What is the Main Purpose of a JIT Inventory?

One of the most common problems business have to deal with in any industry is the inventory. Having a massive inventory represents thousands of dollars in logistics- related costs. But, having a small inventory may affect your business if you are not able to suit your customers’ demands just in time.

So, what to do then? At the beginning of the 21st century, a model known as “Just in Time” or JIT appeared and immediately became the new superstar in most industries. This model allows companies to have inventory systems that are meant to have everything that is needed at hand but also aims to reduce any possible type of waste.

JIT inventories are defined as management systems that allow companies to produce goods only when it has been required by customers. It works as a controlled inventory that will never affect the final customer.

Keeping that in mind, it is important to say that Just in Time inventory systems are meant to avoid any possible extra cost or problem related to having more than what is needed within your stock. The idea is to satisfy your customers’ demands but not in excess. Imagine you buy extra units of a given material, and you don’t use those units but you still have to store them because they were expensive. That is going to represent a major issue to your business.

This system can be really tricky at the beginning, but most companies that implement it have shown great results. Having said that, in this article David Kiger will share some facts about the purpose of Just in Time inventory systems.

1 . Reduce Costs Related to your Inventory

This is the main purpose of having a JIT inventory system since it will immediately help your company’s numbers improve. Just in Time inventories help you reduce the number of raw materials and goods you have in your inventory. This means you won’t need to store as many things as you did before.

The reason why this is so important is that it will help you reduce costs. You won’t need to have huge facilities or numerous employees working in those facilities. Also, you will eliminate the possibility of having obsolete materials in your inventory.

It is pretty basic, having a high number of materials in your inventory will represent money to your company. So far, this doesn’t seem to be an issue, however, don’t you think it would be better for your business to have that money in the company’s bank account or in cash instead of keeping it in materials?

Besides, when you have a small inventory, you can use the extra money in your business to do some research and develop new products that are probably going to require the use of new materials. It is guaranteed that a company that uses a JIT inventory will expand and grow faster than one that keeps the same old massive inventory.

2 . Time Reduction

Has it happened to you that you want to find something but you have so many things that it takes hours for you to finally reach it? Well, with companies and inventories it happens the same way.

ikea_JIT inventory_storage_warehouse
Image courtesy of torsteinsaltvedt at Flickr.com

When you have excess inventory, you will need to spend more time trying to find the things that you need to manufacture any type of product. You will hardly be able to move to the next step of having everything you need at hand. This situation can greatly affect your business since you will need to spend extra money during each stage of the manufacturing process.

Just in Time inventory systems help companies finish their product faster and in a more efficient way. The reason to this is that you don’t have to waste time moving from one place to another looking for the materials you need to use. Also, JIT helps you reduce or even eliminate bottlenecks. This means fewer problems and more time to produce more units – when needed.

Most companies use process engineers to decide which is the best way to proceed within the production line. Also, they are the ones in charge of defining the maximum amount of materials that are required to produce a given amount of objects. This way, waiting times are supposed to be reduced and production should move easily from one stage to the other.

Related: How To Make Big Strategies Work In Small Businesses

3 . Efficient Production Layout

Just in Time inventories give companies the chance to design better and more efficient manufacturing layouts. This means, that you can choose how materials flow from one stage to the other, keeping in mind which is going to be the most efficient way to do so.

For instance, now that you have everything that you need at hand, you can choose which workstations you want to be closer to the raw materials or to each other, following the parameters of the layout you have designed.

This layout will also help you reduce the time and save some money. Knowing how to build products in an efficient way will help your company implement better manufacturing systems and focus on what really matters, such as your customers’ needs.

* Featured Image courtesy of Mark Smithat Flickr.com

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