The Just in Time inventory system is the one which aims at reducing the cost of inventory at nay organization by monitoring the holding cost of it. It aims at reducing all the costs that are associated with inventory management and to enhance the production of products. The philosophy aims at the production of goods “at the right place, at the right time and in the right quantity” (Muller, 2003). History of Just In Time Inventory System Just in Time inventory system is another name of lean production system.
The creator of the philosophy of Just in Time Inventory was Taiichi Ohno, the father of Toyota Production System (TPS) in Japan. The TPS systematizes production and logistics for the vehicle manufacturer, together with communication with the suppliers and customers. The system was between the years 1948 and 1975. As it was previously called the Just In Time Production, the TPS was basically built on the writings of Edward Deming and the famous car manufacturer Henry Ford.
When the founders of Toyota visited United States, they were not impressed by the assembly line of Ford which focused on the concept of mass production, however, when they visited the super market, they were very impressed by the system of resupply and replenishment of drinks only when one drink was consumed. They adopted this system and named it “The Toyota Way”. Characteristics of Just in Time Inventory System Just In Time system gained popularity. It focused on many aspects of production and helped many organizations reduce their costs on their inventory.
The basic characteristics of Just in Time inventory system are that it reduces the inventory accumulation in any organization. The holding cost of inventory goes down and hence the production costs are reduced by large figures. As opposed to the mass production system, lean production or Just in Time production system focused on production of goods in batches. The production is done in smaller lots and sizes. It also focuses on the aspect of quality control and inspection. The smaller lot sizes give the advantage of better inspection of the production batches.
The production or the assembly line is divided into work cells, the system step by step production system which saves the capacity and saves the time to move from one step to the other. The most important characteristic is waste minimization at all times. With lesser inventory accumulation, the costs reduce, the inventory does not go obsolete and costs of warehousing and safety does not incur. Currently, organizations that have maintaining their supply chain are effectively making the use of Just in Time inventory system (Hugos, 2006).
Benefits of Just in Time inventory System There are lots of advantages in implementing JIT lean manufacturing. JIT makes manufacturing operations competent, cost efficient and customer responsive. It allows producers to acquire and collect materials just before they’re needed, thus lessening the cost and trouble of administrating redundant parts. With the constantly changing demand JIT is apt to the producers’ needs of purchasing new inventory all the time.
By acquiring only a limited and certain amount of inventory, the costs are saved and if the demand of a product goes down, the manufacturers are saved from huge losses they might incur from extra inventory that has gone outdated. Not only the inventory problems, producing the right quantity of goods saves the companies from accumulating capital in unsold inventory. Hence, there is no waste during production and demand is accurately met (Muller, 2003). Demerits of Just in Time System Even though the Just in Time system has some advantages, it lacks at some points.
Just in Time system if not kept well can disrupt the whole supply chain of an organization. The companies which produce goods that have fluctuating demand can find it difficult to implement Just in Time. The demand does not allow the manufacturers to rely on a certain quantity of material. If the demand is too low, their inventory can go in waste, and if the demand is too high, they might not be able to fulfill the demand completely in a single batch of production (Sharma & Narayan, 2010) (from UIU Library). Just in Time has got some major risks associated with it.
In countries like Pakistan and India where labor strikes and political instability makes it difficult to ascertain the demand and if the supplies don’t reach the factories and plants on time, supply chain can disrupt. However, these issues can be overcome by making sure that transportation and logistics are well looked upon and alliances are built with suppliers to ensure that supplies are received right on time. Moreover, the concept of safety stock also comes into existence as the risk out running out of stock increase (Muller, 2003).
Practical Application JIT is a philosophy and can not be implemented as a complete science. However, with minor changes, it can be effectively put into practice. Dell, a famous computer manufacturer has made a successful application of JIT system. The company produces customized PCs and laptops for its customers only when it receives the order. The manufacturer to customer model of selling has also made it very successful and it has also helped the organization to establish its unique selling proposition effectively (Piasecki, 2003). Wal-Mart is another organization with an excellent supply chain and is the world leader in whole sell.
It has also made a successful implementation of JIT system. Another organization that is very famous for its initiative of JIT system is none other than Toyota. Toyota has made the use of JIT as well as other philosophies such as Kanban and Kaizen. Their concepts of continuous improvement and card system have made their assembly line produce the car at cheap rate. It might seem that with low cost cars, quality might not be as satisfactory as it supposed to be, but, Toyota has implemented some major quality control system.
Six sigma is the foundation of their quality. They have come up with different terms that identify how well the work is going on in the organization. Hence, Toyota is an example that can not be eliminated from the success given by JIT system (Monden, 1998).
Conclusion JIT system is highly successful of implemented with complete knowledge and care. The idea of the system is to eliminate waste and save costs that are stuck with several kinds of waste during a production process.