Production waste and controlling inventory are two common problems associated with manufacturing and supply chain management for companies around the world. If you overestimate the amount of product demand in your market segment, you end up having too much inventory on shelves and tons of material waste sitting still in the production line waiting for store inventory to go down to prompt an increase in manufacturing processes.
To handle both production and inventory waste, companies are adopting just-in-time production models. These models factor in customer demand, available supplies and production schedules to only request materials and create products when the items are needed.
What is Just-In-Time Production?
Being at the forefront of global shipping logistics, David Kiger works with companies who have adopted the just-in-time approach. Just-in-time production has a main focus of eliminating overproduction at the manufacturing level. Instead of a company seeking to create enough products so there is a surplus at distribution centers and warehouses in advance to cover demand fluctuations from customers, just-in-time production focuses on only creating products when there is an actual need for them.
What is the Purpose of Just-In-Time Processes?
Factor in the amount of time products will sit on shelves. While market analysis had anticipated a high demand for these products, customer trends may not have matched these estimates, leading for an overabundance of products in warehouses. This problem can slow down operations because manufacturers no longer have room to stock up on other wanted products. The lack of demand could be so great that it leads to having a surplus of obsolete products that cannot be shipped out to customers, creating a waste in production time, work, materials and shipping costs.
Just-in-time processes strive to lessen this waste on every level. By only answering customer demand at the exact moment it appears, you aren’t requesting excess materials. Production schedules and manufacturing work focuses on creating that specific product that has already been ordered. Shipping costs can also be controlled because trucks are only sent out when the product is desired. In addition, the product is not taking up space on warehouse or store shelves.
What Advantages are Present with Just-In-Time Production?
One of the top advantages you may see in adopting just-in-time production is that you can switch your focus on creating other high demand products. Your company can reduce inventory for slow moving items and better invest resources into the product areas that are currently satisfying customers’ pain points. When sales demand starts to shift, you can pull back on creating more inventory for the current product until demand picks up again.
Another advantage is that you have a greater opportunity in streamlining operations as you can place workers in more desirable positions. Cutting back on the workforce and certain production processes allows you to save money that can be placed into a safety net for future emergencies or be invested back into growing the business. When he founded Worldwide Express, David Kiger saw firsthand the opportunities that appeared for companies who may have opened additional store locations or reached into global markets due to how they made their production processes more efficient.
Understanding the Pitfalls of Just-In-Time Production
As with any production process strategy, just-in-time manufacturing is not without its problems that need to be addressed. Your company will require retailers to contact suppliers to instantly send out materials to the production company when product demand appears. You will also need distribution centers standing by ready to fulfill shipping orders to the satisfaction of customers.
This amount of coordination within the supply chain requires having an integrated technology infrastructure and inventory management system. Logisticians such as David Kiger suggests having a firm handle on real-time logistical data so you can take the right actions instantly to keep production schedules and order fulfillment in control.
Another factor to keep in mind is that one mistake in the supply chain process can lead to the lack of production execution for orders, making unsatisfied customers. The longer customers have to wait for desired products, the less future demand there may be as customers will either go to the competition for the same products or find other products that will meet their pain points. When you finally obtain the materials and create the desired products, the items fail to move off shelves as this problem will again lead to higher inventory costs.
Like any new business tactic or strategy, understanding your production processes and market demand can allow you to make the best decisions for your company. While just-in-time production may be suitable for your operations, also consider the risks and plan the right contingency plans to handle any problems that may appear.
Controlling waste and limiting inventory to meet current customer demand are the main goals of just-in-time production processes. There are advantages and disadvantages to this process as you need to understand the risks to reap in the rewards.