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Just-In-Time (JIT) Inventory System

Just In Time (JIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs.

Tina S
Tina S
Jan 7, 2010
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 Just-in-time (JIT) 

Just-in-time (JIT) is easy to grasp conceptually, everything happens just-in-time. For example consider my journey to work this morning, I could have left my house, just-in-time to catch a bus to the train station, just-in-time to catch the train, just-in-time to arrive at my office, just-in-time to pick up my lecture notes, just-in-time to walk into this lecture theatre to start the lecture. Conceptually there is no problem about this; however achieving it in practice is likely to be difficult!


JIT, or just in time inventory is a inventory management strategy that is aimed at monitoring the inventory process in such a manner as to minimize the costs associated with inventory control and maintenance. To a great degree, a just-in-time inventory process relies on the efficient monitoring of the usage of materials in the production of goods and ordering replacement goods that arrive shortly before they are needed. This simple strategy helps to prevent incurring the costs associated with carrying large inventories of raw materials at any given point in time.

JIT originated in Japan. Its introduction as a recognized technique/philosophy/way of working is generally associated with the Toyota motor company, JIT being initially known as the "Toyota Production System". Note the emphasis here - JIT is very much a mindset/way of looking at a production system that is distinctly different from what (traditionally) had been done previous to its conception.
 
 
Taiichi Ohno, a former shop manager and eventually vice president of Toyota Motor Company, is the individual credited most for the with the development of just-in-time. 
 
In simple words we can explain JIT only required necessary units be provided in necessary quantities at necessary times. Producing one unit extra is as bad is being one unit short. Completing one day early is as bad as finishing one day late. Items are supplied “just-in-time”. 
 
Accordingly Ohno devised a new system of production based on theelimination of waste. In his system waste was eliminated by:
 
Just-in-time - items only move through the production system as and when they are needed

• Autorotation - automating the production system so as to include inspection - human attention only being needed when a defect is automatically detected whereupon the system will stop and not proceed until the problem has been solved.

In this system inventory (stock) is regarded as an unnecessary waste as too is having to deal with defects.
Ohno regarded waste as a general term including time and resources as well as materials. He identified a number of sources of waste that he felt should be eliminated:
 
 Overproduction - waste from producing more than is needed
 
Time spent waiting - waste such as that associated with a worker being idle whilst waiting for another worker to pass him an item he needs (e.g. such as may occur in a sequential line production process)
 
Transportation/movement - waste such as that associated with transporting/moving items around a factory
 
Processing time - waste such as that associated with spending more time than is necessary processing an item on a machine
 
 Inventory - waste associated with keeping stocks
 
Defects - waste associated with defective items
 
Manufacturing inventory flows in JIT are compared to pipelines, but they are often referred to as "four wall systems."
Once raw materials enter the four walls, they are not recorded again until they leave as finished goods. There are three reasons for this. 

First, the product does not spend enough time in the plant to make several inventory recordings necessary. 

Second, the higher quality in JIT systems reduces rework and minimizes abnormal flow paths and times, lessening recordings needs. 

Third, in a JIT system product flows are disciplined and flow distances are short, lending a visual aspect to work-in-process inventory control.

Another application of a just in time inventory focuses not on raw materials but on finished goods. Again, the idea is to develop a solid understanding of what is needed to produce goods and schedule them for shipment to customers within the shortest time frame possible. As with raw materials, shipping finished goods shortly after producing them leads to minimizing storage costs and any taxes that may be applicable. 
 
This dual application of a just in time inventory strategy can significantly cut the operational expenses of a business in regards to the amount of inventory that must be stored at any one time and the amount of taxes that must be paid on larger inventories.
 
Just-in-time inventory is viewed as the waste of resources and considered as obstacle in improvement.
As there is little buffer inventory between the workstations, so the quality must be high and efforts are made to prevent machine breakdowns. When all these things are taken into consideration, system produces high-quality goods, quickly and at low cost. This system is also being able to respond to changes in customer demands.
 
Classic JIT diagram
 
The classic JIT diagram is as below. There the company (the boat) floats on a sea of inventory, lurking beneath the sea are the rocks, the problems that are hidden by the sea of inventory.
 
                       |
                    --|--
                       |
              ---------------
                               /     
======== Company   /============ Sea of inventory
                ---------/
                        x
                       xxx     xxxx
                      xxxxx   xxxxxx    Rocks - the problems hidden
                     xxxxxxxxxxxxxxxx           by the sea of inventory
 
 
 
If we reduce the inventory level then the rocks become exposed, as below.
 
                        |
                     --|--
                        |
             ---------------     x 
                               /    xxx     xxxx    
======== Company   /====xxxxx===xxxxxx========
                ---------/   xxxxxxxxxxxxxxxx 
 
 
Now the company can see the rocks (problems) and hopefully solve them before it runs aground!
Benefits
 
The benefits of JIT are:
 
• better quality products
• quality the responsibility of every worker, not just quality control inspectors
• reduced scrap and rework
• reduced cycle times
• lower setup times
• smoother production flow
• less inventory, of raw materials, work-in-progress and finished goods
• cost savings
• higher productivity
• higher worker participation
• more skilled workforce, able and wiling to switch roles
• reduced space requirements
• improved relationships with suppliers
 
Just-in-time systems are being implemented in most companies, though some more than others. Those companies that acknowledge just-in-time philosophies and implement them fully as part of a complete total quality management system are quickly becoming players in the world market. Those companies that do not implement total quality management with an emphasis on just-in-time systems may be left behind as we go into the twenty-first century.
 

 

Author's note: Ref: Operations Management Eighth Edition William J. Stevenson Rechester Institute of Technology
Keywords: JIT,just in time,diagram,benefits,overproduction,inventory stock,autorotation,Japan,Toyota Production System,Taiichi Ohno,Toyota Motor Company,resources,operations management.



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