JIT inventory management

Just-in-Time Inventory Management

By guaranteeing that materials are available at the beginning of the production process and that there are enough of them to meet the needs of a certain manufacturing process, just-in-time inventory management is a production approach that tries to shorten the time taken within the production process. Additionally, it lowers production costs by limiting the cost of inventory holding because orders for the inventory are only placed when the product is ordered (Agus and Hajinoor 21). The business does not require a warehouse to hold materials while it waits for the production process to start (Danese, Romano, and Bortolotti 442). This concept was developed in British Motor plant in Australia by around 1950s and adopted in Japan in 1960s by Toyota motor manufacturers.

The Concept of JIT

The concept of JIT was invented to improve the efficiency and at the same time reduce the cost of inventory. The producer does not need to carry large inventories in their premises. It involves the production of products to meet the exact demand of customers, in time, quantity and quality. Just-in-time includes the following;

Continuous Improvement

Continuous improvement involves elimination of anything that does not add value to the production process or to the product itself. Also, there is a devising system that assists in identifying problems in the production system. There is less time applied in moving the materials from one point to another. There is quality control at the source that ensures that the product quality satisfies the demands of the customer (Danese, Romano, and Bortolotti 442). A system called poka-yoke or foolproof is used to prevent mistakes from occurring during the production process.

Elimination of Waste

Just-in-time strategy also aims at reducing the waste that occurs during the production process. There is a lot of waste that organizations experiences from overproduction, waiting time, processing waste, waste that occurs during transportation as well as waste on product defects.

Close Collaboration and Point of Sale

The strategy is based on the philosophy that the products should only produced when needed by customers. It requires a close collaboration between suppliers and retailers that will help maximize the relationship between production and sales as well as the inventory level and this reduces inventory carrying cost (Danese, Romano, and Bortolotti 442). It is linked to a computerized point of sale that helps to monitor as well as maintain a point of sale through automatic reordering system. The company that applies JIT must have a small number of suppliers and maintain the relationship and also determine their ability to meet the requirement regarding inventory.

Inventory Monitoring and Ordering

In Just-in-time, a computer monitors the level of inventory and automatically makes an order when necessary and also when there is an order from the customer. This means that customer places order then the company after processing the order, communicates with supplier to supply them with the exact amount of material that are needed to complete the order made by customer (Gongand Wang 209). There is no material being stored in the company. The company shall have saved a lot of money on warehouse expenses, the cost as a result of storage wastes among others.

Efficiency and Challenges

The system is initiated by customers demand that makes the company to alert the supplier to bring the material needed as to quality, quantity and time. For efficiency of JIT, an organization will have to establish product oriented layout that reduces movement and also eliminate queues. In addition, there is need to institutionalize leveled production that smoothes flow of production in the company.

Downsides of JIT

Even though the system of Just-in-Time is proven to be cost effective, there are some downside parts of it that companies have to deal with. These are;

Potential Stockouts

The company risks running out of stock and therefore not meeting the customers' request. This is because everything is based on order and if there is no proper procedure that would ensure that stocks are available quickly as needed. If something happens to stock on their way to the company, the production process will be interfered with and customers might be disappointed if they do not get what they want at the right time.

Dependency on Suppliers

Making everything to order is not so healthy for the production process. A lot of issues might happen at the process of delivering raw materials to the company that would prevent them from commencing the process of manufacturing the needed product. In such a case, if there were inventory that was in stock, the production process would not be interfered with, but instead, the company will use these available materials to maintain its processes while still searching for a replacement of the affected supplier (Alippi, Boracchi, and Roveri 620). This is one of the significant reasons as to why organizations store materials needed for production in a warehouse close to their production plant. Also, the supplier that is relied on every day can have interference from the government due to business regulations and this will affect their ability to deliver the required resources on time. The quality also of this material might not assess well because there is a speed to start processing the order made by the customer. In all these, JIT can fail the company using it.

Integration with Kanban System

On the other side, Kanban system will not experience such problems. In this system, there is a level of inventory that the organization will need to maintain. In case the inventory is almost going past the set level, the Kanban system will alert the computer which then makes a reorder of the said product to refill it above the set minimum level. The company will not have to worry about the problems that might be encountered by their supply at the time they need these materials to process the order (Alippi, Boracchi, and Roveri 621). In cases where the supplier has a problem, there are materials in the store that can still be used while sorting out issues of another supplier.

Integration of JIT and Kanban System

If the Kanban system can work together with JIT, the production process will be better. The two techniques can be integrated in a way that the Kanban system keeps material for the JIT process at a certain level after which the firm can still order materials from the supplier when there is a customer order but not interfering with the level of inventory until there is a need to do that.

Kanban System and How It Works

In the Kanban system, there is a small stock at the dedicated location. The customer makes an order and then a computer signal is sent to the supplier or the store and makes a replacement of the item selected by the customer. The essential elements in the Kanban system are computer signal, stock points, frequent replenishment, and feedback. The idea behind the Kanban system is to reduce the idle time that the system takes when waiting for inventory. It delivers what is needed when it is needed by the production process (Danese, Romano, and Bortolotti 442). The word Kanban means a visual card. The lean production process uses the visual card to send signals on what is needed in the process and thus triggers the action of the supply process. The need can either be external or internal.

The Kanban has data printed on it. Let's say in a supermarket; the Kanban can be used to link the displayed goods on the shelves to the store or warehouse that has more products stored and also a link to the supplier. When the product is running out of stock on the shelves, there will be an alert by the visual card, Kanban, that sends a signal to the store to replace the stocks that have been bought. In the same process, if the stocks in the warehouse are running out, the Kanban will send an electronic signal to the supplier to refill the stock before it runs out completely. The process also applies to the manufacturing process. Where an item needed for the process is going down in stock, it will be replaced in the same way so that the process is not interfered with (Hammarberg and Joakim 15). There is also no idle time as inventories are replaced as soon as their levels are falling below the expected one.

Conclusion

In summary, material management in the world of advanced technology has helped reduce the cost that is associated with storing inventory, such as insurance and waste that occurs when there is too much stock in stores. JIT works well but it has some downsides that can be solved if kanban is integrated with it. Both systems eliminate waste in the production process and thus make it more effective and efficient.

Work Cited

Agus, Arawati, and Mohd Shukri Hajinoor. "Lean production supply chain management as driver towards enhancing product quality and business performance: Case study of manufacturing companies in Malaysia." International Journal of Quality & Reliability Management 29.1 (2012): 92-121.

Alippi, Cesare, Giacomo Boracchi, and Manuel Roveri. "Just-in-time classifiers for recurrent concepts." IEEE transactions on neural networks and learning systems 24.4 (2013): 620-634.

Danese, Pamela, Pietro Romano, and Thomas Bortolotti. "JIT production, JIT supply and performance: investigating the moderating effects." Industrial Management & Data Systems 112.3 (2012): 441-465.

Hammarberg, Marcus, and Joakim Sunden. Kanban in action. Manning Publications Co., 2014.

Gong, Qiguo, Yuru Yang, and Shouyang Wang. "Information and decision-making delays in MRP, KANBAN, and CONWIP." International Journal of Production Economics 156 (2014): 208-213.