Inventory Management

Just-in-Time Technique

Just in time (JIT) is a production strategy striving to improve a business's return on investment by reducing in-process inventory and associated carrying costs. To meet JIT objectives, the process relies on signals or Kanban between different points in the process.

Kanban is usually "tickets" but can be simple visual signals, like the presence or absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organization's return on investment, quality, and efficiency. To achieve continuous improvement, key areas of focus are:

• flow
  
  
• employee involvement
  
  
• quality

Noticing that stock depletion requires personnel to order new stock is critical to the inventory reduction at the center of JIT. But JIT relies on other elements in the inventory chain. Therefore, JIT is best implemented as one part of an overall lean manufacturing system.

Benefits of JIT:

• Reduced setup time. Cutting setup time allows the company to reduce or eliminate inventory for "changeover" time.
  
  
• The flow of goods from warehouse to shelves improves. Small or individual lot sizes reduce lot delay inventories, which simplifies inventory flow and its management.
  
  
• Employees with multiple skills are used more efficiently. Having employees trained to work on different parts of the process allows companies to move workers where they are needed.
  
  
• Production scheduling and work hour consistency are synchronized with demand. If there is no demand for a product at the time, it is not made. This saves the company money, either by not having to pay workers overtime or by having them focus on other work.
  
  
• Increased emphasis on supplier relationships. A company without inventory does not want a supply system problem that creates a part shortage. This makes supplier relationships extremely important.
  
  
• Supplies arrive at regular intervals throughout the production day. They are synchronized with production demand, and the optimal amount of inventory is always on hand. When parts move directly from the truck to the assembly point, the need for storage facilities is reduced.
  
  
• Minimizes storage space needed.
  
  
• Smaller chance of inventory breaking/expiring.

Drawbacks

Just-in-time operation can leave suppliers and downstream consumers open to supply shocks and large supply or demand changes. In addition, very low stock levels mean shipments of the same part can come in several times daily. This means firms favoring JIT are especially susceptible to flow interruption.