Just in Time Inventory

Running head: JUST-IN-TIME (JIT) INVENTORY

Just-In-Time (JIT) Inventory

Just-In-Time (JIT) Inventory

Just-in-time (JIT) inventory is an inventory control process that reduces in process or standing inventory to the minimum amount necessary to maintain flow. The process requires the ordering of raw materials in a manner that will support the manufacturing floor with no stock outs and maintain the business inventory turns at an acceptable level. This paper will discuss the importance of Just in Time materials management, as well as a brief history. Furthermore, we will provide a complete view of how the system is implemented and sustained through the use of daily metrics and visual management. Just in Time has a long standing proven history of minimizing the affects of high cost raw materials with long lead times.

JIT philosophy

Just in Time requires a discipline that comes from understanding today’s business environments. Recently companies have been moving towards a more matrix type business structure. What this means is all of the assets necessary to bring a product from raw material to finished goods have been place into one reporting structure based on a product or process. This is the foundation of Value Stream Management, Integrated Product Team, or Integrated Manufacturing Teams. Whatever name given to these teams they have one focus; get the product to the customer, with world class quality, on time every time, and at a fair market value that generates profit for stockholders.

The concept of JIT is to eliminate the wastes in the processes that are generated by not having the material necessary for operators to perform their job. To begin this journey we need to see the waste in a process and understand how that affects the bottomline. Let’s take a look at some general wastes and see where material inventory control at point of use can help us. The standard for waste categories

was present by Toyota, these are: Overproduction, Overprocessing, Waiting, Motion, Travel, Quality Defects, and Inventory. Recognizing that inventory is a waste is step one, however if the leadtime of the process is longer than the customer demand you must have inventory in the process to ensure timely delivery. If you must have inventory, you must control it. (Ohno, 1978)

As the world moves into an era of globalization we see that the need for strong supplier management and partnering is becoming more and more necessary. The search for cheaper, more reliable suppliers has driven companies to manage their inventory more aggressively. The past has been a haven for the generation of inventory simply to keep people busy on the floor; these days are ending as investors are looking at operating metrics as much as financial metrics to ensure their returns are the most for the money.

This leads us to the concept of continuous improvement. Continuous improvement is a business mindset that challenges everyone to look for and eliminate waste in every facet of their work. Challenging the status quo to move beyond the ordinary and become world class. The future of each company rests on the belief that only through change can one survive in today’s business environment. We must use the processes available to create an atmosphere of encouragement to drive our inventory down and eliminate cost. This will move inventory turns up allowing the business to invest in the future as this money is no longer needed to maintain large volumes of on hand inventory.

History of JIT

Henry Ford, considered the father of mass production, first discussed the concept of Just in Time. He was quoted in his autobiography as saying, “"We have found, in buying materials that it is not worth while to buy for other than immediate needs, we buy only enough to fit into the plan of production.” (Wikipedia, 2006) Not only did JIT reduce costs by not tying up large sums of money in raw materials; it also sped up production and improved quality. Henry Ford was very successful in the large scale production of a few models of cars.

In the 1950’s the chief engineer for Toyota Motor Company, Taiichi Ohno recognized that JIT was a valuable manufacturing process, and decided it can help Toyota improve production, quality and delivery time on its cars. The challenge presented to Ohno was how to manufacture large volumes of many different types of vehicles. Under Ohno’s direction, Toyota began simplifying its production process; it standardized all of their tools and machinery. Robots were first introduced during this time to eliminate the mistakes