Just In Time (JIT)
Monday, November 25, 2013
When is the best time to have an inventory part ready for production?
– Just in time.
When is the best time to have an item ready for the next step in production?
– Just in time.
When is the best time to have a product ready for delivery to a customer?
– Just in time.
So why do manufacturers build inventory of both finished goods and raw materials?
– Just in case!
A buffer of inventory on hand is comforting – and costly.
If you hold a lot of items in inventory, you're
locking away a huge amount of cash unnecessarily. These items
can be lost, stolen, or damaged, or they can deteriorate. They
occupy space, which could otherwise be devoted to operations.
And they can become obsolete, particularly when products are improved
or changed often (many of us can remember images of airfields
full of unwanted, obsolete cars from the 1970s and 1980s.) All
of this represents financial loss to the business.
In the 1970s, when Japanese manufacturing companies
were trying to perfect their systems, Taiichi Ohno of Toyota developed
a guiding philosophy for manufacturing that minimized waste and
improved quality. Called Just In Time (JIT), this philosophy advocates
a lean approach to production, and uses many tools to achieve
this overall goal.
When items are ready just in time, they aren't
sitting idle and taking up space. This means that they aren't
costing you anything to hold onto them, and they're not becoming
obsolete or deteriorating. However, without the buffer of having
items in stock, you must tightly control your manufacturing process
so that parts are ready when you need them.
When you do (and JIT helps you do this) you
can be very responsive to customer orders – after all, you have
no stake in "forcing" customers to have one particular
product, just because you have a warehouse full of parts that
need to be used up. And you have no stake in trying to persuade
customers to take an obsolete model just because it's sitting
in stock.
The key benefits of JIT are:
Low inventory
Low wastage
High quality production
High customer responsiveness.
The JIT Strategy
By taking a JIT approach to inventory and product
handling, companies can often cut costs significantly. Inventory
costs contribute heavily to the company expenses, especially in
manufacturing organizations. By minimizing the amount of inventory
you hold, you save space, free up cash resources, and reduce the
waste that comes from obsolescence.
JIT Systems
To facilitate a JIT approach, you need a variety
of systems in place. The most notable is a kanban .
This is a Japanese approach to ensuring a continuous supply of
inventory or product. Kanbans were designed to support the JIT
philosophy.
A kanban is a visual signal that indicates it
is time to replenish stock and possibly reorder. For instance,
as the supply of bolts in a bin on the assembly line falls below
a certain number, it may uncover a yellow line painted around
the inside of the storage bin. This yellow line indicates to the
foreman that he needs to prepare a requisition for more bolts.
That requisition is given to the purchasing department, which
processes the order. This prevents the supply of bolts from dropping
below a critical amount and allows production continues to flow
smoothly. To read more on kanban, click here for the Mind Tools article on it.
JIT also exists in concert with continuous improvement
systems. Total
Quality Management and Six Sigma are overarching programs
that help you take a detailed look at every point of the production
process and identify ways to make improvements. By applying JIT,
you are continuously monitoring the production process. This gives
you opportunities for making the production process smoother and
more efficient.
Because JIT is intended to spread throughout
the organization, it can have an impact on many areas through
improvements in processes. When the emphasis is on lean production,
systems tend to be made simpler and more predictable. From how
a product moves through the building to ways to increase worker
involvement in system design, JIT improves efficiency.
JIT and Stakeholder Relationships
With JIT, it is necessary that you build strong
ties with your supply chain. This will ensure that you have access
to the supplies you need when you need them. (A side benefit of
this is that you're more likely to receive forewarning of shifts
in supply that may have an impact on your business.)
With a secure source of supplies, you can continue
to make improvements in your production and inventory systems.
This helps you to increase your responsiveness to customer demand.
If you need to ramp up production, you can be confident knowing
your suppliers will help you.
If your customers demand a newer technology,
you can switch product quite easily, without worrying about writing
off a large stock of obsolete supplies and finished goods. This
means that you can meet changing customer needs more quickly.
Custom orders are simpler with a JIT system.
Instead of the customer's widget being built six months in advance
and waiting on a shelf, it is built when it's ordered. By delivering
product "just in time," you allow for last-minute changes.
Essentially, JIT allows your company to get
the right products to the right customers at the right time. In
many industries, this can give you a huge competitive advantage,
at the same time that it helps you save a large amount of money.
Note:
A key drawback of JIT is that it only works if you can rely
on your suppliers to deliver when they promise to – otherwise
your whole operation may grind to a halt.
What's more, if material costs suddenly
increase, then storing them at a lower rate might have been
a more economic option. And JIT is also based on historical
patterns of need: If orders increase sharply, adjusting
to the increased need for supplies may not be easy for you
or your suppliers.
Key Points
Just In Time is a way of managing operations
so that they run leanly and efficiently. JIT requires giving up
your "Just In Case" safety net, and controlling supplies
and inventory to levels that just support production. The main
emphasis of JIT is on cost reduction and minimal waste.
The process of implementation requires you to
take a very close look at every stage of your production and inventory
carrying points. This alone is a useful exercise that will highlight
some areas for improvement. Ultimately, the more efficient you
are and the higher quality product you provide, the more appealing
you will be to customers and clients.
