Author: Jim Riley Last updated: Sunday 23 September, 2012
Production & operations - Just-in-time (JIT) production
Just-in-time (“JIT”) aims to ensure that inputs into the production process only arrive when they are needed. Implemented successfully, stock levels of raw materials, components, work in progress and finished goods can be kept to a minimum.
This requires a carefully planned scheduling and flow of resources through the production process. Modern manufacturing firms use sophisticated production scheduling software to plan production for each period of time, which includes ordering the correct stock.
Supplies are delivered right to the production line only when they are needed. For example, a car manufacturing plant might receive exactly the right number and type of tyres for one day’s production, and the supplier would be expected to deliver them to the correct loading bay on the production line within a very narrow time slot.
The main advantages and disadvantages of JIT can be summarised as follows:
Lower stock holding means a reduction in storage space which saves rent and insurance costs
There is little room for mistakes as minimal stock is kept for re-working faulty product
As stock is only obtained when it is needed, less working capital is tied up in stock
Production is very reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed
There is less likelihood of stock perishing, becoming obsolete or out of date
There is no spare finished product available to meet unexpected orders, because all product is made to meet actual orders – however, JIT is a very responsive method of production
Avoids the build-up of unsold finished product that can occur with sudden changes in demand