How do customers’ become loyal to the brands that they buy repeatedly? Or in certain demography a particular brand is popular? How do brands achieve that success? These brands produce quality products; provide value for money for their products to the customers. These brands apply a concept of Total Quality Management (TQM) throughout their operations. One important component of that TQM is to secure the input raw materials and supplies at a time and place when needed.
Holding that raw inventory for days or months is a costly practice. These companies have formed strong relationships with their suppliers to arrange for the raw materials and components “JUST IN TIME (JIT)”.
“A manufacturing practice whose objective to produce or procure input components as they are required rather than for inventory.”
Just in Time approach as the name suggests focuses on supplying the raw material and products for the production process on need basis. Although the technique wasn’t new, it came to limelight when Toyota applied this method to achieve success in productions. It stresses on eliminating excessive inventory holding and tries to keep it to a minimum. This is a systematic approach that calls for the participation of all departments in the production process. JIT is a practice for production management but it cannot achieve results unless applied throughout the operations. Just in Time approach applies to both production and procurement sections. Often when this system is in place, we normally outsource the raw material procurement which calls for a strong supply chain management.
The Purpose of JUST IN TIME System
- Timely procurement of input components or products
- Reduction in holding inventory costs
- A smooth production flow of work throughout the company
- Emphasis on waste reduction activities and materials
- Approach towards a Total Quality Management system
Inventory management can be costly for companies manufacturing big units like vehicles e.g. Toyota. Vehicle assembling goes through a series of manufacturing steps, and each assembling or manufacturing step requires many different components or products. Few of these components or products can be outsourced to reliable a partner, which reduces the need for the inventory holding and reduces both costs and time waste.
However, to implement the JIT system successfully, there are certain requirements:
Reliable Suppliers and Trained Staff
Any manufacturing process cannot be successful without quality raw material; strong relationships with reliable suppliers will ensure timely procurement of the input components. The focus should also on utilizing these components perfectly; a highly trained workforce can achieve that target.
In the JIT approach, the manufacturing system should aim to get things done accurately. Waste reduction is an important part of achieving success under the JIT approach. Any non-value adding activities and products should be discarded.
JIT in all is a cost reduction process; basically we can achieve this by minimizing the inventory held, reducing the time for customers’ leads, material handling process, and producing quality products to reduce product recall costs.
Flexible Operations in All Departments
Just in Time approach cannot achieve results unless the operations throughout work in liaison with each other. All the departments including production and procurement need to be flexible in their approach to achieve success. The customer demands, design changes, or the disruption in supplies call for the flexible approach.
As with any theoretical approach there certain benefits and limitations associated with Just in Time approach too.
Benefits of JUST IN TIME Method
- The single biggest benefit of the JIT approach is the sense of Total Quality management in the system throughout the organization.
- It reduces inventory costs significantly.
- Lower inventory means the operations need to be more accurate, with emphasis on getting things right first time.
- JIT approach reduces waste of resources both in products and activities. The non-value adding components are kept to zero.
- JIT approach stresses a strong relationship with suppliers, which increases the certainty in operations and helps in forecasting.
Limitations of JUST IN TIME Method:
- As the JIT system stresses for lower inventory, often we outsource the parts to the suppliers, which may not be the cost-saving decision.
- A single disruption from suppliers may result in total suspension of operation in the whole production process.
- JIT approach opposes the “base Stock” concept which eliminates the buffer zone.
- The company might not be able to take advantage of the seasonal or sudden demand in a product as the inventory is held to a minimum for the forecast production only.
The Just in Time system considers the production process as a whole concept of quality control and quality management. Strong supplier relationships, skilled and trained staff, and flexible operations are keys to the successful implementation of this system. JIT system calls for standardization of operations and a strong communication culture. Careful planning and decision making is required before implementation of JIT system in production, as the skills and resources required might not be readily available. JIT system calls for a responsive culture towards the customer demands otherwise the advantage gained through lean production will be wasted.