Just in time manufacturing was developed by Toyota in the 1970s where raw materials were not brought to the production floor until an order was received and this product was ready to be built. No parts are allowed at any stage unless they are required for the next stage, or they are part of an assembly for the next stage of the production line. This philosophy has allowed Toyota to reduce to a minimum the amount of inventory which means lower costs for the entire company.
We can say that it works more or less the same for small businesses but it has a different “name”: Just In Time Inventory. Just in time inventory for shops and small businesses has the goal of saving money and reducing waste, while still providing their customers with the products they want and need. Just-in-time inventory systems allow small business owners to create their products after they receive a request from customers, rather than having already assembled products on the shelves waiting for purchase. Here are some examples on where the Just In Time inventory could work perfectly and give the small business owner a strategy to approach clients and products and guarantee a profit.
Drop-shipping companies are the ones that have a strategy for their supply chain where the retailer does not keep goods in stock but places orders and shipment details to the manufacturer or another retailer, or a wholesaler, who then ships the goods directly to the customer. The JIT inventory allows this type of business owners to avoid having inventory and storage space to service their customers. For example, an entrepreneur who wants to start a gift basket business can buy all the supplies and raw material and create the gift baskets for every occasion. If no one purchases the baskets, or the approach does not work, the entrepreneur will be left with excess inventory and more than likely will lose money. On the other hand, this same business owner can use JIT inventory and partner with a drop-ship gift basket company and place orders as they arrive. This way the business can avoid having inventory on hand and order simply based on customer demand, saving time, effort and money.
We have all eaten in fast food restaurants. We have purchased fast food on street food trucks and stands and we all have seen the dynamic. Well, it is a JIT inventory dynamic taken to the streets. Here is how: these types of restaurants use just-in-time inventory to serve their customers on a daily basis during breakfast, lunch and dinner. The fast food restaurant does not have their dishes already prepared instead, they have cheese, burger meats, toppings, fixings and all the ingredient ready to use, but they don’t start assembling and cooking their hamburgers, sundaes or fish sandwiches until a customer places an order. It could seem simple but it is exactly how it works. Subway, the sandwich company, uses JIT inventory and manufacture right before your eyes, when they prepare the sandwich for you with the ingredients you have in front of your eyes.
Florist shop or freelancer.
A florist that runs the business from her house will always use JIT inventory to cover her clients, save time and money, while still getting quality finished products to her clients. The florist will receive orders for the occasion and run to the flower shop and create the orders. A local, home-based florist shop, apart from having their flowers and arrangements displayed, they can take orders from customers for everything from weddings and baby showers to corporate events. Once an order is placed, they can just go to the nearest flower shop or flower mart to pick up the flowers needed to make the arrangements. It is a common practice among flower shops because the arrangements that have been sitting days in the shop just look unattractive and are not worth selling.
Computer and mobile phone manufacturers
On a bigger scale, computer manufacturers use just-in-time inventory to control the manufacturing and ordering of their computer parts. They don’t have a warehouse filled with computers ready to be shipped, what they do is order the part to the suppliers as orders come in and they assemble the computer at a special location. It works the same for mobile phone companies that manufacture their phones with materials from all over the world.
The Just In Time production approach was born within the Toyota company. It works very well for very big operations as they can also reuse their material. For small businesses, the JIT inventory approach will give them a different way of doing business and approaching their clients, keeping up with trends such as customization of products and special orders for special needs.