JUST IN TIME (JIT)

Definition of 'Just In Time - JIT' An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. JIT STRATEGY By taking a JIT approach to inventory and product handling, companies can often cut costs significantly. Inventory costs contribute heavily to the company expenses, especially in manufacturing organizations. By minimizing the amount of inventory you hold, you save space, free up cash resources, and reduce the waste that comes from obsolescence. JIT SYSTEM To facilitate a JIT approach, you need a variety of systems in place. The most notable is a kanban This is a Japanese approach to ensuring a continuous supply of inventory or product. Kanbans were designed to support the JIT philosophy. A kanban is a visual signal that indicates it is time to replenish stock and possibly reorder. For instance, as the supply of bolts in a bin on the assembly line falls below a certain number, it may uncover a yellow line painted around the inside of the storage bin. This yellow line indicates to the foreman that he needs to prepare a requisition for more bolts. That requisition is given to the purchasing department, which processes the order. This prevents the supply of bolts from dropping below a critical amount and allows production continues to flow smoothly. JIT also exists in concert with continuous improvement systems. Total Quality Management and Six Sigma are overarching programs that help you take a detailed look at every point of the production process and identify ways to make improvements. By applying JIT, you are continuously monitoring the production process. This gives you opportunities for making the production process smoother and more efficient. Because JIT is intended to spread throughout the organization, it can have an impact on many areas through improvements in processes. When the emphasis is on lean production, systems tend to be made simpler and more predictable. From how a product moves through the building to ways to increase worker involvement in system design, JIT improves efficiency. Advantages and disadvantage JIT Advantages of JIT Lower stock holding means a reduction in storage space which saves rent and insurance costs As stock is only obtained when it is needed, less working capital is tied up in stock There is less likelihood of stock perishing, becoming obsolete or out of date Avoids the build-up of unsold finished product that can occur with sudden changes in demand Less time is spent on checking and re-working the product of others as the emphasis is on getting the work right first time Disadvantages of JIT There is little room for mistakes as minimal stock is kept for re-working faulty product Production is very reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed There is no spare finished product available to meet unexpected orders, because all product is made to meet actual orders – however, JIT is a very responsive method of  production