Just-In-Time (JIT) Inventory Management

Just-In-Time (JIT) Inventory Management

JIT (JIT) inventory control, commonly referred to by the name Lean Manufacturing and often known as”The Toyota production process (TPS) is an inventory management strategy manufacturers employ to boost efficiency. The process involves placing orders stock for the production as well as customer sales only when it is required to manufacture goods and not prior to.

This kind of inventory management has many advantages however it does not come without its drawbacks. It relies heavily on factors like an effective, quick and reliable supplier network.

The Purpose of JIT

The event that inventory is ordered on an “as-needed” basis implies that the business has no stocks of safety and is operating with a constant low inventory. This approach helps companies reduce their cost of carrying inventory as well as increase efficiency and reduce wasted resources. JIT demands that manufacturers be very precise in forecasting the demand they will face for their goods.

Just-in-time inventory management can be an effective inventory management strategy that cuts costs. approach, however, it can result in stockouts. The aim of JIT is to boost the ROI of an organization by reducing the cost of non-essential expenses.

There are a variety of competing inventory management systems that exist, including short-cycle manufacturing (SCM) Continuous-flow manufacturing (CFM), and demand-flow manufacturing (DFM).

This JIT inventory method is a departure from the earlier “just-in-case” strategy, in which manufacturers had more stock of raw materials, in the event that they were required to manufacture more units due to increased demand.

History of the Technique

The management method was developed the management method in Japan and is frequently associated with Toyota. Many think that the Japanese shipyards were the first to devise and implement this method successfully. The origins of JIT are believed to be threefold: the post-war deficiency of cash, a lack of space to build inventory and factories, and the absence of natural resources in Japan. So it was that the Japanese “leaned out” their methods to make room for new processes, and JIT was born.

News concerning the development process as well as the success of JIT/TPS made it to Western shores around 1977 and implementations took place in the U.S. and other developed countries starting in the year 1980.

Benefits of the System

JIT has advantages like it allows manufacturers to reduce production times and then move to new products fast and effortlessly if required. Businesses using JIT don’t have to manage a vast amount of warehouse space in order to keep inventory. Also, a company doesn’t have to shell out huge amounts of money for raw materials to make its products, since JIT only orders what it requires, which makes cash flow available to use for other things.

The Strategy in Use at Toyota

Toyota began using JIT inventory control in the late 1970s and needed over fifteen years of development to refine the procedure. Toyota is able to send out orders to purchase production components only after it has received new orders from its customers.

Toyota or JIT manufacturing will prosper in the event that JIT Manufacturing has a steady and steady production and high-quality work. no malfunctions in the factory that can halt production. Furthermore, it requires reliable suppliers that are able to provide parts on time and be able to quickly assemble the machines that create its vehicles.

Potential Risks

JIT inventories could cause disruptions to the chain of supply. It is only a matter of just one source of raw material that is in trouble and unable to provide the goods in time to stop the entire manufacturing process of a company. The customer’s order for goods that exceeds the company’s forecasted expectations could result in parts shortages that can delay the delivery of final products to every customer.

An Example of Disruption

In 1997, a fire occurred at a brake part plant operated by Aisin, the company. Aisin caused the plant to cease to make a P-valve piece that was used in Toyota automobiles. Aisin is the only provider of this component for Toyota The company was forced to cease production for a few weeks. Due to Toyota’s JIT inventory levels, the company ran out of P-valves within a single day.

The situation could have been devastating to Toyota’s supply chain. Fortunately, one of Aisin’s suppliers was able to change its tools and begin manufacturing the required P-valves in just two days.

However, the fire caused Toyota more than 16 billion yen of revenue lost and 70,000 vehicles. 1 The problem spread to other suppliers of Toyota also. Some of them were forced to close due to the fact that Toyota did not require their parts to put together the cars that were assembled on the line.

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