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Unit 2 Just in Time

Just-in-time (JIT) inventory management involves ordering and receiving inventory only as needed for production and sales to increase efficiency and decrease waste. It requires accurate forecasting and relies on strong supplier networks. JIT reduces costs by keeping low inventory levels and eliminating safety stock but can lead to stockouts if forecasts are inaccurate. Toyota pioneered JIT, taking over 15 years to perfect the process, and it relies on steady production rates and reliable suppliers to succeed. A disruption in one supplier's ability to deliver parts can shut down the entire production process.

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Rupendra Tripathi
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76 views

Unit 2 Just in Time

Just-in-time (JIT) inventory management involves ordering and receiving inventory only as needed for production and sales to increase efficiency and decrease waste. It requires accurate forecasting and relies on strong supplier networks. JIT reduces costs by keeping low inventory levels and eliminating safety stock but can lead to stockouts if forecasts are inaccurate. Toyota pioneered JIT, taking over 15 years to perfect the process, and it relies on steady production rates and reliable suppliers to succeed. A disruption in one supplier's ability to deliver parts can shut down the entire production process.

Uploaded by

Rupendra Tripathi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Just-In-Time (JIT) Inventory Management

Increase Efficiency and Decrease Waste


Just-in-time (JIT) inventory management, also know as lean manufacturing and
sometimes referred to as the Toyota production system (TPS), is an inventory strategy
that manufacturers use to increase efficiency. The process involves ordering and
receiving inventory for production and customer sales only as it is needed to produce
goods, and not before.

This type of inventory management provides many benefits, but is not without its
downsides, and relies heavily on factors such as a strong, fast and efficient network of
suppliers.

The Purpose of JIT


Ordering inventory on an as-needed basis means that the company does not hold
any safety stock, and it operates with continuously low inventory levels. This strategy
helps companies lower their inventory carrying costs, increase efficiency, and decrease
waste. JIT requires manufacturers to be very accurate in forecasts for the demand for
their products.
Just-in-time inventory management is a positive cost-cutting inventory management
strategy, although it can also lead to stockouts. The goal of JIT is to improve a
company's return on investment by reducing non-essential costs.

Some competing inventory management systems exist, including short-cycle


manufacturing (SCM), continuous-flow manufacturing (CFM) and demand-flow
manufacturing (DFM).

The JIT inventory system represents a shift away from the older "just-in-case" strategy,
in which producers carried much larger inventories of stock and raw goods, in case they
needed to produce more units because of higher demand.

History of the Technique


The management technique originated in Japan and is often attributed to Toyota.
However, many believe that Japan's shipyards were the first to develop and
successfully implement this approach. Its origins are seen as three-fold: Japan's post-
war lack of cash, lack of space for big factories and inventory, and Japan's lack of
natural resources. Thus the Japanese "leaned out" their processes, and JIT was born.

News about the process and success of JIT/TPS reached Western shores in 1977 with
implementations in the U.S. and other developed countries beginning in 1980.

Benefits of the System


JIT offers advantages such as allowing manufacturers to keep production runs short
and move on to new products quickly and easily if needed. Companies using JIT no
longer need to maintain a huge expanse of warehouse space to store inventory. A firm
also no longer needs to spend large amounts of money on raw materials for production,
because it only orders exactly what it needs, which frees up cash flow for other uses.

The Strategy in Use at Toyota


Toyota started using JIT inventory controls in the 1970s and took more than 15 years to
perfect its process. Toyota sends off orders to purchase production parts only when it
receives new orders from customers.

Toyota and JIT manufacturing will succeed as long as the company maintains a steady
production rate, with high-quality workmanship and no machine breakdowns at the plant
that could stall production. Additionally, it needs reliable suppliers that can always
deliver parts quickly, and the ability to efficiently assemble machines that put together
its vehicles.

Potential Risks
JIT inventories can bring about disruptions in the supply chain. It only takes one supplier
of raw materials who has a breakdown and cannot deliver the goods on time to shut
down a manufacturer's entire production process. A customer order for goods that
surpasses the company's forecasted expectations may cause parts shortages that delay
the delivery of finished products to all customers.

Kanban (Japanese for sign) is an inventory control system used in just-in-time (JIT)
manufacturing to track production and order new shipments of parts and materials. Kanban was
developed by Taiichi Ohno, an industrial engineer at Toyota, and uses visual cues to prompt the
action needed to keep a process flowing.

Kanban (Japanese for sign) is an inventory control system used in just-in-time (JIT)
manufacturing to track production and order new shipments of parts and materials. Kanban was
developed by Taiichi Ohno, an industrial engineer at Toyota, and uses visual cues to prompt the
action needed to keep a process flowing.

6 Core Practices of the Kanban Method:


1. Visualize the flow of work
2. Limit WIP (Work in Progress)
3. Manage Flow
4. Make Process Policies Explicit
5. Implement Feedback Loops
6. Improve Collaboratively, Evolve Experimentally
An Example of Disruption
In 1997 a fire that took place at a brake parts plant owned by the company Aisin
destroyed its capacity to produce a P-valve part for Toyota vehicles. Aisin was the sole
supplier of this part for Toyota, and the company had to shut down production for
several weeks. Because of Toyota's JIT inventory levels, it ran out of P-valve parts after
just one day. 

This situation could have devastated Toyota's supply line. Fortunately, one of Aisin's
suppliers was able to retool and start manufacturing the necessary P-valves after just
two days.

Nevertheless, the fire cost Toyota nearly 16 billion yen in lost revenue and 70,000
cars.1  The problem trickled through to other suppliers for Toyota, as well. Some
suppliers were forced to shut down because the auto manufacturer didn't need their
parts to complete any cars on the assembly line. 

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