If you are familiar with the world of supply chain and logistics, you must be aware of the buzzwords such as Just in Time (JIT) inventory and Just in Time manufacturing. Plenty of businesses have adopted this approach, with the growing competition and increasing pressure to upscale profitability, businesses use this strategy to boost their bottom line.
Just in Time (JIT) manufacturing is a method that involves producing goods to meet demand instead of producing them ahead of time or whenever they are required.
This procedure is pretty contradictory to the conventional methods of production that revolve around carrying product inventory on hand to fulfill orders and create products. While the traditional method of storing up large merchandise is practical, it consumes a lot of in-house resources that could be easily utilized somewhere else.
Brief History of Just In Time Manufacturing (JIT)
JIT manufacturing is not a new concept entirely, it has been around for more than 100 years now. The idea revolves around the production of simply enough units to fulfill the current needs. The first process was introduced by Henry Ford around 1923.
Mr. Ford recognized the inefficiencies present when rail cars were loaded with materials and the components were sitting idle, resulting in lost income. JIT didn’t come into consideration until its adoption by the Toyota Motor Company. Toyota implemented this procedure to direct its product manufacturing and development.
Just like lean manufacturing, JIT is intended to satisfy demand rather than create a surplus in expecting a future need. Its basic role is to decrease the waste that originates from overproduction, waiting, and surplus stock. The primary purpose of just-in-time manufacturing is to eliminate the waste that comes typically from overproduction, waiting, and excess inventory. Let us take a look at these wastes in a bit more detail:
- Overproduction – Is manufacturing products in advance of more than the requirement. It is considered one of the most common wastes by proponents of just-in-time manufacturing because it squanders time, space, and money. All the while masking the other problems within a company’s processes.
- Waiting – To begin one process until the next one finishes are quite ineffective and a super waste of time. The flow of operations should always remain consistent. Most estimate suggests that there is more than 90 percent of a product’s time of manufacturing is only spent waiting.
- Excess Inventory – This means that a company has ordered more than the market demand or the inventory is in surplus as compared to the required demand. Either way, it leads to occupying space and resources, wasting a lot of space with increased cost. Companies, later on, get rid of the excess inventory by selling it at a reduced cost or eliminating them idly, both lead to loss of profits.
Key Benefits of Just in Time Management (JIT)
1. Reduces Wastage
The purpose of the JIT manufacturing model is to reduce the excess or unrequired inventory and overstocking completely. You can easily achieve low inventory levels while significantly reducing the risk of inventory going idle, unsold, or unused in the warehouse. Just in time manufacturing will reduce the risk of overproduction, which occurs when the supply of an item extends the demand and leads to the possession of unusable items.
You can also minimize and reduce the losses incurred due to any defective products by simply identifying and addressing defective inventory items when production quantities are slowed down or lowered. With JIT manufacturing, order only what you need, with zero perceived risks.
2. Enhanced Efficiencies
JIT model helps in reducing the cost of storing, procuring as well as warehousing raw materials and excess inventory. This leads to a higher inventory turnover which in turn limits the inventory from sitting idle in your warehouse for a long time and becoming useless.
You can also try to store quantities in smaller quantities, so it’s easier to deliver them away. This virtually reduces the excess raw material inventories. Local sourcing allows the supplies situated near your organization’s production areas to timely deliver inventory in smaller quantities and reduce the need for safety stock.
3. Decreases warehouse holding cost
Warehousing is super expensive and takes a lot of resources from the company. Excess inventory can double your holding costs dramatically. With the Just in Time system, the warehouse holding costs are kept to a minimum. As you order only when your customer places an order, your item is already pre-sold before it reaches you, so there is simply no need to store it, it can directly go to its original destination.
Organizations that follow just-in-time inventory manufacturing will be able to easily reduce the number of products stored in their warehouses or eliminate the concept of warehousing altogether. This leads to a drastically reduced cost of warehousing, which can be utilized in other areas of manufacturing.
4. Gives the manufacturer more control
In a Just in Time Manufacturing model, the manufacturer gets complete control and access over the manufacturing process, which works on a demand-pull basis. For any unexpected demand for a product, manufacturers have the control to surplus the in-demand of a product and reduce the manufacturing of lower demanded products to save costs at the right time.
This is what makes the JIT model super flexible and able to cater to the ever-changing market demands and requirements. For instance, Toyota does not purchase raw materials until an order is received for that particular raw material. This gives an opportunity to keep minimal inventory, thereby eliminating its costs and enabling it to simply adapt to the changes in market demand without stressing over overstocking or unused inventory in the warehouse.
