• 02Dec

    What is Just-In-Time inventory management?

    A relatively new (and increasingly popular) management system is called Just-In-Time or JIT. That approach relies on a scheme in which company suppliers deliver their products directly to the company production center in small quantities but more frequently – they deliver just the products needed for current production. In fact, the products arrive “just in time” instead of being sent to storage first and then sent to a producer when they are needed.

    JIT implementations




    Honda implements Just-In-Time inventory management system very effectively. In addition to the agreement with Donnelly about supplying its American plants with mirrors, Honda cooperates with independent suppliers of stereo loudspeakers, seats, and dozens of other different parts. Each supplier delivers parts to a Honda plant three times a day, and each delivery goes directly to the assembly line and is used immediately. The advantages of the system are obvious: the producer does not have to maintain large stocks of necessary parts and the potential damages are minimal. The system is useful for the suppliers as well: they do not have to maintain the final goods inventories because they are shipped to producers immediately after being made. They can also make an exclusive and long term deal with supplying companies.

    Many companies adopted the Just-In-Time system that was originally developed in Japan. For example, an important ingredient of Harley-Davidson’s success in re-mastering the heavy motorcycle industry was the adoption of JIT system.

    Strengths of JIT inventory management

    Honda

    Honda implements Just-In-Time inventory management system very effectively

    There are lots of advantages of incorporating Just-In-Time inventory management in a company. If there is a good coordination with suppliers, the company will certainly have benefits from JIT, and it will be reflected with more efficiency in production operations and will result in inventory and cost control, so it will also have positive impact on customers’ expectations.

    Through successful JIT management, companies will prevent the risk of being stuck with inventories that may become obsolete. Some researches show that some companies reduced their supply by more than 50 percent by implementing Just-In-Time inventory management. It means that those companies reduced the costs of maintaining inventories and, at the same time, the supplies were not threatened.

    Weakness of JIT inventory management

    Just-In-Time inventory management also  has weaknesses. The biggest problem in JIT is dependency. If a supply chain is not well interconnected or something breaks anywhere, it may have negative impact on supplies, and the product or the service will not be delivered on time. Any problem will have a chain of consequences for other companies relying on the one having troubles. These problems could be caused by labor protests, strikes, interruptions in the production line, bad communication among supplying partners, fluctuations on the market, and many others.

    JIT might be beneficial, but, as with any approach, it has to be implemented wisely, and management should be aware of the possible consequences of this approach.

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