Just-In-Time Inventory Management Strategy & Lean Manufacturing Overview of Just-in-Time Inventory Management
Just-in-time is a movement and idea that has gained wide acceptance in the business community over the past decade. As companies became more and more competitive and the pressures from Japans continuous improvement culture, other firms were forced to find innovative ways to cut costs and compete. The idea behind JIT, or lean manufacturing, is to have the supplies a firm needs at the exact moment that they are needed. In order to accomplish this goal a firm must constantly be seeking ways to reduce waste and enhance value. A recent survey of senior manufacturing executives showed that 71% used some form of JIT in their processes (Pragman). This simple statistic illustrates that JIT is here to stay and also that firms must constantly be searching for ways to cut costs and achieve an advantage. JIT is one way to achieve that end result.
In order to understand how JIT works a common vocabulary needs to be established from which to further discuss the topic and gain insight into why so many firms have adopted it. As previously stated, one of the key components of JIT is to reduce waste and add value. There are several activities that a company must monitor as targets for reducing waste. Among these are, excessive waste times, inflated inventories, unneeded people or material movement, unnecessary processing steps, numerous variabilities throughout a firm's activities and any other non-value adding activity. A key example of this is a new plant that Caterpillar is bringing on-line in the near future. By reducing the number of times a bucket had to be repositioned while it was being welded, Caterpillar was able to reduce the amount of time the bucket spent in the welding line, reduce labor costs by limiting idle time at the welding station and increase the efficiency of the entire manufacturing process.
The layout and inventories that are part of a JIT strategy may seem the most logical steps to reduce waste and increase value. By simply redeveloping the layout of certain facilities a firm can reduce the time it takes for supplies to get to the next step in process and cut costs associated with that movement. One way to do this is to have work-in-progress close to the next station in the manufacturing chain. Couple this with lowering inventories and a powerful combination is formed to reduce costs. In lowering inventories a firm can reap numerous benefits; batch sizes, set-up times and safety stock are all reduced, ergo costs are trimmed and value is added. But in order to achieve these things a firm must be willing to accept the problems that these actions can either uncover or create. Dell Computers participates in both of these activities and they are now the industry leader. Dell has warehouse space at their manufacturing facilities in which suppliers keep parts directly on-site which is the quintessential JIT layout. In addition, Dell is constantly working to achieve "JIT" inventories of only four days and in doing so are constantly uncovering and solving supply chain problems.
Going hand-in-hand with maintaining Just In Time inventory levels is JIT scheduling. By working to reduce inventory to the lowest possible working levels, a firm must constantly be adjusting its schedule of ordering and delivering. In doing so, communication both up and down the supply chain is critical. Frequent orders are placed for supplies and small production runs are constantly being initiated. In order to achieve this breakneck pace of order/production schedule, a firm must constantly be making small changes to orders/production and recognize that kanbans are of incredible importance.
Possibly the single piece of JIT that has the most relevance to a study of supply chain management is the partnerships that are essential to making JIT truly work. A firm cannot implement a JIT system by itself; it must have the complete...
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