Just In Time manufacturing or production (JIT) is a production model or inventory strategy that focuses on the creation of material only to meet demand and not to stock a surplus as a projected need. The main goal of Just In Time manufacturing is to greatly reduce the waste associated with overproduction, waiting times and dealing with excess inventory. Those three aspects are defined as some of the categories of waste outlined by the principles of lean manufacturing or the Toyota Production System.
Toyota as being one of the earliest developers of the system, as well as the company that has helped it evolve into the widely accepted methodology it is today, also provides us with the clearest example of how it works in broad terms. In Just In Time manufacturing, companies work with very low inventory levels, like in the case of car manufacturers that only receive the parts necessary for the sections of the product they are currently working on. Doing this allows them to remove great strain in the supply chain because parts will arrive only as they are needed and hopefully “just in time”.
Using Just In Time greatly reduces the need for raw materials and work-in-process while at the same time practically eliminating finished goods inventories completely. The advantages are many.
The fact that production runs are so short makes it ideal in the event of a production halt and the need to switch to a different product or adjust to the customer’s specifications. In situations like that, the waste created is minimal and the time wasted is almost nonexistent. Even if unexpected events force production to stop, the damages won’t be so debilitating if they happen on a smaller scale. Production mistakes are also easily spotted when the volume of output is lower.
Minimal amounts of inventory also mean a minimal amount of obsolescence because of the high rate of turnover that is moving the product constantly and not keeping it in stock for extended periods of time. Holding smaller amounts of inventory also means reduced costs in warehousing and storage optimization for specialized items. At the same time, having warehouses with fewer inventories, translate to more space for operators to maneuver and less opportunities for the inventory that does exist, to get damaged internally by the warehouse staff.
Smaller companies are greatly benefited from this manufacturing model as well because it calls for a smaller investment in stock and inventories that are not staying behind as the result of unnecessary overproduction.
We can safely say that the main advantage of Just In Time production is its costs effectiveness. Lowering overheads, reducing potential for waste and mistakes in production as well as the need for smaller spaces for the operation, are all factors that save manufacturers large amounts of money in their production. Another great advantage is the impact it has in the environment. Keep stocks low not only creates less waste, but also reduces energy consumption, saving money while also being friendlier to the planet. Buying just as much raw material as it’s going to be needed and eliminating the need for large storage spaces are also factors that contribute to the cost-conscious nature of Just In Time production.
While the advantages are so clear and seem like overwhelming evidence of the efficacy of the system, Just In Time manufacturing also has some limitations that is worth examining in order to better evaluate if the method works for your particular operation.
In the event a supplier doesn’t deliver materials on time to the company or makes a mistake in the numbers that are supposed to be received, they can greatly impact production to the point of making it come to a sudden halt. The problem with working with a system that does things in just the right amount, is the fact that even the smallest change can create a domino effect that ripples through the whole production line. Since such small quantities of stock are readily available, it is of extreme importance to have contingencies in place in the event that more stock is needed at a moment’s notice. To remedy this situation, a great relationship with suppliers is absolutely necessary.
Slow dispatch time and getting into situations where the customer’s order may not be fulfilled on time is something that you must outweigh against the advantages of Just In Time production.
The difficulty of predicting the market’s demand becomes even more dangerous in a production method that has such high risk of running out of stock. Working with a mentality of always keeping low stock in storage can become a problem in the event of a massive wave of demand for your product. The problem is that in most cases it is very hard to adjust the production to meet the demands without having to apply major changes to the current operation.
For more great information about supply chain and production methods, check out our other articles available at David Kiger’s Blog.
* Featured Image courtesy of Hugo Chisholm at Flickr.com