Nowadays we can observe the constant quest of businesses for better effectiveness and lower expenses on the Web. Among them, JIT manufacturing is one of the most widely used approaches to achieve this end.
This approach seeks to create products when they are required to minimize stock or rather avoid creating a product that will not be useful in the future. This article discusses What is JIT? How does it function? What advantages does JIT have? What difficulties or issues relate to JIT?
What is Just-in-time?
JIT stands for Just in Time and manufacturing strategy integrates the chain of supply with an organization so that it delivers parts and materials just in time for them to be used in production or for the customer. JIT is based on the concept of creating or purchasing items which are only needed at the last possible moment.
The JIT concept is originally from Japan with Toyota piloting it in the 1950s. Essentially, the system was created to respond to one of the biggest challenges that companies faced during production; high costs coupled with excessive stocks. JIT is adopted by companies around the world to perform tasks, improve organizational performance and avoid unnecessary expenses.
How Does It Work?
JIT is based on the synchronization of the input supply, production, and materials release to the other partner using time intervals. The idea here is to order all sorts of materials to get to the factory when required and not to buy them in huge batches. This approach means that the business needs to have a good rapport with its suppliers so that materials to be used in production are supplied on time.
Here's a basic outline of how JIT works in a manufacturing setting:
- Using such information as customer data and existing trends in the market, businesses can make accurate predictions of demand. This makes it easy for them to set production schedules that meet real needs without having to make assumptions.
- Purchasing managers maintain a close relationship with suppliers so that they can deliver the materials and ingredients at the time of production. Poor communication between departments causes some tasks to be delayed when they require the input of other departments.
- As soon as the materials are procured, they are processed without delay. Since organizations do not have inventories stored on their premises, they must guarantee that phases of production are quick and accurate in response to consumers’ needs.
- Once manufacturing, assembling or the process of production is over, the products move or are taken to consumers or stores directly. This cuts out the need for having large storage facilities, which also cuts out holding costs.
Everything concerning JIT is based on proper data, cross-functional communication, and inventory management. In its ideal form with no hitches, malfunctions, or sources of instability and that is how JIT can cut expenses and waste dramatically. However, it has some risks and challenges also, which are described in the subsequent section.
Pros and Cons of Just-in-time
Now that you know how this inventory management methodology works for manufacturing industries, let’s discuss some of its key challenges. If you are planning to move forward with JIT, it is important to weigh its pros and cons so that you understand which outweighs which one. Hence, it will help choose or skip the idea of JIT.
Pros:
First, let’s discuss the benefits of using JIT for businesses.
Reduced Inventory Waste
A main advantage of JIT is the fact that inventory waste is controlled. Since materials and products are only procured or supplied when required there is no need for inventory or stockpiling by the business organizations.
This cuts down the probability of stocks becoming obsolete or damaged merchandise. The paper established that waste minimization leads to cost savings, hence improving the firm's bottom line and the environment.
More Control on Manufacturing
JIT helps firms to have better control of their production processes. If the stocks or inventories needed for the formulation of the endowed goods are purchased, when necessary, then the businesses will have an easier time satisfying the needs of the current market.
This makes the overall cost to be low since it minimizes the probability of firms producing excessively, which can be bad for the economy. JIT enables the organization’s recognition and adaptation to certain market conditions faster than other strategies.
Less Warehouse Holding Cost
JIT means that one does not have to have a huge warehouse of stock or manufacturing of final products. This means that costs like rent, utilities, and wages for employees who may be needed to oversee a warehouse are eliminated. Controllable costs may be directed to other business departments, making the company's operation more efficient.
If the company has some space that was to be used for stocking inventory, they can use it for some other purpose that can be more profitable.
Less Investment Capital Required
JIT also contributes less capital in stocking raw materials and inventory. Purchases are made when they are required, hence a business can hold little money in raw materials and other stock. This is beneficial to companies because it frees up capital for other needs – perhaps a company needs to grow or hire new technology. Hence, helping the finances of small and medium businesses as well as the large ones.
Local Sourcing Opportunities
Since JIT relies on the rapid supply of materials, most firms source products from local suppliers so that turnaround time is optimized. It can also augment the relations with other local firms and boost the local economy of the country.
Local sourcing also eliminates the cost of transportation and other related expenses and thus is cost-friendly and friendly to the environment. The best part is that it supports local suppliers and businesses rather than gathering stuff from international markets.
Cons:
JIT does have some benefits for businesses, but it also has its fair share of disadvantages which are discussed below.
Reworking Orders Become Difficult
JIT does not allow much freedom concerning redesigning the order because of its stringent setup. Because material is delivered when required, there can be not enough stock if say a product is required to be changed or modified in some way.
This can extremely affect the production line, making it take longer thus translating into customer dissatisfaction.
High Dependency on Suppliers
The main threat to the use of JIT is suppliers. The problems can be felt by everyone if a supplier has delays, shortages, or any other related problems. Since there isn’t any stock kept, business establishments are prone to any kind of disruption to the supply chain.
One of the most significant disadvantages for organizations that employ the JIT model is this high dependency on suppliers.
Lack of Stock Can Cause Sale Halts
JIT as an idea is an approach whereby companies manufacture goods that are in high demand rather than keeping high inventories. However, this is disadvantageous because if there is increased demand, the businesses cannot meet the demand in the market rapidly.
The following can be disastrous regarding new business opportunities: These lead to lost sales and ultimately low revenues if customers are redirected to competitors' stocks.
Needs a Lot of Management
The material and information flow of a JIT system must be well administrated to be effective. These are some of the responsibilities of supply managers; firms require supply chain managers to oversee the events that transpire in the firm’s supply chains, production calendars, and industry trends.
There may be certain loopholes that cost an enormous amount of time and put production on hold. It is for this reason that JIT calls for highly coordinated processes among employees within the organization.
Adverse Environmental Effects
JIT may minimize scrap and support local purchases hence its strengths while on the other hand, it may have the following weakness on the environmental impacts. An area of weakness associated with JIT is that it entails small order quantities delivered quite often which ends up consuming more transport and fuel.
This can increase carbon emissions and polluting of the environment meaning that the gains in the environment mainly on wastage are sometimes equal to increased carbon emissions and pollution.
Conclusion
JIT manufacturing is a forceful instrument in the hands of the organization that is willing to cut wastage, increase efficiency, and ultimately, minimize expenses. When goods are manufactured and sold only as required, then this would reduce wastage, hold down storage costs, and allow for better investment.
Yet, JIT also has its loophole: While the cost of the inventory is low, companies that use it rely on their suppliers and need to manage the system constantly relying on forecasted sales figures to ensure they did not miss a sale.
