7 MIN READ

Just in Time (JIT)

Reducing Inventory, Minimizing Waste, and Responding to Your Customers

When items are ready just in time, they don't occupy so much space.

When is the best time to have an inventory part ready for production? Just in time.

When is the best time to have an item ready for the next step in production? Just in time.

When is the best time to have a product ready for delivery to a customer? Just in time.

So why do manufacturers build inventory of both finished goods and raw materials? Just in case!

A buffer of inventory on hand is comforting – and costly. If you hold a lot of items in inventory, you're locking away a huge amount of cash unnecessarily. These items can be lost, stolen, or damaged, or they can deteriorate. They occupy space, which could otherwise be devoted to operations. And they can become obsolete, particularly when products are improved or changed often (many of us can remember images of airfields full of unwanted, obsolete cars from the 1970s and 1980s.) All of this represents financial loss to the business.

In the 1970s, when Japanese manufacturing companies were trying to perfect their systems, Taiichi Ohno of Toyota developed a guiding philosophy for manufacturing that minimized waste and improved quality. Called Just In Time (JIT), this philosophy advocates a lean approach to production, and uses many tools to achieve this overall goal.

When items are ready just in time, they aren't sitting idle and taking up space. This means that they aren't costing you anything to hold onto them, and they're not becoming obsolete or deteriorating. However, without the buffer of having items in stock, you must tightly control your manufacturing process so that parts are ready when you need them.

When you do (and JIT helps you do this) you can be very responsive to customer orders – after all, you have no stake in "forcing" customers to have one particular product, just because you have a warehouse full of parts that need to be used up. And you have no stake in trying to persuade customers to take an obsolete model just because it's sitting in stock.

The key benefits of JIT are:...