A JIT System (Just- in-time System) is an inventory management philosophy aimed at reducing waste and redundant inventory by delivering products, components, or materials just when an organization needs them. When I wrote a blog on JIT Purchasing there has been quite a lot comments and interest from the supply chain community on how it fits in overall inventory management system, therefore, I thought to expand on this topic.
It is well known fact that Kanban and JIT System were developed by the Toyota Motor Company during the 1950s and 1960s. The philosophy of Kanban and JIT System is that parts and materials should be supplied at the very moment they needed in the factory production process. Here are 5 Salient Features of JIT System you might find useful:
1) 3 JIT system principles
These JIT improvements can only become available with efficient supply chains. There are 3 JIT system principles which are of importance when considering implementation:
- Total quality control; JIT system focuses on improving efficiency of material processes and quality is very important.
- Elimination of waste: JIT system focuses on improving the effectiveness of processes and operations that add value to the materials. Inventory is considered as waste and should be reduced as much as possible.
- People involvement; the company’s employees are its most valuable resource. It is essential that everyone understands JIT system and gets involved with making it a success.
2) 6 JIT System Inventory Management Principles:
Minimizing waste is one of the basic objectives of JIT system. This requires the effective management of inventory throughout the entire supply chain. A manufacturing enterprise will initially seek to reduce inventory and improve operations within its own organisation. It is also vital to an organisation that improvements are carried out continuously to enable it to maintain competitiveness. This is in line with the concept of ‘kaizen’ or continuous improvement. In an attempt to minimize waste attributed to inefficient inventory management, 6 principles related to JIT have been described by Schniededans (1993) and they are:
- Reduce lot size and increase frequency of orders.
- Reduce buffer inventory.
- Reduce purchasing cost.
- Improve material handling.
- Seek zero inventory.
- Seek reliable suppliers.
Most of the above principles are related either to the supplier or the supply chain. Lot size, buffer inventory, purchasing cost, material handling and reliable suppliers are all supply chain related factors. Thus the supply chain is a critical factor for making JIT System successful.
3) Implications of JIT System for Logistics Integration
Although the application of JIT has been concentrated on manufacturing operations, material handling and storage, and supplier deliveries, its principles can be extended throughout the supply chain. JIT methods have proven quite successful in simplifying and streamlining the material supply chain and the information flows which plan and control it – Christopher (1992) 1 mentioned achieving world class performance through logistic integration in the supply chain. JIT System has numerous implications for logistics executives.
- Transportation becomes an even more vital component of logistics under a JIT System. That means supply chain need shorter, more consistent transit times and more sophisticated communications.
- Proper implementations of JIT require that the firm fully integrate all logistics activities. Many trade-offs are required, but without the coordination provided by integrated logistics management, JIT cannot be fully implemented.
- Warehousing assumes an expanded role as it assumes the role of consolidation of facility instead of storage facility.
4) Benefits of Implementing JIT System
In general, JIT produces benefits for firms in four major areas: improved inventory turns, better customer service, decreased warehouse space, and improved response time. Other specific benefits are: 2
- Productivity improvements and greater control between various production stages.
- Diminished raw materials, work in progress, and finished goods inventory.
- A reduction in manufacturing cycle times.
- Dramatically improved inventory turnover rates.
- Reduce distribution costs.
- Lower transportation costs.
- Improved quality of supplier products.
- Reduced number of transportation carriers and suppliers
5) Problems Related with the Implementation of a JIT System
Some companies have successfully introduced JIT into their operations; however, not all organisations find it suitable. JIT System has 3 inherent problems which need to managed:
- Supplier production schedules- A JIT depends on a supplier’s ability to provide parts in accordance with the firm’s production schedule. Smaller, more frequent orders can result in higher ordering cost. Furthermore, large number of small quantity is produced, suppliers may incur higher production cost and setup costs.
- Level production schedules- A JIT is difficult to implement with uneven demand and does require level production schedules. If your business operates in high demand variation environment then the JIT is not for you!
- Suppliers locations- A JIT is not suitable for long distance suppliers. As distance between the firm and its supplier increases, delivery times may become more erratic and less predictable and short frequent suppliers are not practical.
Other problem area that can become obstacles to JIT System, especially in implementation, are lack of system support, inability to define service levels, a lack of good planning and shit of inventory at supplier location.3
If you have any questions about the JIT System to manage your or have any experience applying it in your life or business, leave your thoughts in a comment below—I would love to hear from you