In a JIT model, the manufacturer has full control over the manufacturing process, which operates on an on-demand pull basis. They can meet customer needs by rapidly increasing production of a sought-after product and reducing production of slow-moving items. This makes the JIT model flexible and able to meet the ever-changing needs of the market. For example, Toyota does not purchase raw materials until an order is received. This allowed the company to maintain minimal inventory, reduce costs, and quickly adapt to changes in demand without having to worry about existing inventory. Companies that succeed in JIT inventory management maximize their profits by keeping inventory investments as low as possible. You use the data to manage inventory. They use an ERP system to collect information about shipping, customer satisfaction, loss prevention, warehousing, purchasing, repeat orders, goods in stock, receipt of goods, stock rotation and more. However, a JIT system could also work for a new low-budget business with limited space for product storage. Keep in mind that such a system would likely benefit from continuous improvement as you expand your supply chain and manufacturing processes.
The disadvantages of existing JIT systems are potential disruptions in the supply chain. If a raw material supplier breaks down and cannot deliver the goods on time, it could cripple the entire production process. A sudden and unexpected order of goods can delay the delivery of finished products to end customers. One way to understand JIT is a supermarket analogy. In a supermarket, customers can get what they need, when they need it and only get the quantity they need. Similarly, a JIT process only requires parts from a previous manufacturing process or inventory when it needs them, and only in the amount needed at that time. As it gained traction, JIT was implemented in various industries, not just by automakers. The benefits of reducing inventory investments are significant, which can cause a company to reduce too much inventory. When this happens, any unplanned disruption to the flow of materials can cause operations to stop almost immediately.
Therefore, JIT concepts should definitely be followed, but be aware that there is a lower limit to how much you can reduce inventory. JIT is a form of inventory management that requires close collaboration with suppliers to ensure that raw materials arrive at the scheduled start of production, but not earlier. The goal is to have the minimum stock available to meet demand. There are a variety of improvements related to JIT inventory, especially in terms of reducing cash requirements and making it easy to detect manufacturing issues. One of the advantages of JIT inventory is that it minimizes the investment in working capital. Another advantage is that with such low inventory, there is little risk of there being a lot of obsolete inventory. Another advantage is that defective items are easier to identify and correct, which reduces scrap costs. In addition, a fully implemented JIT system should reduce the time required to manufacture products, which can reduce the lead times for customers placing orders.
And a final advantage is that it is much easier to implement technical change orders on existing products, as only a few existing raw material stocks need to be recovered before changes can be made to a product. The just-in-time inventory control model allows a company to respond quickly to changing customer needs and reduce the number of unsold or obsolete products. This model is best suited for companies with shorter demand peaks. It is widely used by the restaurant industry, technology manufacturers, and book publishers. These industries need to produce products quickly to meet demand and avoid excess inventory when demand declines. Japanese industrial engineers Eiji Toyoda and Taiichi Ohno created the system when Toyota Motor Company (TMC) realized that American automakers at the time were outperforming their Japanese counterparts. After a few tests, they established the Toyota production system and closed the gap between 1945 and 1970. JIT has continued to grow as a practice worldwide. The basic idea of this system is to minimize the consumption of resources that do not add value to a product.
The main risk of the JITT stems from its philosophy. JIT inventory management requires everyone to be engaged and cohesive in an ecosystem and supply chain. If part of this agreement collapses, the entire infrastructure is threatened. JIT inventory ensures that there is enough inventory to produce only what you need, when you need it. The goal is to achieve large-scale production with minimal inventory and avoid waste. The table of contents is a principle and process of continuous improvement that identifies weaknesses or systemic variables.