Even if a slightly higher price is paid, the cost difference could be offset by the low cost of inventory.Īn entirely different mindset will be needed throughout the company. Therefore, new negotiations may be needed because of minimum order requirements. One negative is the problem that smaller orders will be needed for JIT. At the same time, supply-chain relationships might require multiple suppliers, closer locations, and suppliers that can provide materials with minimal notice. To make JIT workable, management must rethink the entire work flow of the company, from the intake of raw materials to the final finished product. A more flexible workforce can focus on quality production with lower defect rates, which lower costs and increase customer satisfaction. With JIT, manufacturers will know when employees are needed at different stations of assembly to meet the demand of those stages of manufacturing. JIT also allows the workforce to focus on primary tasks, from making goods to interacting with customers rather than stocking material. A retail store-using JIT-can renovate its warehouse space, providing additional retail floor space without expanding the store itself.Ī manufacturer can convert part of its warehouse into manufacturing space, increasing production. Print-on-demand companies don't print the books until an order is placed.īy reducing inventory, JIT frees up resources to employ them elsewhere in the company. Self-published authors can take advantage of just-in-time inventory by working with a printer that offers print-on-demand services. Authors might forgo the traditional approach to publishing their works and self-publish. Fast food restaurants have cheese, burger patties and all the fixings in a refrigerator, but they don't start assembling and cooking their cheeseburgers until a customer places an order.Īnother example is the self-publishing industry. One example of JIT are fast-food restaurants, which use just-in-time inventory to serve their customers on a daily basis during breakfast, lunch and dinner. The just-in-time inventory model reduces this waste. The company will need to cut prices on any unsold inventory just to clear it out, which reduces the perceived value of the manufacturer’s other products. For example, a manufacturer that uses the just-in-time inventory model can quickly increase production of an in-demand product, while reducing production on products that are slowing down. This helps the company acquire a larger market share and outpace its competitors.īy using the JIT model, a manufacturer has a better level of control over its entire manufacturing process, thereby, making it easier to respond quickly when the needs of customers change. Companies that employ the just-in-time inventory model may be able to reduce the number of warehouses they own, or even allow them to eliminate those warehouses altogether.Īn efficient supply chain can deliver lower costs throughout the manufacturing process, and those lower costs can then be passed on to the customer, making the company's products more affordable. Reducing the amount of inventory can reduce carrying costs. Warehousing excess inventory can be very expensive. This allows a company’s customers to be better served, while, at the same time, lowering the cost of doing business. The just-in-time inventory model lets manufacturers reduce their overhead expenses while always ensuring that parts are available to manufacture their products. The inventory storage location would then replenish just the amount of the material taken. In a manufacturing situation, a worker would go to an inventory storage location and remove the quantity of material needed for production. The store restocks the shelf with enough new product to fill up the shelf space. When shopping for groceries, a customer takes what s/he wants from the shelf and purchases them. Toyota’s founder used the American supermarket as his model for what he was trying to achieve in the factory. The concept behind Toyota’s system is to work intelligently and eliminate waste so that only minimal inventory is needed. Many manufacturers have tried to imitate Toyota without understanding the underlying concept or motivation, which might have led to the failure of those projects. Just-in-Time means that a manufacturer makes only what is needed, only when it is needed, and only in the amount that is needed. The original concept was created by the founder of Toyota. JIT avoids the waste associated with overproduction, waiting for material and holding excess inventory. Importantly, manufacturers must forecast their requirements accurately. Just-in-time (JIT) inventory is a stratagem that manufacturers utilize to increase efficiency and decrease waste by receiving goods only as they are needed in the manufacturing process, thereby reducing the cost of inventory.
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