What Is Just-in-Time (JIT)?
Let me explain what Just-in-Time, or JIT, really means. It's a management strategy where you align raw-material orders from suppliers directly with your production schedules. As a company, you use this to boost efficiency and cut down on waste by only receiving goods when you need them for production, which slashes inventory costs. But remember, this approach demands that you forecast demand accurately.
Key Takeaways
- Just-in-time (JIT) manufacturing is also known as the Toyota Production System (TPS) because the car manufacturer adopted the system in the 1970s.
- Kanban is a scheduling system often used in conjunction with JIT to avoid overcapacity of work-in-process.
- The success of the JIT production process relies on steady production, high-quality workmanship, no machine breakdowns, and reliable suppliers.
- The terms short-cycle manufacturing, used by Motorola, and continuous-flow manufacturing, used by IBM, are synonymous with the JIT system.
How Does Just-in-Time Inventory (JIT) Work?
Here's how JIT inventory actually operates. It minimizes your inventory levels and ramps up efficiency. You cut costs because you receive materials and parts only when they're needed for production, avoiding storage expenses. You're not stuck with excess inventory if an order falls through. Take a car manufacturer, for example—they run with low stock but depend on the supply chain to deliver parts just as they're required to build vehicles. They order components only after receiving customer orders. For JIT to work, you need consistent production, top-notch quality, reliable machinery, and trustworthy suppliers.
Advantages and Disadvantages of JIT
JIT systems offer clear advantages over traditional inventory methods. Your production runs are short, allowing quick shifts between products. You reduce costs by needing less warehouse space and buying only the raw materials required for current orders—no extras. On the flip side, disruptions in the supply chain can be a major issue. If a supplier fails to deliver on time, it might stop your entire production line. An unexpected surge in orders could also delay deliveries to customers.
Example of JIT
Consider Toyota Motor Corporation, which is renowned for its JIT system. They order parts only upon receiving new car orders. They implemented this in the 1970s, but it took two decades to refine. In 1997, a fire at supplier Aisin, which solely provided P-valves, nearly shut down Toyota. The shutdown lasted weeks, halting Toyota's production for days and causing a ripple effect among other suppliers. This incident cost Toyota 160 billion yen in revenue.
Special Considerations
You should also think about Kanban, a Japanese scheduling system that pairs well with JIT and lean manufacturing. Developed by Toyota's Taiichi Ohno to enhance efficiency, Kanban measures lead and cycle times to spotlight issues and set limits on work-in-process inventory, preventing overcapacity. During events like the COVID-19 pandemic, disruptions in supplies such as masks and sanitizers showed how JIT can falter when overseas inputs can't meet sudden demand spikes.
FAQs
What exactly do I mean by Just-in-Time? It's a strategy where you receive goods as close as possible to when you need them, like a car plant getting airbags only as cars hit the assembly line, avoiding shelf stock. Is Just-in-Time manufacturing risky? Yes, it cuts inventory needs and saves costs, but supply or demand shocks can halt everything, as seen in the 2020 crisis with items like ventilators. What types of companies use JIT? Think retailers, restaurants, on-demand publishing, tech and auto manufacturing—they benefit from this system. Who invented JIT inventory management? Toyota executives in the 1970s developed it to adapt quickly to market changes without excess inventory.
The Bottom Line
In summary, the Just-in-Time (JIT) inventory system minimizes stock and boosts efficiency. It's widely used by small businesses and large corporations to improve cash flow and reduce capital requirements. However, if the supply chain breaks down, the whole system can fail to deliver on time.
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