What is the Just in Time Method?
Just in Time Method is a kind of business planning that companies employ in production, such that the ordering for production materials done when those materials are needed without maintaining huge inventories. The main motive of this method is to ensure there is a reduction in expenses by avoiding excess inventory. This method ensures there is an excellent alignment between production schedules and materials ordered from the suppliers. With this method, a company can successfully increase its efficiency and avoid unnecessary waste. But to achieve this, there is a need for a good analyst to forecast materials needed would be accurate upon delivery by the supplier. So, in a nutshell, the Just in Time Method is basically to ensure inventories are available in the exact amount needed to align with demand and cut off all excess by avoiding excess demand that could lead to stockpiling of the surplus product.
Just in Time (JIT) Inventory Management Methodology
The JIT method is based on a “draw” plan or approach in production. What does this mean? It merely means that inventory is drawn nearer via demanding whenever there is more sale, which requires more production to occur. JIT method is dependent on established signals in the production process that passes information to the manufacturer when new materials are needed.
A famous example of a manufacturer using this method is Toyota, which uses this method in the assemblage of its line of a system.
Just in Time (JIT) inventory at a glance
JIT inventory is an idea that is all about cost-saving, time-saving, and the overall increase in companies’ efficiency. The following advantages of JIT are
- With the help of the JIT method, money saved due to low inventories invested somewhere productive activities.
- Also, stockpiles are avoided in the case of using JIT. Stockpiles take space, and since avoided, those spaces used for beneficial activities of the company
- Generally, profits are made when the JIT method is employed and wastage of inventories avoided.
- One major demerit of the JIT method is the shock in price and supply. JIT method exposes manufacturers to supply shock. There are cases of very high demand such that manufacturers find it challenging to meet up with the market.
- Manufacturers are affected by price shock a lot. Most times, prices are assumed to be constant, and due to this, whenever there is a price increase, the company’s profit might have to suffer for it.
- JIT method could be a highly complex method at times. It is not always as easy as explained.
Examples of successful Just in Time (JIT) in action
Apple: JIT method has helped Apple to minimize production cost by carrying out production under low-cost economics
Kellogg’s: The big cereal manufacturing company has also cut off waste and successfully rearrange processes in its supply chain.
Xiaomi: Xiaomi employs the JIT method by releasing a limited number of their mobile phones weekly. This act implies that consumers have to wait for orders sometimes.
Zara: JIT method has helped Zara in terms of storing its inventories and also in its maintenance.
Tesla: The manufacturing company has been able to keep up with vehicle assemblage and manufacturing by the accurate JIT method.