Glossary for Industry Terms

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Just-in-Time (JIT)

What is Just-in-Time?

Just-in-time is an inventory management scheme that aims to minimize inventory and maximize cost efficiency. In this strategy, the quantity of raw materials ordered from suppliers is aligned with the customer demands or production needs. 

In conventional operations management, more inventory is desirable. This strategy is known as just-in-case. That is, a company produces goods in excess and stores them in case customer will demand the excess goods. 

On the other hand, JIT perceives inventory as a waste or dead investment and thus, prohibits overproduction by not receiving excessive resources. In a nutshell, the manufacturer will produce only the quantity that is required at a known time period. 

How does JIT work?

In manufacturing, the term lean management is define as the management strategy to maximize efficiency by eliminating wastes or “fat” and thus termed as “lean.” These “wastes” include overproduction, transportation, inventory, product defects, unproductive workers, etc. 

A part of this broader lean management system is JIT, which is the management of lead times. JIT works by taking into consideration all lead times of processes involved in the operation – from purchasing of raw materials up to delivering the finished product to the customer. These lead times are then managed in such a way that only the raw materials needed in creating the specific quantity needed by customers for a period of time are purchased from suppliers. This scheme allows reduction or elimination of inventory costs such as warehouse area, storage defects, and additional personnel. 

Thus, JIT reduces overhead expenses while making sure that the resources required are available to create the product. Furthermore, it allows the operation to focus on satisfying the customers and improved process control.   

How to make JIT system successful?

To make the JIT strategy work effectively, an organization needs an accurate forecast of customer orders as this will be the basis of computing how many resources are needed to be purchased. JIT also requires reliable and steady production and suppliers. Otherwise, a disruption in supply of resources and processing of raw materials will cause unnecessary delays, unpredictable problems, and eventually, customer dissatisfaction. All of these incur higher overhead costs and may cause distrust to customers. Machine breakdowns should also be predictable to provide accurate calculation of production time required for a certain number of orders. Unpredictable machine breakdowns can also result to production and delivery delays or worst, non-fulfillment of committed products. Finally, the workforce should have high workmanship and made aware of the whole JIT process. Just like the machines, workforce performance is critical to success of JIT. If employees’ performances and attendance are unsteady, production is likewise not stable.

What are the cons of JIT?

Due to its dependence on accuracy, reliability, and steadiness of processes and resources, JIT can be, on the other hand, be sensitive to any kind of disturbance or unpredictable errors. Such faults are not addressed in the JIT scheme. The JIT management system also cannot handle sudden spikes in customer demands, unless there is a very strong coordination and support from suppliers who can deliver resources in accordance to the customer’s demand.  

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