP adaptation to JIT(MRJ)

measures whether the plant has integrated just-in-time concepts such as a pull systems and back flushing for scheduling production .

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MRP adaptation to JIT(MRJ)

We use a run schedule (pull system), rather than work orders.We use MRP for major even planning only, such as product changes or a shift in run size.We use work orders extensively, to maintain shop floor information.We use both MRP and JIT for our production planning and control.We use JIT for daily control of operations.MRP and JIT are well integrated, so that they do not conflict with each other at our plant.

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Repetitive nature of master schedule (RMS)

assesses use of small lot sizes, mixed model assembly, and level daily production schedule in the plant .

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Repetitive nature of master schedule (RMS)

Our master schedule repeats the same mix of products from hour to hour and day to day.The master schedule is level-loaded in our plant from day to day.We make every model every day.A fixed sequence of items is repeated throughout our master schedule.We are able to use a mixed model schedule because our lot sizes are small.Within our schedule, the mix of items is designed to be similar to the forecasted demand mix.

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Setup time reduction (STR)

evaluates whether the plant is taking measures to reduce setup times and lower lot sizes in order to facilitate just-in-time production.

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Setup time reduction (STR)We are aggressively working to lower setup times in

our plant.We have converted most of the setup time to

external time while the machine is running.We have low setup times of equipment in out plant.Our crews practice setups to reduce the time

required.Our workers are trained to reduce set-up time.Management emphasized importance of set-up time

reduction.

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Small lot size (SLS)

measures whether or not the plant has moved towards producing in small batches as opposed to producing in large lots.

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Small lot size (SLS)We have large lot sizes in out plant.We are aggressively working to lower lot sizes in our plant.We tend to have large lot sizes in out master schedule.We have a small amount of work-in-process inventory, compared to our industry.We emphasize small lot sizes to increase manufacturing flexibility.

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Synchronization of operations (SOP)

measures whether manufacturing capacities and workloads are well balanced within the plant and throughout the supply chain in order to keep total inventory minimal.

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Synchronization of operations (SOP)

Capacities are balanced in our supply network.Our manufacturing capacity is balanced throughout the entire manufacturing process.We can easily determine bottleneck operations in our supply chain.We have large in-process inventories between different operations.Our suppliers do not use large inventories to supply us.

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Results of Measurement Analysis

Nine measurement scales are satisfactory in terms of reliability and validity.The super-scale, JIT, is also reliable and valid, which suggests the close relationships among nine measurement scales. The factor loading for SLS is marginal.

Part II

Relationship between JIT Production and

Competitive Performance

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Competitive Performance Indicators

These indicators show plant management’s opinion on plant performance vis-à-vis global competition in quality, delivery, flexibility, and inventory turns.This is based on the subjective judgment by one plant manager.Objective performance measures have some difficulties at least for Japan.

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Competitive Performance Indicators1. Unit cost of manufacturing2. Quality of product conformance3. Delivery performance4. Fast delivery5. Flexibility to change product mix6. Flexibility to change volume7. Inventory turnover8. Cycle time9. Speed of new product introduction10. Product capability and performance11. On time new product launch12. Product innovativeness13. Customer support and service

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Super-Scales and Competitive Performance IndicatorsCanonical correlation 0.9732 Likelihood ratio 0.00004 Significance 0.0715Redundancy index: Super-scales 0.3816 Performance 0.1852Correlations between super-scales and canonical variable of performance indicatorsHR 0.4963 JIT 0.7350 TOC 0.5673 QM 0.6577 TPM 0.7094 SCM 0.7772NPD 0.3281 TECH 0.5812 MS 0.6568Correlations between Performance indicators and canonical variable of super-scalesUnit cost of manufacturing 0.4501Quality of product conformance 0.1845Delivery performance 0.2300Fast delivery 0.1548Flexibility to change product mix 0.2798Flexibility to change volume 0.4248Inventory turnover 0.7994Cycle time 0.3205Speed of new product introduction 0.5986Product capability and performance 0.1369On time new product launch 0.5044Product innovativeness 0.3765Customer support and service 0.3494

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Strength of Relationship with Competitive Performance

1. Supply Chain Management2. Just-in-time Production3. Total Preventive Maintenance4. Quality Management5. Manufacturing Strategy6. Technology Development7. Theory of Constraints8. Human Resources9. New Product Development