Tags:
Skills, Strategy Tools
– Just in time.
When is the best time to have an item ready for the next step in production?
– Just in time.
When is the best time to have a product ready for delivery to a customer?
– Just in time.
So why do manufacturers build inventory of both finished goods and raw materials?
– Just in case!
A buffer of inventory on hand is comforting – and costly.
If you hold a lot of items in inventory, you're
locking away a huge amount of cash unnecessarily. These items
can be lost, stolen, or damaged, or they can deteriorate. They
occupy space, which could otherwise be devoted to operations.
And they can become obsolete, particularly when products are improved
or changed often (many of us can remember images of airfields
full of unwanted, obsolete cars from the 1970s and 1980s.) All
of this represents financial loss to the business.
In the 1970s, when Japanese manufacturing companies
were trying to perfect their systems, Taiichi Ohno of Toyota developed
a guiding philosophy for manufacturing that minimized waste and
improved quality. Called Just In Time (JIT), this philosophy advocates
a lean approach to production, and uses many tools to achieve
this overall goal.
When items are ready just in time, they aren't
sitting idle and taking up space. This means that they aren't
costing you anything to hold onto them, and they're not becoming
obsolete or deteriorating. However, without the buffer of having
items in stock, you must tightly control your manufacturing process
so that parts are ready when you need them.
When you do (and JIT helps you do this) you
can be very responsive to customer orders – after all, you have
no stake in "forcing" customers to have one particular
product, just because you have a warehouse full of parts that
need to be used up. And you have no stake in trying to persuade
customers to take an obsolete model just because it's sitting
in stock.
The key benefits of JIT are:
Low inventory
Low wastage
High quality production
High customer responsiveness.
The JIT Strategy
By taking a JIT approach to inventory and product
handling, companies can often cut costs significantly. Inventory
costs contribute heavily to the company expenses, especially in
manufacturing organizations. By minimizing the amount of inventory
you hold, you save space, free up cash resources, and reduce the
waste that comes from obsolescence.
JIT Systems
To facilitate a JIT approach, you need a variety
of systems in place. The most notable is a kanban .
This is a Japanese approach to ensuring a continuous supply of
inventory or product. Kanbans were designed to support the JIT
philosophy.
A kanban is a visual signal that indicates it
is time to replenish stock and possibly reorder. For instance,
as the supply of bolts in a bin on the assembly line falls below
a certain number, it may uncover a yellow line painted around
the inside of the storage bin. This yellow line indicates to the
foreman that he needs to prepare a requisition for more bolts.
That requisition is given to the purchasing department, which
processes the order. This prevents the supply of bolts from dropping
below a critical amount and allows production continues to flow
smoothly. To read more on kanban, click here for the Mind Tools article on it.
JIT also exists in concert with continuous improvement
systems. Total
Quality Management and Six Sigma are overarching programs
that help you take a detailed look at every point of the production
process and identify ways to make improvements. By applying JIT,
you are continuously monitoring the production process. This gives
you opportunities for making the production process smoother and
more efficient.
Because JIT is intended to spread throughout
the organization, it can have an impact on many areas through
improvements in processes. When the emphasis is on lean production,
systems tend to be made simpler and more predictable. From how
a product moves through the building to ways to increase worker
involvement in system design, JIT improves efficiency.
JIT and Stakeholder Relationships
With JIT, it is necessary that you build strong
ties with your supply chain. This will ensure that you have access
to the supplies you need when you need them. (A side benefit of
this is that you're more likely to receive forewarning of shifts
in supply that may have an impact on your business.)
With a secure source of supplies, you can continue
to make improvements in your production and inventory systems.
This helps you to increase your responsiveness to customer demand.
If you need to ramp up production, you can be confident knowing
your suppliers will help you.
If your customers demand a newer technology,
you can switch product quite easily, without worrying about writing
off a large stock of obsolete supplies and finished goods. This
means that you can meet changing customer needs more quickly.
Custom orders are simpler with a JIT system.
Instead of the customer's widget being built six months in advance
and waiting on a shelf, it is built when it's ordered. By delivering
product "just in time," you allow for last-minute changes.
Essentially, JIT allows your company to get
the right products to the right customers at the right time. In
many industries, this can give you a huge competitive advantage,
at the same time that it helps you save a large amount of money.
Note:
A key drawback of JIT is that it only works if you can rely
on your suppliers to deliver when they promise to – otherwise
your whole operation may grind to a halt.
What's more, if material costs suddenly
increase, then storing them at a lower rate might have been
a more economic option. And JIT is also based on historical
patterns of need: If orders increase sharply, adjusting
to the increased need for supplies may not be easy for you
or your suppliers.
Key Points
Just In Time is a way of managing operations
so that they run leanly and efficiently. JIT requires giving up
your "Just In Case" safety net, and controlling supplies
and inventory to levels that just support production. The main
emphasis of JIT is on cost reduction and minimal waste.
The process of implementation requires you to
take a very close look at every stage of your production and inventory
carrying points. This alone is a useful exercise that will highlight
some areas for improvement. Ultimately, the more efficient you
are and the higher quality product you provide, the more appealing
you will be to customers and clients.
