What is Just-In-Time Manufacturing?
The British Motor Corporation plant in Australia originally developed the just-in-time production system in the 1950s, but it was largely adopted by Japan in the 1960s and 1970s. Post-World War II, Japan was seeking to rebuild industry but was short on cash and space. Rather than financing the big-batch, large inventory production methods used elsewhere, they built smaller factories that only housed the necessary materials to fill existing orders. This dramatically reduced inventory and investment costs. Toyota played a key role in developing just-in-time manufacturing in Japan and introducing the method to the United States; for this reason, it is often referred to as the Toyota Production System (TPS).
Just-in-time manufacturing can be referred to in many different ways and incorporate diverse elements — JIT production systems, the Toyota Production System (TPS), Kanban, continuous improvement and total quality management (TQM), to name a few. However, the essential principle behind these methods is the same: eliminate waste, inconsistencies and unreasonable requirements to improve productivity.
Just-in-time manufacturing operates on a philosophy of complete elimination of waste. Rather than working on a production-push basis, JIT manufacturing works on a demand-pull basis. Essentially, actual orders dictate the exact quantities organizations manufacture: they make only what is needed, when it is needed and in the amount it is needed. To do this successfully, organizations must implement incredibly detailed plans concerning procurement policies and manufacturing processes. They must employ technological systems, such as production scheduling software and electronic data interchange, to provide necessary support. And finally, organizations must be willing to continually reevaluate systems and implement new methods to meet their customers’ needs and improve efficiency.
Advantages of Just-In-Time Manufacturing
- This method eliminates waste, removing out-of-date or expired products and overproduction from the equation.
- Stock holding costs are kept to a bare minimum. Storage space is freed up and better utilized, eliminating unnecessary rent and insurance costs.
- Because only essential stocks are acquired, less working capital is necessary to finance procurement. A minimum re-order level is set, and new stocks are ordered only when that mark has been reached, streamlining inventory management.
- Return on investment (ROI) is generally high because of the low level of stocks held.
- Just-in-time production can easily incorporate changes in demand. Because the system works on a demand-pull basis, all products manufactured are sold. JIT production is adaptable to today’s somewhat volatile markets.
- This system necessarily emphasizes the “right first time” concept, minimizing costs of inspection and rework.
- JIT production encourages high quality products and continually improving efficiency.
- This method emphasizes constant communication with the customer to improve processes, meet changing needs and promote higher customer satisfaction.
Disadvantages of Just-In-Time Manufacturing
- Just-in-time manufacturing can make re-working difficult in practice, as inventory is kept to a bare minimum. As a result, zero tolerance for mistakes is critical.
- There can be a high reliance on the performance of suppliers.
- There are no buffers for delays as they can destroy the equilibrium of the production process.
- It can be difficult to meet an unexpected increase in orders with no excess finished goods.
- Transaction costs can be relatively high with frequent transactions.
- Just-in-time manufacturing may be less environmentally friendly due to more frequent deliveries and higher consumption of fossil fuels.
While just-in-time manufacturing is not without its pitfalls, these disadvantages can be overcome. This system encourages continual improvements, as well as planning and innovation to overcome any obstacles and inefficiencies. This just-in-time manufacturing method has been successfully implemented in many manufacturing organizations. It is a philosophy that focuses on optimization: reducing waste, increasing productivity and constantly responding to customer needs.
If you are interested in building a partnership centered on a just-in-time manufacturing philosophy, start the conversation with Mainstay.