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JIT Production and Competitive Performance IndicatorsFirst canonical correlation 0.9741 0.9212Likelihood ratio 0.0001 0.0015 Significance 0.0157 0.2128Redundancy index: JIT production 0.2915 0.2370 Performance 0.0268 0.1751Correlations between JIT scales and canonical variable of performance indicatorsDaily schedule adherence 0.5234 0.6351 Equipment layout 0.1555 0.7167Just-in-time delivery by suppliers 0.5565 0.6463Just-in-time link with customers 0.5464 0.4435Kanban 0.7672 0.1584Repetitive nature of master schedule 0.5080 0.4047Setup time reduction 0.3056 0.7070Small lot size 0.0465 0.1285Synchronization of operations 0.5242 0.5091Correlations between performance indicators and canonical variable of JIT scalesUnit cost of manufacturing 0.0641 0.5938Quality of product conformance -0.2247 0.1864Delivery performance 0.0617 0.1195Fast delivery 0.3598 0.0626Flexibility to change product mix -0.0404 0.4640Flexibility to change volume 0.1150 0.6365Inventory turnover 0.3479 0.3898Cycle time 0.0855 0.2805Speed of new product introduction 0.1049 0.5170Product capability and performance 0.0453 -0.1444On time new product launch -0.0231 0.5980Product innovativeness -0.1707 0.3216Customer support and service 0.0361 0.3009

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JIT Production and Competitive Performance IndicatorsSecond canonical correlation 0.9212 Likelihood ratio 0.0015 Significance 0.2128Redundancy index: JIT production 0.2370 Performance 0.1751Correlations between JIT scales and canonical variable of performance indicatorsDaily schedule adherence 0.6351 Equipment layout 0.7167 Just-in-time delivery by suppliers 0.6463 Just-in-time link with customers 0.4435 Kanban 0.1584 Repetitive nature of master schedule 0.4047 Setup time reduction 0.7070 Small lot size 0.1285 Synchronization of operations 0.5091Correlations between performance indicators and canonical variable of JIT scalesUnit cost of manufacturing 0.5938Quality of product conformance 0.1864Delivery performance 0.1195Fast delivery 0.0626Flexibility to change product mix 0.4640Flexibility to change volume 0.6365Inventory turnover 0.3898Cycle time 0.2805Speed of new product introduction 0.5170Product capability and performance -0.1444On time new product launch 0.5980Product innovativeness 0.3216Customer support and service 0.3009

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Strength of Relationship with Competitive Performance

Equipment layoutSetup time reductionJust-in-time delivery by suppliersDaily schedule adherenceSynchronization of Operations

Kanban may facilitate fast delivery and inventory turnover.

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Speed of new product introduction

On time newproduct launch

JIT Production and Performance Indicators

Unit cost ofmanufacturing

Setup time reduction

Equipment layout

Flexibility to change volumeJust-in-time delivery

by suppliers

Kanban

Daily schedule adherence

Synchronizationof operations

Fast DeliveryInventory turnover

Part III

Requirements for (and Impacts of) Excellent JIT Production

Systems

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Table 6 Correlations between super-scales

JIT HR TOC QM TPM SCM NPD TECH HR 0.70074TOC 0.70319 0.68729QM 0.5781 0.69961 0.65423TPM 0.78587 0.88186 0.77538 0.77478SCM 0.80174 0.74724 0.68664 0.62961 0.79198NPD 0.33238 0.23585 0.32472 0.26076 0.31226 0.24591TECH 0.65833 0.60571 0.60666 0.72163 0.76802 0.63013 0.40785MS 0.57762 0.69357 0.67465 0.68549 0.7669 0.67002 0.19092 0.73234

All entries are significantly different from zero at 0.1% level by one-tailed test　except the pairs between NPD and others

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JIT Production and Super-ScalesCanonical correlation 0.9329 Likelihood ratio 0.0113 Significance 0.0154 Redundancy index: JIT production 0.4355 Super-scales 0.4956

Correlations between JIT production scales and canonical variable of super-scalesDaily schedule adherence 0.8423 Equipment layout 0.7911 Just-in-time delivery by suppliers 0.7033 Just-in-time link with customers 0.7564 Kanban 0.4097 Repetitive nature of master schedule 0.7712 Setup time reduction 0.7989 Small lot size 0.2452 Synchronization of operations 0.8164

