Just in Time (JIT) Manufacturing and Inventory control system

Just in Time (JIT) Manufacturing and Inventory Control System:

Learning objectives of the article:

• Define and explain the concept of just in time manufacturing and inventory control system.
• What are advantages and disadvantages of just in time manufacturing system / JIT Company?
• Highlight six advantages of just in time in material production.
• just in time (jit) systems and their effect on inventory levels

Traditionally manufacturers have forecasted demand for their products into the future and then have attempted to smooth out production to meet that forecasted demand. At the same time, they have also attempted to keep everyone as busy as possible producing output so as to maximize “efficiency” and (hopefully) reduce costs. Unfortunately, this approach has a number of major drawbacks including large inventories, long production times, high defect rates, production obsolescence, inability to meet delivery schedules, and (ironically) high costs. Non of this is obvious-if it were, companies would long ago have abandoned this approach.

Managers at Toyota are credited with the insight that an entirely new approach, called just in time (JIT) was needed.

• Definition of Just in time manufacturing
• Just-In-Time concept
• Benefits / Advantages of just in time manufacturing system
• Limitations / Disadvantages of Just in Time Manufacturing
• List of Companies that use just in time System

Definition and Explanation of Just in Time Manufacturing:

Just In Time (JIT) is a production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand.

When Companies use Just in Time (JIT) manufacturing and inventory control system, they purchase materials and produce units only as needed to meet actual customers demand. In just in time manufacturing system inventories are reduced to the minimum and in some cases are zero. JIT approach can be used in both manufacturing and merchandising companies. It has the most profound effects, however, on the operations of manufacturing companies which maintain three class of inventories-raw material, Work in process, and finished goods. Traditionally, manufacturing companies have maintained large amounts of all three types of inventories to act as buffers so that operations can proceed smoothly even if there are unanticipated disruptions. Raw materials inventories provide insurance in case suppliers are late with deliveries. Work in process inventories are maintained in case a work station is unable to operate due to a breakdown or other reason. Finished goods inventories are maintained to accommodate unanticipated fluctuations in demand. While these inventories provide buffers against unforeseen events, they have a cost. In addition to the money tied up in the inventories, expert argue that the presence of inventories encourages inefficient and sloppy work, results in too many defects, and dramatically increase the amount of time required to complete a product.

Just-In-Time Concept:

Under ideal conditions a company operating at JIT manufacturing system would purchase only enough materials each day to meet that days needs. Moreover, the company would have no goods still in process at the end of the day, and all goods completed during the day would have been shipped immediately to customers. As this sequence suggests, “just-in-time” means that raw materials are received just in time to go into production, manufacturing parts are completed just in time to be assembled into products, and products are completed just in time to be shipped to customers.

Although few companies have been able to reach this ideal, many companies have been able to reduce inventories only to a fraction of their previous level. The result has been a substantial reduction in ordering and warehousing costs, and much more efficient and effective operations. In a just in time environment, the flow of goods is controlled by a pull approach. The pull approach can be explained as follows. At the final assembly stage a signal is sent to the preceding work station as to the exact amount of parts and materials that would be needed over the next few hours to assemble products to fill customer orders, and only that amount of materials and parts is provided. The same signal is sent back to each preceding workstation so a smooth flow of parts and materials is maintained with no appreciable inventory buildup at any point. Thus all workstations respond to the pull exerted by the final assembly stage, which in turn respond to customer orders. As one worker explained, “Under just in time system you don’t produce any thing, any where, for any body unless they ask for it some where downstream. Inventories are evil that we are taught to avoid”.

The pull approach described above can be contrasted to the push approach used in conventional manufacturing system. In conventional system, when a workstation completes its work, the partially completed goods are pushed forward to the next work station regardless of whether that workstation is ready to receive them. The result is an unintentional stockpiling of partially completed goods that may not be completed for days or even weeks. This ties up funds and also results in operating inefficiencies. For one thing, it becomes very difficult to keep track of where every thing is when so much is scattered all over the factory floor.

An other characteristics of conventional manufacturing system is an emphasize on “keeping every one busy” as an end on itself. This inevitably leads to excess inventories particularly work in process inventories. In Just in time manufacturing, the traditional emphasize of keeping everyone busy is abandoned in favor of producing only what customers actually want. Even if that means some workers are idle.

Benefits / Advantages of Just in Time Manufacturing System:

The main benefits of just in time manufacturing system are the following:

1. Funds that were tied up in inventories can be used elsewhere.

2. Areas previously used, to store inventories can be used for other more productive uses.

3. Throughput time is reduced, resulting in greater potential output and quicker response to customers.

4. Defect rates are reduced, resulting in less waste and greater customer satisfaction.

As a result of advantages such as those cited above, more companies are embracing just in time manufacturing system each year. Most companies find, however, that simply reducing inventories is not enough. To remain competitive in an ever changing and ever competitive business environment, must strive for continuous improvement.

Disadvantages of Just in Time Manufacturing System:

Implementing thorough JIT procedures can involve a major overhaul of your business systems – it may be difficult and expensive to introduce.

JIT manufacturing also opens businesses to a number of risks, notably those associated with your supply chain. With no stocks to fall back on, a minor disruption in supplies to your business from just one supplier could force production to cease at very short notice.

List of Companies that use just in time (JIT):

• Harley Davidson

• Toyota Motor Company

• General Motors

• Ford Motor Company

• Manufacturing Magic

• Hawthorne Management Consulting

• Strategy Manufacturing Inc.

You may also be interested in other useful articles from “business and quality improvement programs” chapter:

1. Just-in-Time (JIT) Manufacturing and Inventory Control System
2. KANBAN
3. Total Quality Management (TQM) System
4. Six Sigma
5. Business Process Reengineering (BPR)
6. Theory of Constraints (TOC)