Jit Management

Topics: Supply chain management, Supply chain, Inventory Pages: 8 (2938 words) Published: April 8, 2013
Supply Chain Management is a term used to describe the relationship that exists between an organisation and its network of suppliers and buyers. Just-In-Time (JIT) management is the ability of an organisation to integrate its systems and processes with that of the supply network. Describe a supply chain where this occurs and discuss the challenges and benefits of the JIT methodology.

A Just -In -Time System is a system which organizes the resources, information flows, and decision rules that enable a firm to realize the benefits of JIT principles. (Larry P. Ritzman) The main purpose of a just in time system is to eliminate through improvement activities various kinds of waste lying concealed within a company. During periods of slow growth the Toyota production system which was developed by Toyota Motor Corporation could actually make some form of profit by reducing costs and eliminating excessive inventory and getting rid of excessive staff. (Yasuhiro Monden, 1994). As mentioned above JIT main purpose is to eliminate waste and to effectively increase their profit levels. The table below shows the types of waste which Just in Time Production aims to solve and thus make the company more efficient in reducing waste and eliminate unnecessary capacity. * Transportation| * Over Excessive movement and material handling of product through transporting from a large distance, this can cause damage and deterioration of the product. Companies such as “Wall-Mart” have close supplier ties in which there are very short transportation times to deliver their stock eliminating this wastage.| * Overproduction| * Over Producing a piece of item, this will create unnecessary costs in storing the product, furthermore if demand for the overall product falls and this product isn’t sold it is considered to be a waste of money creating a unnecessary cost. | * Inappropriate Processing | * Using expensive equipment which is not needed to produce a simple product. This leads to overutilization of expensive capital assets. “Toyota is famous for their use of low-cost automation, combined with immaculately maintained, often older machines.” (David McBride, 2009)| * Inventory| * Excessive inventory consumes space, increases lead times and inhibits communication. “Work-in-process inventory is a direct result of overproduction and waiting. (Larry P. Ritzman).Dell operates with 6 days of stock to reduce warehouse costs and reduce lead times. (Caplan, 2004)|

An example of a company in the modern day which Integrates just-In-Time management throughout their network of suppliers and buyers is the computer manufacturing Company “Dell”. The Owner of Dell Michael Dell states that Dell is due to the fact they have sufficient knowledge of what the customer wants and that he defines the success of knowledge management by stating “physical assets are being replaced by intellectual assets.” (Michael Dell) This is heavily supported by the way in which Dell have implemented a Just-In-Time inventory system, which operates on only 6 days of inventory. Dell is able to achieve greater profit margins and increased profits because of their inventory system. Stock levels and labour expenses are the highest costs to the firm and s by using Just-In-Time Production they can help minimalize these costs to the fullest. (Caplan, 2004) Because Dell stated that they only operate with 6 days of stock, they do not need excess space at warehouses, they can avoid hiring large security teams and equipment to check and maintain the inventory. Furthermore it allows Dell to free them from holding old technology which is out of date and therefore non profitable for them as a company. Dell only operates with 6 days’ worth of inventory, they are able to cut costs on warehousing, hiring people to track and maintain inventory, and avoid holding on to obsolete technology. This allows Dell to free up cash flow to invest in other value adding activities....
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