Correlations between super-scales and canonical variable of JIT production scalesHR 0.8446 TOC 0.7068QM 0.7109TPM 0.8409SCM 0.8467 NPD 0.2774 TECH 0.7460 MS 0.6837

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JIT Production and Human ResourceCanonical correlation 0.9433 Likelihood ratio 0.0003 Significance 0.0369Redundancy index: JIT production 0.3371 HR 0.3183

Correlations between JIT production scales and canonical variable of HR scalesDaily schedule adherence 0.6979 Equipment layout 0.6791 Just-in-time delivery by suppliers 0.5625 Just-in-time link with customers 0.7623 Kanban 0.3356 Repetitive nature of master schedule 0.7394 Setup time reduction 0.6810 Small lot size 0.3197 Synchronization of operations 0.6615Correlations between HR scales and canonical variable of JIT production scalesCooperation 0.5340 Coordination of decision making 0.8446Employee suggestions 0.5940 Commitment 0.5756Flatness of organization structure 0.1418 Human goodness 0.2347 Management breadth of experience 0.2830 Multi-functional employees 0.5978 Recruiting and selection 0.6630Supervisory interaction facilitation 0.6939Small group problem solving 0.7561 Shop floor contact 0.7205Task-related training for employees 0.6050Centralization of authority -0.1176 Rewards/manufacturing coordination 0.6239

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JIT Production and TOCCanonical correlation 0.8417 Likelihood ratio 0.1942 Significance 0.0004 Redundancy index: JIT production 0.3316 TOC 0.6414

Correlations between JIT production scales and canonical variable of TOC scales

Daily schedule adherence 0.6096 Equipment layout 0.7659 Just-in-time delivery by suppliers 0.6231 Just-in-time link with customers 0.6000 Kanban 0.3724 Repetitive nature of master schedule 0.6245 Setup time reduction 0.7695 Small lot size 0.0960 Synchronization of operations 0.7766

Correlations between TOC scales and canonical variable of JIT production scales

TOC philosophy 0.8417 Implementation of TOC 0.7567

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JIT Production and QualityCanonical correlation 0.9048 Likelihood ratio 0.0006 Significance 0.0061 Redundancy index: JIT production 0.3360 Quality scales 0.3437

Correlations between JIT production scales and canonical variable of quality scalesDaily schedule adherence 0.7494 Equipment layout 0.7654 Just-in-time delivery by suppliers 0.5690 Just-in-time link with customers 0.4860 Kanban 0.4094 Repetitive nature of master schedule 0.6288 Setup time reduction 0.7863 Small lot size 0.3826 Synchronization of operations 0.5927

Correlations between quality scales and canonical variable of JIT production scalesCleanliness and organization 0.6324 Customer focus 0.1859Customer involvement 0.4537 Customer satisfaction 0.6622Organization-wide approach 0.5373 Prevention 0.3869 Process emphasis -0.1113 Feedback 0.6820Process control 0.7513 Supplier quality involvement 0.5852Top management leadership for quality 0.6087TQM link with customers 0.4192 Supplier partnership 0.4917

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JIT Production and TPMCanonical correlation 0.9015 Likelihood ratio 0.0793 Significance 0.0012 Redundancy index: JIT production 0.4740 TPM scales 0.5668

Correlations between JIT production scales and canonical variable of TPM scalesDaily schedule adherence 0.7560 Equipment layout 0.7224 Just-in-time delivery by suppliers 0.7242 Just-in-time link with customers 0.7537 Kanban 0.6299 Repetitive nature of master schedule 0.7905 Setup time reduction 0.7820 Small lot size 0.1317 Synchronization of operations 0.7648Correlations between TPM scales and canonical variable of JIT production scalesAutonomous Maintenance 0.2634 Maintenance Support 0.7416Team Based Maintenance 0.8692Preventive Maintenance 0.7789

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JIT Production and SCMCanonical correlation 0.9240 Likelihood ratio 0.0498 Significance 0.0001 Redundancy index: JIT production 0.4565 SCM scales 0.4629

