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Just-in-Time (JIT) Inventory Management 101

January 28, 2021
5 min read
Transportation Logistics
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man body with hand out holding a clock that says just in time underneath

Just-in-Time (JIT) Inventory Management is a method of scheduling (or refilling) the staff-hours and materials required for production, so they are delivered during the process at the exact time needed. Simply put, a company produces an item or items after a purchaser has placed an order, not before.

Who Thought of it First?

To minimize delays and waste – and to keep up with demand, the Japanese, led by industrial engineer Taiichi Ohno, was first to develop and apply the JIT idea in the manufacture of Toyota automobiles. It became known as the Toyota Production System. Also, they needed to keep up with and hopefully outshine the competition. This required everyone involved to be entirely on-board, working in optimized plants with processes designed with the highest levels of efficiency, productivity, and quality in mind.

JIT as a Diagnostic Tool

When JIT is applied, hidden production issues come to light, e.g., faulty parts or inventory excesses, allowing for corrective actions, leading to smoother operations with far fewer halts in production. And with smoother and more timely operations, costs are lower as inventory turnover is quicker.

Communication is Key

If a manufacturing company hopes to successfully apply the JIT method, there must be a clear understanding of the companies supplying the materials needed for production. Suppliers must always be ready to deliver requested amounts of high-quality material exactly when required. Other features of successful JIT application include:

  • Evaluating the current lay of the land, identifying any issues, then removing anything detracting from the product
  • Keeping systems streamlined and coherent for all users
  • Making quality control the responsibility of all workers, for their specific aspects of the whole
  • Minimizing waste across the board: time, defective products, excess production, transportation, inventory
  • Having less to zero inventory
  • Smaller lot sizes with more frequent orders
  • Lower purchasing expenses
  • Enhanced handling of material

JIT Pros and Cons

Pros most often include:

  • Less stock = costs minimized due to less capital used, lower insurance expenses
  • Improved use of space
  • No expired products otherwise leading to waste
  • Enhanced inventory management via strict guidelines for re-ordering
  • High and consistent return on investment (ROI)
  • All goods get sold, changes in demand more easily accommodated
  • The idea of “right the first time” saves time and money
  • Reduced inspection time
  • Improved efficiency leading to enhanced relationships within
  • High customer satisfaction

Cons most often include:

  • With extremely-low-to-zero tolerance for error combined with minimal inventory, do-overs can cause delays
  • Low inventory can also be an issue when orders increase unexpectedly, resulting in delays or cancellations
  • Suppliers must be extremely reliable
  • Higher transaction costs
  • Frequent deliveries have a more significant environmental impact due to increased transportation

Though JIT offers many benefits that might seem like “no-brainers” – and it certainly worked well for Toyota, inspiring the lean management method now widely used – it’s essential to thoroughly understand all aspects of the theory before applying it in practice.

Amware helps public warehousing clients ensure their JIT programs run smoothly and effectively. Contact us today to learn more about our public warehousing options and how we can help you with your JIT management needs.

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