What is just-in-time (JIT) management strategy and how can it reduce costs?
The just-in-time (JIT) management strategy traces back to early in the auto industry, first introduced at the Ford Motor Plant and later perfected by Taiichi Ohno for Toyota as a means to improve operational performance. With JIT, goods arrive exactly when they are needed in the production process.
When implemented correctly, companies can experience improved efficiencies and reduced costs. The JIT strategy works best for companies that have repetitive manufacturing functions where demand can be forecasted accurately. In addition, supplier relationships become critical. The incoming materials must be of appropriate quality and deliveries must be on time, as a defective lot or late delivery can set back production and create a domino effect throughout the system.
Pairing JIT with a Kanban system makes it more effective. While JIT reduces inventory, Kanban signals when more is needed. Essentially, Kanban serves as a scheduling system for the supply chain. It tells a company what, when and how much to produce.
Companies who often experience slight fluctuations in production levels and struggle with accurate forecasting could greatly benefit by partnering with a supplier who offers inventory management. With a safety stock readily available with the supplier, companies can pull from it when needed to keep lines running efficiently.
A JIT strategy that is properly implemented can bring value to both a company that employs it and its customers. Some of the benefits include:
- Increased efficiency – Production lines can run continuously since materials are available to meet immediate production needs.
- Reduced waste – Since you are no longer warehousing stockpiles of inventory, the risk of having obsolete inventory is eliminated.
- Reduced inventory costs – There is no need to warehouse idle materials, and you don’t have to make a big upfront investment on materials. In addition, the freed up space can be used for revenue-generating activities.
- Reduced overtime – Production levels smooth out, so employee overtime associated with production spikes is reduced.
- Improved delivery to your customers – JIT speeds your production processes, allowing you to reduce long-lead times and provide on-time delivery to your customers.
- Reduced production obstacles – Having a stockpile of inventory can mask inefficiencies and other issues in your production line. Your line is only as efficient as your least efficient process. Bottlenecks and areas with increased defects can be flushed out and addressed.
Estes: a supplier who understands the value of JIT and Kanban
Estes Design and Manufacturing has years of experience with Kanban and JIT inventory systems. With the experience, tools, and space to accommodate your inventory management needs, you can be assured you are partnered with a supplier that can meet your JIT delivery needs. Using your forecast and lead-time requirements, we will get your product to you precisely when you need it, allowing you to improve efficiencies and reduce costs. If you would like to discuss how our services fit your needs contact us at (317) 899-2203 or Email Us.