What is Just In Time (JIT)? - YouTube

What is Just in time (JIT)?

Just in time is an inventory management technique  in which the materials, goods and labour  

are scheduled or re-filled to arrive in the  manufacturing process, exactly when required.

If the JIT approach is applied  adequately in an organisation,  

then it extends a competitive advantage to the  organisation as the production capacity increases,  

product quality improves and the  wastage is minimised significantly.

Summary

Just in time is an inventory management  

technique in which the manufacturing  process occurs exactly when required.

If applied adequately, the JIT approach extends  a competitive advantage to the organisation.

Two main components of JIT are continuous  improvement and waste elimination.

Frequently Asked Questions (FAQs)

What are the elements of JIT?

The two main components of JIT are continuous  improvement and the elimination of waste.

Continuous improvement – Identifying  the problems and the activities which  

do not add any value to the overall  production process and eliminating the same.

It involves devising systems to locate  the problem in the production process.

It states that the system should  be simple, easy to understand  

and manageable. It helps locate the problem  easily and minimises the issues as well.

The layout should be product oriented as  less time will be devoted to the parts.

Quality control should be taken at the  source, that is, workers will be held  

responsible if any defect is detected in the  product. It reduces the chances of error. 

Eliminate waste – Waste can be  categorised into seven parts, namely,

Time wastage

Transportation wastage

Wastage due to defects in the product.

Processing waste

Inventory waste

Waste due to overproduction.

The primary objective of JIT is to  eliminate wastage and it should be  

implemented throughout the supply  chain to gain positive results.  

Earlier, the manufacturing industry was aiming at  reducing the inventory and focusing on operations.  

The waste can be reduced by adopting six  principles which were introduced by Schniededans,

Reduction in the buffer inventory.

Zero inventory.

Reliable suppliers

Focusing on reducing the cost of purchase.

Material handling is improved.

Reducing the lot sizes and  increasing the order’s frequency.

What is the importance of JIT?

For gaining the full  advantage of the JIT approach,  

the entire supply chain needs to be planned  and superior software should be employed.  

By efficiently employing JIT, an organisation  can achieve the following benefits –

Inventory waste reduction – Overproduction is  eliminated by JIT, that is, the approach ensures  

that the supply and demand match and there is no  excess unusable inventory. The unusable inventory  

is termed as dead stock and adds to the inventory  storage cost. In the JIT system, the supply order  

is only placed when it is required, so there  is no accumulation of unusable inventory.

Reduction in warehousing cost – Warehousing adds  to the cost and holding excess inventory further  

adds to the cost. JIT approach aims at keeping the  warehousing cost minimum as the inventory is only  

ordered when the need arises. This can happen when  a customer places an order or when daily orders  

need to be fulfilled. With JIT, the warehouse  cost can be reduced, or it can be avoided as well.

The manufacturer gains control over the  manufacturing process – The manufacturing  

department gains full control over  the supply and demand process.  

The production is increased  when the demand increases,  

and the production process is slowed down  when the demand is reduced. Therefore,  

JIT introduces flexibility in the process as  the supply can be managed as per the demand.

Local sourcing – The manufacturing  process starts when the order is received,  

therefore, the organisation must arrange raw  material locally, so that raw material is  

delivered when the requirement arises. With  local sourcing the cost of transportation  

and time also reduces. Moreover, the employment  opportunities increase within the location.

Smaller investments – Less working capital is  required for financing the manufacturing process  

as the stock of raw materials is only ordered when  the demand arises. The stock in inventory is less,  

therefore the return on investment will be high.  JIT involves the concept of “right first time”,  

that is, activities undertaken should be perfect  when the activity is conducted the first time,  

ultimately reducing the cost of rework,  resulting in a reduction in investment cost. 

What are the drawbacks of JIT?

The JIT methodology is effective in  increasing the production capacity  

and reducing the production cost; however, the  methodology suffers from few drawbacks, which are:

In the JIT approach, the inventory is  generally kept to a bare minimum or in  

accordance with the customer’s order, therefore,  it becomes nearly impossible to rework orders.

The model is dependent upon the timeliness  and performance of the suppliers,  

and it is difficult to control the same. Moreover,  the manufacturers must a plan in case there is a  

sudden hike in the raw material prices. The  organisation cannot stop the manufacturing  

process while looking for  competitive rates in the market.

The JIT model includes a lot of shipping for  the purpose of arranging material and making  

the product available to the end customers.  It can lead to the creation of pollution and  

leave a negative externality on the  environment as fossil fuel is burnt.

In case of any external disruption, the  business (which has adopted the JIT approach)  

might face a lot of losses as there is no  extra stock on which the company can rely.

The JIT needs to be organised and  managed carefully in accordance  

with the changing business requirements, and it  becomes difficult if done manually. Therefore,  

the organisation needs to adopt software, gaining  access to which can be an expensive affair.

What are some real-life examples of JIT?

Majority of the perishable goods companies  adopt the JIT approach for managing their  

inventory. For example, Kellogg’s uses the JIT  approach and makes sure that the production  

matches the consumer’s demand  and limited inventory is stored.

Xiaomi is a mobile manufacturing company and  utilises the JIT approach. A limited quantity of  

smartphones is produced every week. The strategy  allows the company to reduce the overall cost and  

eliminate the wastage significantly. However,  it also acts as a drawback as the consumers  

have to wait to gain access to the product and  it might result in buying the competitive brand.