Just in time is a Japanese system of organization and production, mainly used in large car factories. It is also known as Toyota method. The secret of this method is the reduction of cost management and storage losses after systematically avoiding unnecessary actions. Thus, it does not occur under assumptions, but on actual orders. A simple definition of the main goal of Just in Time is “producing the needed good in the needed quantities when they are needed by a particular client.” This means that by applying Just in time, the customer must feel that he has purchased a product or service quality, which has received within the requested time and has paid the right price for it.
In short, from the point of view of any supplier of products or services, being efficient means producing and providing the customer what he needs, in the exact amounts and on the dates agreed or requested.
Just in time production is both a philosophy and an integrated management system of production. It has slowly evolved through a process of trial and error over a period of more than 15 years. Japanese factories have been a suitable environment for this production development, which was established from the moment Toyota gave its employees the order to “eliminate waste at all costs”. To that extent, all the waste that does not correspond to the minimum amount of equipment, materials, parts, space and time, which is not indispensable for giving added value to products or services must be reduced to zero.
Related article: Toyota: ahead of its time by David Kiger
Actually, there was no master plan or any draft when Toyota started to implement this system, and yet, JIT has been an unprecedented boom in recent decades. After the success of other Japanese companies during the crisis of the 70s, researchers and companies around the world turned their attention to a form of production which, until then, had been considered linked to the traditions of both the culture and the social values of Japan and, therefore, very difficult to implement in industries outside of Japan. However, it was later shown that although the implementation of the JIT principles and techniques requires a profound change in the production of any organization, it may be implemented regardless of the society and culture.
In fact, just after being formally adopted by many Japanese plants in the 70s, JIT began to be implemented in the US and some European countries (like Spain) during the 80s. A good example is the General Motors plant in Saginaw, Michigan, which was in danger of closing its doors because of low productivity in the early nineties. Employees complained about the tedious and repetitive nature of their duties. Both the managers and the union agreed to try to solve the problem together, and the JIT philosophy was the guide for reform efforts. The results were surprising. The morale of all workers raised after the new working methods were developed. In 1995, productivity increased by 14%, and the proportion of defective parts was reduced by 58%. The company signed a contract with Toyota to supply its plant in Georgetown.
Nevertheless, it is important to note that although this form of production is very useful and practical in many cases, it may not be the most recommended method for some companies. Even though this system significantly reduces storage costs of inventories, including the opportunity cost and the release of large amounts of human resources focused on particular tasks, despite its undoubted success, JIT is not a system designed for small businesses. The biggest drawback of this system is its high complexity logistics. The managers of every company must rethink the whole entire workflow of the organization, from purchasing raw materials to product distribution, and those changes may be counterproductive if the small company in question is actually working efficiently.
In addition, JIT requires a very close relationship with very few suppliers, which should be physically close to your company, since you need a very fast and flexible response to customer demand. In addition, a very large trading power for your supplier is integrated into your supply chain under the JIT system and it may mean additional costs. At the time, when the supplier no longer serves a product, SMEs can’t meet customer needs and the system will simply collapse.
JIT requires a very large amount of resources that can be put into practice, and this is not ideal if you own, for example, a small family business that doesn’t need to grow to industrial levels. On the other hand, JIT production may lead to delays and suspensions in the production chain for lack of supplies, and it may impact costs negatively. Similarly, the possibility of reducing purchase prices may be limited if the number of your purchases is of low. However, depending on the relationship with the supplier, this disadvantage can be mitigated.
I hope this post has been useful in case you want to implement this system in your business.
Recommended: What’s Your Excuse for Not Using JIT?