Every company needs a strategy and the best project management software to help with inventory management. Not using either can lead to excess inventory and spending. To avoid these pitfalls, many companies use the JIT (just-in-time) approach. In this article, we’ll explain what JIT is and highlight the advantages of JIT.
Let’s begin with a brief history lesson. The concept of JIT manufacturing first came to life in the early 1970s. Industrial engineer Taiichi Ohno, creator of the Toyota Production System, Lean manufacturing and the Kanban method, developed the JIT method. His goal was to boost production efficiency and ensure companies could meet customer demand.
Ohno felt that the mass production of products led to overproduction, resulting in large amounts of waste. He wanted to create a new method to refine the production process, ensuring companies only had the inventory they needed to meet demand. Thus, the JIT inventory management model was born.
Meaning & Definition: What Is JIT Inventory Management?
Think of the just-in-time method as a similar approach to the on-demand model used in drop-shipping. Rather than produce your product in large numbers, you adjust your supply chains to mirror customer demand.
Just-in-time production often goes through cycles, such as seasonal sales periods. Working within specific time periods and using minimal inventory makes it easier for a company to ensure customer satisfaction. A more streamlined inventory system also helps avoid product delays.
JIT Example
Car manufacturer Toyota was the first to adopt JIT inventory management, christening it the Toyota Production System. The company only brought in materials for a product after a customer had placed an order. Using the JIT system, Toyota ordered additional materials as they became necessary further down the production line.
Other major brands have implemented the JIT manufacturing process in their inventory management systems. Dell would only obtain the raw materials for its custom computers once a customer request was submitted. McDonald’s also leans into JIT by only making food once an order is placed, rather than cooking in bulk prior to receiving orders.
How Does JIT Delivery Help Stores Make a Profit?
One big question remains: How does JIT inventory management lead to an increase in profits? Implementing supply chain management removes the risk of wasting funds on unnecessary excess inventory.
Defined production schedules also ensure you don’t overspend on resources. Mass production can take more time and effort, and can lead to overspending on labor expenses and production costs. This vicious cycle can easily result in scope creep.
View this process as a way of living within your means. Only when an order arrives do you create the product, which helps guarantee quality and satisfy consumer demand. This will ideally lead to an increase in your profit margin in the long run.
The Pros: Benefits of JIT Production System
Let’s look at some of the many advantages of using the just-in-time method. We’ve already gone over some of them, but we’ll break down a few more in this section to help you understand how your company can take full advantage of just-in-time for its supply chain.
Maximizes Storage Space
With proper inventory management, you can control the amount of storage space you need in your production factory. Mass production and exceeding customer demand require more production space, which means spending more capital on finding and maintaining that space. Just-in-time manufacturing keeps those costs down, which is better for your bottom line.
Helps Minimize Waste
JIT was developed with the goal of decreasing waste. Prior to JIT, manufacturers would purchase huge amounts of materials that would become unnecessary stock due to a lack of demand. JIT is even more important in view of what we now know about the planet. It ensures waste reduction and thus decreases the negative impact of production on the environment.
If you’re looking for project management software that can help your company use and monitor Lean methods, check out our roundup of the best free project management software.
Improves Productivity
With less inventory to worry about and by staying level with demand, the labor force is able to focus solely on what is necessary. This allows them to hyperfocus, which in turn should lead to an increase in productivity and efficiency, higher quality standards and greater customer satisfaction.
The Cons: Disadvantages of JIT
No system is perfect, and the JIT model is no exception. Its flaws manifest mostly in terms of working with external suppliers and contractors. We’ll break down each disadvantage below.
Broken Supplier Relationships
When new orders come in, a company needs reliable suppliers that can quickly fulfill orders for raw materials. With no excess inventory available, a supplier not reacting quickly can lead to delays in production. In turn, this means you can’t make timely deliveries to your customers.
Little Room for Flexibility
JIT provides little room for flexibility. If your forecasts are inaccurate and demand increases, it can be difficult to react quickly to ensure you meet that demand. This can result in a loss in sales, which, of course, is no good if your objective is to increase profits.
Poor Planning Can Sink the Ship
Those using JIT manufacturing tend to have higher customer demand during certain periods of the year. Meticulous prior planning is necessary to ensure you’re stocked and ready to meet the demand. This takes time and resources to plan. Additionally, if you get it wrong or your sales trend goes off course, it can lead to unsold inventory, wasted labor costs and decreased profits.
Final Thoughts: Advantages of JIT
You should now understand the advantages of JIT and be able to implement the concept in your own manufacturing processes. It may take a while to shift from previous processes, and you may need to bring in a change manager to help with the transition. However, trust that it will be worth it, as JIT will help improve your company’s efficiency, product quality and bottom line.
For proper planning and ongoing performance measurement, we recommend using monday.com. It has tons of useful tools for pre-project planning, customer relationship management and inventory management. Learn more about it in our monday.com review.
Did you find this guide useful? Are there any other processes you would like us to explain? Do you have any experience with JIT? Can you think of any other advantages of JIT? Let us know in the comments. Thanks for reading!
FAQ: Just-in-Time Inventory Management Model
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Advantages of JIT (just-in-time) inventory management include waste reduction, better cash flow management and increased profits. The disadvantages include limited flexibility, the inability to fulfill demand when orders increase and precarious relationships with suppliers.
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Measuring performance allows you to analyze the areas where you are most efficient, thus leading to a long-term increase in productivity. Measuring performance also reveals which areas need improvement.
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JIT ensures less raw material stock is wasted, allows you to control your inventory levels and helps you create products only as necessary. This means you’re reducing waste and producing in response to demand, which helps streamline processes, improve efficiency and increase profits.
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