Just In Time (JIT) manufacturing describes the process whereby companies only acquire and produce items on an as needed basis. This process in contradictory to conventional thought that focuses on carrying large amounts of product inventory and merchandise on hand to create products and fulfill orders. While the conventional approach of amassing a large inventory and keeping the parts or stock items on hand to fill orders sounds practical, the reality is the process of holding significant inventories in house consumes large amounts of valuable resources that could be leveraged elsewhere within the organization.
JIT manufacturing is not a new concept. The JIT principle has actually been around for more than one-hundred years. The concept focuses on the production or acquisition of just enough units to meet current demands. The process was first modeled by Henry Ford around 1923. Mr. Ford recognized the huge inefficiencies present when rail cars full of materials or components were sitting idle. He understood those assets at rest represented lost revenue. JIT, as a process, did not really come into sharp focus until its adoption by the Toyota Motor Company. The Toyota company has thrived with the implementation of this process to guide its product development and manufacturing.
Impact to Business
The JIT process significantly impacts businesses in a couple of significant ways. First, it allows the business to decrease the inventory they carry on hand. This measure provides the company with a greater amount of operating capital on hand to reinvest in new products or to shore up balance sheets. Second, it forces the companies that use this methodology to implement streamlined processes. When a company is using JIT, they do not have a significant amount of parts in stock for production. This forces them to ensure they have stable, well-defined supply chain management systems. Third, it encourages the businesses using JIT to partner with other firms that understand the JIT process model and that can accommodate the on-demand nature of a JIT supply chain scenario.
The implementation of a JIT based manufacturing system forces companies to evaluate how they do business. Broken processes can easily hide in systems that are over-laden with surplus inventory. However, as companies begin to lean their process flow and diagram and understand their organization’s business processes these broken areas come quickly to light. Process improvement programs such as JIT and Lean Six Sigma will expose and help to correct broken, antiquated processes that are still being used from an era when excess and inefficiency was tolerated. Through the effective implementation of JIT manufacturing processes, when accompanied by effective supply chain management using available technology, it is possible for businesses to not only increase the efficiency with which they produce product, but also increase the money saved within a company while doing so. JIT processes are not a silver bullet to solve all of a company’s problems, but they provide a solid foundation upon which to begin implementing continuous process improvement within an organization.