- basics of JIT, Just In Time concept for supplying a manufacturing line while optimising cashflow and keeping costs to a minimum.
Just in time, JIT is a production strategy that strives to deliver components to a production line just in time for their use.
Just in time strategy aims to improve a business return on investment by reducing in-process inventory and associated carrying costs.
Just in time, JIT, basics
The philosophy behind just in time, JIT inventory management is that inventory that comes in early forms an inefficient use of resources. Not only does the inventory require the correct storage - space, temperature control, inventory management, etc - but it also requires early payment. In addition to this, some items such as batteries may be "life'd" items. It is also found that the terminations on some components, especially capacitors and resistors may degrade with time. BY employing JIT, this becomes less of an issue because any stock is held for a much shorter time
By introducing Just in Time, JIT, other issues and process inefficiencies may be brought to the fore. In some cases additional stock may be kept to overcome a process failure. By introducing Just in Time management, these efficiencies can be highlighted and resolved.
In terms of accounting, stock adds to the value of a company. However, it is capital that is tied up and not returning any gain in value. Only when it is used, does it bring added value. To combat this, the inventory should be brought in exactly when it is needed.
By running an efficient supply chain and production organisation it is possible to schedule deliveries for the items when they are needed.
Just in time advantages
There are several advantages to just in time inventory control:
- Inventory reduction: With just in time inventory management the level of inventory cna be reduced. Traditional thinking would ensure that all stock was available ahead of production. This results in large amounts of inventory being required before any production starts.
- Reduced storage area: With inventory arriving approximately when it is required, the level of inventory being stored is greatly reduced. This brings many benefits.
- Reduces inventory management costs : There are significant costs associated with inventory storage and management. Not only are storage areas needed which add costs for the space itself and environment management, but people and equipment are required to manage the inventory. Reducing inventory by reducing stock levels with just in time management significantly reduces costs.
- Reduces capital investment: With les inventory being on site, and only needed when it is about to be used, the level of inventory is reduced and this brings considerable cost reductions. It also improves cashflow management.
- Reduced degradation of inventory: If inventory is held on site for periods of time, it can degrade. Stock holding requires the correct conditions to be maintained, but even so some items may degrade. Just in time inventory management helps overcome this solution by reducing he time an item is held before it is used.
Just in time disadvantages
While just in time inventory control has many advantages, there are a number of disadvantages that need to be factored into any decisions about its use.
- Scheduling requires to be accurate: One of the major disadvantages of just in time inventory control is that scheduling must be very accurate. Late deliveries, however small will impact the production operation and cause large increases in production costs resulting from the management of shortages. Product quality and reliability may also be impacted by the late addition of components.
- Inventory premium: In order to deliver at a specific time, many distributors and manufacturers charge a premium to meet the delivery requirements. Typically this can be 5 to 10%. This cost can be built into the overall manufacturing costs to determine whether the additional costs bring an overall saving.
- Less green: As just in time manufacturing requires more deliveries to ensure individual components arrive on time, some worry about the environmental aspects of JIT.
Just in time inventory control for manufacturing is a recognised method of improving the overall manufacturing efficiency level. It is used in many areas of manufacturing from heavy plant to building, and car manufacture, aviation and of course the electronics industry.
By Ian Poole
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