Correlations between JIT production scales and canonical variable of SCM scalesDaily schedule adherence 0.7902 Equipment layout 0.8230 Just-in-time delivery by suppliers 0.7576 Just-in-time link with customers 0.7724 Kanban 0.4603 Repetitive nature of master schedule 0.7250 Setup time reduction 0.8116 Small lot size 0.2287 Synchronization of operations 0.8589Correlations between SCM scales and canonical variable of JIT production scalesCoordination of plant activities 0.7571 Stability of demand 0.4991Supply chain planning 0.8164

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JIT Production and NPDCanonical correlation 0.8765 Likelihood ratio 0.0357 Significance 0.2565 Redundancy index: JIT production 0.1903 NPD scales 0.1046

Correlations between JIT production scales and canonical variable of NPD scalesDaily schedule adherence 0.5721 Equipment layout 0.2854 Just-in-time delivery by suppliers 0.5225 Just-in-time link with customers 0.3104 Kanban 0.4228 Repetitive nature of master schedule 0.4043 Setup time reduction 0.2788 Small lot size 0.5622 Synchronization of operations 0.4318

Correlations between NPD scales and canonical variable of JIT production scalesCustomer Involvement -0.0580 Project Complexity -0.1007Manufacturing Involvement in New Product Development 0.4469Project Priority 0.1199Team Rewards -0.3631 Team Spirit -0.0143 Supplier Involvement 0.4913

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JIT Production and TechnologyCanonical correlation 0.8818 Likelihood ratio 0.0761 Significance 0.0174 Redundancy index: JIT production 0.3865 TECH scales 0.3430

Correlations between JIT production scales and canonical variable of TECH scalesDaily schedule adherence 0.7896 Equipment layout 0.7847 Just-in-time delivery by suppliers 0.6440 Just-in-time link with customers 0.6038 Kanban 0.3860 Repetitive nature of master schedule 0.6986 Setup time reduction 0.8393 Small lot size 0.2784 Synchronization of operations 0.7669Correlations between TECH scales and canonical variable of JIT production scalesEffective process implementation 0.8424 Inter-functional design efforts 0.7998Mass customization 0.4868Modularization of products 0.3769New product introduction cooperation 0.3838

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JIT Production and Mfg StrategyCanonical correlation 0.9146 Likelihood ratio 0.0085 Significance 0.2430 Redundancy index: JIT production 0.2625 MS scales 0.2586

Correlations between JIT production scales and canonical variable of MS scalesDaily schedule adherence 0.7936 Equipment layout 0.6972 Just-in-time delivery by suppliers 0.4820 Just-in-time link with customers 0.5675 Kanban 0.2082 Repetitive nature of master schedule 0.4508 Setup time reduction 0.7581 Small lot size 0.0862 Synchronization of operations 0.7049

Correlations between MS scales and canonical variable of JIT production scalesCommunication of manufacturing strategy 0.5985 Formal strategic planning 0.4398 Integration between functions 0.5812Leadership for functional integration 0.5883Manufacturing as a competitive resource 0.0156 Unique practices 0.7007 Proprietary equipment 0.4896 Achievement of functional integration 0.4913Anticipation of new technologies 0.5936Competitive intensity of industry 0.1629Manufacturing-business strategy linkage 0.3814

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Summary: Requirements for Excellent JIT

HRCoordination of decision making; Small group problem solving; Shop floor contact; Supervisory interaction facilitation; Recruiting and selection

TOCTOC philosophy; Implementation of TOC

Quality ManagementProcess control; Feedback; (Customer satisfaction)

TPMTeam Based Maintenance; Maintenance Support; Preventive Maintenance

SCMSupply chain planning; Coordination of plant activities

New product developmentEffective process implementation; Inter-functional design efforts

Manufacturing Strategy(Unique practices)

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Process ControlFeedback

Effective Process ImplementationInter-Functional Design Efforts

Coordination of Decision MakingSmall Group Problem Solving

Shop Floor ContactSupervisory Interaction Facilitation

Recruiting and Selection

Daily ScheduleAdherence

Equipment Layout

Just-in-time Deliveryby Suppliers

Just-in-time linkwith Customers

Repetitive Nature ofMaster Schedule

Setup Time Reduction

Synchronizationof Operations

Interrelation between JIT Production and Other Operations Management Areas

Supply Chain PlanningCoordination of Plant Activities

Team Based MaintenanceMaintenance Support

Preventive Maintenance

TOC PhilosophyImplementation of TOC

Thank you for your time.