Many of us might not be aware of the term Just in time inventory. So, let’s start the blog with JIT meaning and definition.
Just in Time Inventory meaning and Definition
Just in Time is one of the popular methods where business owners produce final products only when the customer has requested and paid for it. Here the products are not assembled before the customer requests which impacts the storage costs.
Jit is one of the best management strategies that is applied in the business to increase efficiency and productivity. The method helps reduce waste and contributes to smoother production flow. In this concept, you receive just in time delivery, which means the raw material gets dispatched on time as per the production schedules. Here you won’t have to stock up the products before time, rather the inventory will be available on time to meet your exact demands.
JIT Inventory invention
Also, referred to as lean manufacturing and sometimes the Toyota production system (TPS), because the technique was invented in Japan. It is believed that Japan’s Shipyards were the first to introduce, develop and implement this approach.
It got originated because of three reasons as Post-war:
• There was a lack of cash in Japan
• Lack of natural resources
• Lack of space for big factories
Thus, to support their industries JIT was born. This technique proved to be very successful and after a certain period, it reached western shores. JIT was further adopted by the US and other developing countries.
Features of JIT inventory
The Just in Time inventory allows the manufacturer to keep the production short that decreases financial costs, labor costs, and inventory costs. The key features of JIT are summarized below:
Smooth Production Flow:
One of the main features of the JIT process is a uniform production process. From the just in time delivery of material from your suppliers until the delivery of goods to your customers, this technique helps to prevent fluctuating production rates. This strategy also eliminates delays and excess work-in-process inventories.
Pull method is also one of the key features of JIT system where it contributes to a smooth production process. Under this method, the goods or the raw materials are produced in each stage as they are needed. It removes the work-in-process inventory between the production steps, thus reducing the wait-times and associated costs. Wastage is prevented in this method as after every stage of production, inspection is carried out to know any product defect before passing on to the next stage.
Benefits of Just in time Inventory System
Reduction in wait times and Storage
Under the JIT system, goods are purchased in the quantity as required. This avoids building up stocks for future use. You don’t have to make space for the goods as the incoming stock is instantly used for production and dispatched to the customer. It eliminates storage costs, less wastage of time in maintaining the stocks and inventory.
The system encourages faster production machinery setup. Involves a small lot of products manufacturing accurately aligned with the current demands. Therefore, enabling faster machinery setup resulting in reduced costs and more efficiency. The result that you receive is higher quality finished products.
Maintenance of equipment
The just in time inventory system requires strict adherence to timely maintenance schedules. Preventive maintenance of the manufacturing and production equipment will enable the business to avoid the machine breakdowns and costlier downtimes.
Stronger relationships and Employee satisfaction
The JIT system is profitable for everyone associated with the business that adopts it. It provides flexible facilities, encourages multi-skilled workers and provides a great atmosphere for teamwork. Which positively impacts and enhances the production system.
The small lot productions at frequent intervals allow the business to find new ways to improve the product. Which gives a competitive edge, gives the idea to strategize, eliminate added costs and achieve more efficient operations.
The JIT system encourages a stronger relationship between the vendors or suppliers and the manufacturing company. Under the just in time inventory system, you receive transparency and free flow of information between the supplier and the manufacturing company. It helps to support strong supply co-ordination which results in long-term strong business relationships.
The JIT system takes help of the best inventory management system. The inventory system automatically calculates the raw material required depending on the inventory levels and production levels. Then the supplier would receive a message to deliver the products. This reduces time wastage, workforce and improves accuracy. JIT is just made to make things easier and improve efficiency.
The suppliers under the JIT approach is limited. This reduces the time of searching from the ocean of available vendors. The vendors being limited, you can build a great rapport with them which encourages delivery of high-quality goods in time.
Three successful companies practicing JIT systems
Toyota doesn’t bring the raw material on the production floor until an order is received from the customer. During the production process, no other parts or the raw material is added in the production floor even if it is required in the next phase. This helps to lower the inventory costs. This helps Toyota to meet the customer demands in time.
Apple has only a single warehouse in the USA but a pool of 150 key suppliers all over the world. It takes advantage of JIT principles and dropshipping to fulfill customer demands which have resulted in lowered wastage, shipping costs, and storage costs.
McDonald’s is a fast-food chain that adopted JIT inventory to serve its customers on a daily basis. The final product is not assembled unless an order comes in. The JIT system enables them to standardize the process so that every customer gets the best consistent experience from the product.
JIT offers a long-term benefit when it comes to supply requirements and production growth. The change in raw material specifications, then your strategy up-gradation which results in better product output. With time, you will get the idea on how to lower production costs, manufacture products with more features and provide customer satisfaction.