Just in time (JIT) inventory system depends on good communications and harmonization with suppliers to bring production materials in time for production to take place. JIT scheme reduces the need to store supplies and increases reliance on the suppliers, quality control as well as error-free process. This system provides an excellent inventory and production process. Below are some features of JIT system.
The system needs a long-term concentration on production growth and supply requirements. Changes in raw materials specifications, products levels and products offers should be instituted and synchronized with suppliers. Getting supplies, good shipping and enrollment requirements should be performed on time to ensure production is not hindered by resource constraints. Benefits like cost savings, lower production costs and customer satisfaction can be achieved in the long run.
Automated purchasing method supports strong coordination to ensure steady stream of raw materials. Established leads time, existing inventory levels and Production levels are calculated automatically. If supplies are required, the supplier receives an electronic message to deliver them.
JIT system display strong relations between suppliers and producer. Suppliers are always seen as a wing of the business. Communications and information flow are open to assist in supporting strong supply coordination. These relationships are enhanced by long-term contracts.
Efficiency in supply operation is necessary for the JIT system. These efficiencies always spread to production as well as supply process. There is less chances for errors to occur hence raw materials and finished products conform to strict standards. Workers are usually educated to identify errors in the manufacturing process and take corrective measures. Several quality checks leads to efficient production.
JIT production inventory processes depend on constant improvements in eradicating production problems and aid move simplistic procedures. The improvements can be done by developing foolproof production steps and setting up systems to spot errors in production. They can as well remove steps which add no value to products.
Just in time (JIT) inventory management is based on the principle of supply and demand. Organizations that use this plan schedule smaller, more regular deliveries of materials to ensure they only have what they require to accomplish immediate production needs. They regularly apply this principles in fulfilling customer order hence encourage buyers to order small amounts frequently.
Reduces Storage Needs
JIT inventory management cut down storage costs related to storing parts and final products. JIT model does not require much space as materials are stored near production line and are constantly replenished hence reduce downtime for restocking. The final products are stored in or closer to your delivery facility, streamlining your operation further. In most cases, products move directly to distribution containers as they are produced.
Streamlines Inventory Accounting
When the inventory is done faster, the system to manage it is simplified since it is simple to know the things you have. Additionally, errors can be easily identified and solved because you are controlling a smaller amount.
When your production program is based on some kind of algorithm that is intended to predict the outgoing produce, eventually you are likely to remain with an inventory you cannot get rid of. The moment you begin producing newer, faster and improved model, you are wedged with overstock which you must put up for sale at reduced price or use it as door stop. But if you are following the principles of lean manufacturing, overproduction is rationalize since you are only producing what can be sold. This allows you to reduce the losses on products which become obsolete.
Frees Up Capital
Heaps of materials and finished products represent heaps of cash. If your products are just piling in your storage room locks up money. By use of JIT system, you are able to purchase materials in smaller amounts, enabling you to deal with other needs like advertising, expansion as well as marketing.
Implementing Just in Time (JIT) production management strategy can be a business move that you are least prepared to take. This could be because the system’s implementation process may have hidden costs arising from the sudden need to re-train your entire staff and hire technical support team from time to time. You can nonetheless sail through the JIT implementation process successfully by establishing quantifiable targets to lower lead times and capital expenditure. This will enable your firm to operate a lean production system that can be fused with inventory management systems such as Kanban for better results. Just in Time is an effective way of cutting down carrying cost. This is total cost your company incurs as a result of holding an inventory. JIT is designed to reduce human capital and other resources required along your company’s production line. These include salaries, warehousing costs, rent and utility bills. You will also be able to prevent late deliveries and under or over production of products owing to poor communication between your procurement office and raw materials suppliers. The process of implementing JIT will provide you the opportunity to introduce a production line system that supports creativity and self-motivation amongst workers. Teamwork is also likely to improve communications on the production floor. It is however significant to include worker’s opinions in the decision making process to eliminate possible resistance to change in process of implementing the lean production system. Putting JIT management system in place saves time as it reduces your system’s possible downtime. As a result, you do not have to engage workers in overtime activities to compensate for the time lost as result of down time. Just in Time works with communication systems such as electronic date interchange (EDI) and fill rates that enables you to measure the level of improvement attained by the entire production line on a daily basis.
Ford Motor Company was the first company to introduce Just In Time manufacturing system. Different concepts like Kanban and TQM have got great similarities with Just In Time and manufacturing process and procurement policies will have to be planned really well to make this concept a huge success.
The main advantages of this concept are:
1) Overproduction will become a distant reality with the careful application of this system.
2) The much required aspect of higher customer satisfaction will be achieved with the frequent interaction with the customers.
3) Just In Time manufacturing system will nurture and develop close relationships along the production chain.
4) Strict adherence to this concept will result in the overall efficiency and the manufacturing of top quality products will become a reality as well.
5) This system will always focus on minimizing the cost of rework and inspection costs with the help of quality tools.
6) Competition is getting heated up in these days and the volatile nature of the market demand has become a great concern for a good number of companies. Just In Time manufacturing, as the name suggests, works on a demand-pull basis and it will ensure the sale of the produced goods with great efficiency. That is how this system handles the demand fluctuations with great ease.
7) This manufacturing system only allows essential stocks and the working capital will be kept at the optimum level. Financing procurement will become a hassle free process with a strong control over the working capital. Fresh stocks will be ordered only after having achieved the pre-set minimum re-order level and it can be described as a blessing for the inventory management.
8) Because of the low level of stocks, the return on investment (ROI) would be very high.
9) This process ensures complete elimination of waste and there will not be any expired or out-of-date products.
10) Since Just In Time manufacturing system controls the cost of the stock holding in an effective manner, better utilization of the space will become a reality. Financial implications like insurance premiums and rent will be reduced considerably as well.
All these aspects make Just In Time system really unique and highly result oriented as well.
Just in Time (JIT) is a powerful production strategy that can be fused with other management systems such as Kanban to improve productivity. Taiichi Ohno is referred to as the father of JIT having developed the system in 1970s to help Toyota meet souring demand for its cars and spare parts. The system’s popularity in the global manufacturing industry can be attributed to its ability to get rid of defects and delivery delays. Though JIT can bring about inventory complications if not handled properly, there are numerous benefits that you can obtain by adapting the production strategy. Just in Time is designed to cut down the time required to set up new projects. This makes it possible for you to use systems such as SMED ((single-minute exchange of dies) to control the inventory, as a result, you will be able have a better control of your goods’ movement from the warehouse to the market. You will as well be at a position to schedule your production and synchronize it with demand, meaning that you can decide to produce goods on request and this eliminates the need for extra storage costs as the goods are delivered upon completion. JIT is necessary in placing orders for spare parts and raw materials especially if you are involved in dynamic businesses such as computer assembly. Dell for instance adapted Just in Time pattern of management to avoid ordering obsolete computer parts. The system however also makes it possible for the computer manufacturing company to order slightly older computer spares in the interest of customers who own earlier Dell computers models and are in need of spares for repair jobs. JIT has a flexible edge that allows for innovation and creativity, enabling you to come up with unique inventions as the system’s is design allows you to point out mistakes and avoid them before they happen especially if you are carrying out a pilot production project aimed at manufacturing a new line of products or model.