Why Just-In-Time May Not Be for Your Company?

Just in time production may seem like the answer to many manufacturers, but it is not without its pitfalls. First, let’s go through some of the reasons people praise this manufacturing system and why it has been so successful until now. And then, we’ll take a look at some of the disadvantages to using this system. For those of you who are just starting to read about Just-in-time manufacturing, or JIT, which was basically designed to reduce response times between the supplier and the customer. You could definitely implement JIT production so that it works for your company and read more about how to do this on the David Kiger WordPress blog.  Some of the most recognized advantages of JIT are that since you keep only a minimum of inventory amounts at any given moment, it will prevent you from stocking inventory that will become obsolete. Additionally, low inventories will also help decrease holding costs due to reduced warehouse space. Besides this it becomes easier to stop a production on a certain product and switch if and when necessary, since the productions runs are very short. Of course, the expense for inventory will be less since less inventory is needed, not to mention that the probability of inventory being damaged is greatly reduced. Finally, due to the limited inventory a company with this system will usually manage, the production mistakes can be identified very quickly and corrected sooner than in other manufacturing companies. At the end, this will limit the number of products that were affected by the mistake, thus reducing the amount of loss for the company.

Now, after analyzing a little bit all of the advantages behind the JIT strategy, in most cases this will seem like the perfect path to take for any manufacturing companies, but let’s consider the other side. Some companies like Sony Ericsson learned the hard way when they were faced with the terrible dilemma of overcoming the disastrous fire to the warehouse of one of their main suppliers. They unfortunately became the textbook case of how the chain can break, bringing the JIT system to a halt and at the same time bringing great financial and marketing losses with their consumers. Sony is just one of the many examples that demonstrate that the JIT system does have flaws. So here are some of the most relevant setbacks or flaws that have been found in the just-in-time system.

The complete dependency that these companies have with their suppliers can turn into an unhealthy and harmful relationship in a heartbeat. Inconveniences with delivery times, quality or unexpected events can seriously affect the production process. A supplier who delivers must always be sure to send exactly the right amounts, as well as at the right time because if not the results would be catastrophic. A natural disaster could easily affect the established flow of goods and even worse stop the production line for a short or long period of time. The distance to which your company’s warehouse and the supplier’s warehouse is located will also affect delivery times. Now, yet another setback could come at the hands of not having the right software to keep everything synchronized and working smoothly. When you have a limited amount of stock, you may come across certain inconveniences like not being able to fill an order that requires a massive and unexpected order, or on the contrary you may find some suppliers who are not willing to sell below a certain amount. Due to all of this, the coordination of the JIT process will most likely be the most important key to success. This will also bring extra costs when it comes to finding just the right tool to keep track of the raw material and the manufacturing of the final product and all of the involved companies and departments completely communicated.

Sony logo_logistics_david kiger_just in time
Image courtesy of TechStage at Flickr.com

The coordination between your organization and your suppliers will become key to making it work. This strategy precisely means that while everything is running smoothly there are no major hiccups, but because there is no inventory buffer, it may very well suffer greatly due to any kind of inconvenience the inventory could have.  So, although most may focus on the advantages to keeping a low inventory, like helping the company’s bottom line, it is wise not to forget that the investment, in both money and trained personnel, in all of the tools that will allow your organization to set up a platform that can notify you of exactly where the process is at. What is really concerning about this, is that if only one thing fails to work perfectly, the consequence will likely lead to delays and angry customers. There are so many possibilities of something occurring throughout the process, from an increase in prices or even a natural disaster, that could pose a threat to the service that is being offered.

All of this is not to say that JIT is no good. On the contrary, it just calls out to those who have a manufacturing organization to truly analyze the system and see if it works for them.

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