5. Optimized Production
JIT inventory management can heavily eliminate the bottlenecks and delays in the production cycle. It helps in reducing product defects and automating the production processes. With a shorter time of production, companies can easily cope with on-time delivery and attain customer satisfaction with long-lasting relationships.
Just in Time manufacturing ensures that the tasks are scheduled in a timely fashion and executed whenever they are needed, meaning that your production run begins and ends just in time for shipping, this saves a lot of production time while simultaneously meeting the demands on time.
Just in Time implementation requirements
Just in time manufacturing relies heavily upon smooth operations and execution, it’s difficult to attain the benefits of JIT without having smooth execution. You need genuine manufacturer-supplier relationships, communication, continuous improvement, and standardization.
However, some businesses, most commonly startups struggling in implementing this system, let’s discuss the few ways how organizations can consider adopting JIT.
1. Strong Supplier Tiers
Bigger companies have a competitive advantage over SMEs due to their big size, as they make up for a large portion of suppliers’ business, and they can conveniently achieve priority status. So whenever smaller issues occur in the logistics, these clients are neglected as the bigger ones are prioritized above them.
With the help of JIT, this kind of debug can dissolve the whole operation as the manufacturer is highly dependent solely on suppliers by not keeping any safety stock in the warehouse. Strong supplier relationships are the key component for just-in-time manufacturing. Another way to cater to this problem is to choose supplies that are simply close to your facility, so demands can be catered timely.
2. Efficient internal communication
Internal communication could prove to be an issue as well. Whenever a process or operation is disrupted, every department such as communication, data systems, logistics, supply chain etc. gets disrupted. That result slows down the whole operation causing data inaccuracies and could have a major impact on the bottom line of the entire company.
For just in time manufacturing to smoothly execute, a customer should always reach the planning department just as the sales representative enters it into their system.
3. Efficient Workflows
In addition to standardized procedures, and working with smaller lots, just in time manufacturing helps to have a well-designed facility layout that would easily support the production flow without delays. This can be easily created with an adaption of an approach called cellular manufacturing.
In cellular manufacturing, all the parts, tools, resources, and workstations are carefully arranged in a cell sequence to accommodate the optimized workflows, reduced set-ups, and changeover times. It also ensures a streamlined and smooth movement of materials easily.
4. Backward scheduling capability
Backward scheduling means that the production orders are heavily scheduled precisely so they would be quickly and promptly finished and delivered by the clients’ requested delivery dates. That means that everything is scheduled for the last minute, which means more risk.
This even includes ordering the materials and the manufacturing material itself. This task can even be manually done on a consistent basis and requires an ERP/MRP system with a backward scheduling functionality properly.
How does a just-in-time manufacturing system work?
Here is a step by step procedure of how the just in time manufacturing process works,
- A customer simply places an order for a required product.
- The manufacturer then receives the order.
- Later the manufacturer orders the materials required/product from the supplier.
- Supplies effectively receive the order.
- The supplier then delivers the required material or product to the manufacturer.
- Product is received by the manufacturer
- The manufacturer then assembles the product from the materials that are received
- The manufacturer successfully fulfills the order
- The customer finally receives the product.
When do you need Just in Time manufacturing?
Just in Time manufacturing is one of the most natural states of business for make-to-order manufacturers, for instance, especially if you lead to order or run a small job shop. The main purpose of JIT is to bring out the benefits of manufacturing models as per the model of large-scale manufacturing industries and gain maximum perks out of them.
The ideology is to deliver the product exactly when it’s required, as well as the materials for manufacturing should arrive exactly when the production schedule is about to begin – so that the entire operations are streamlined together. Now this indicates that JIT could be best used when the market demand for the products can be forecasted with higher accuracy, the demand is fulfilled without fluctuations, and when you have highly dependable vendors/suppliers.
And there you have it! A complete guide for Just in Time Manufacturing and everything you need to know to get started on this process and gradually adapt it for your business model. In conclusion, companies employing JIT models enjoy reduced cycle times, reduced operating costs, and faster times to market.
There are some potential risks involved, especially for smaller organizations, however, the JIT model specifically works for the maximum benefit of smaller startups only. To find potential success with JIT, it’s highly essential to find vendors and maintain relationships that are reliable and are close to your facility, regardless of how small. Just in Time manufacturing is more of a concept and production philosophy than a regular set of rules you must abide by.
When it is properly executed and adopted, JIT assists organizations to strengthen their competitiveness in the market, including reduced waste, improved quality of production processes, and increased levels of productivity with optimized expenses. In today’s ever-changing market, JIT helps to provide a competitive edge and changes the way companies operate. Get started on the process today for your business and unleash the benefits of JIT manufacturing.
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