The surplus on resources can fatally impair the company's financial health if it is not sold or used in a timely manner. Some companies have said, “Inventory equals death.” In other words, the company can't survive with excess inventory on-hand. What's the reasoning behind using JIT inventory? Then it's delivered into inventory at the appropriate time. With Just in Time manufacturing, the product is produced on schedule. In order for JIT inventory to succeed, the product must be available at the time it's needed. However, the inventory is on hand to allow the kitchen staff to start manufacturing your order immediately.įor a more integrated process, manufacturing and inventory can work together hand in hand, reducing waste and expenses throughout the supply chain. The assembly process for your burger and fries doesn't start until you order it. Let's take a look at a fast-food restaurant. It's up to the component manufacturer to manage its own inventory process. There's a plan to move the product through the supply chain to the customer before it's manufactured or stocked.įor instance, an automaker receiving components focuses on when the component is needed on the assembly line. Many JIT companies produce a product or add it to inventory only when it receives new orders from customers. They are essentially two different points in the supply chain but can operate independently or at the same time. JIT inventory and manufacturing share the same basic principles - produce or receive the product only at the time it is needed. What's the difference between JIT inventory and JIT manufacturing? You could say it's a case of working smarter, not harder. Ultimately, the goal of JIT is to align incoming products with production schedules and sales forecasts instead of having a surplus of inventory on-hand. They kept a lot of inventory on hand just in case supplies would run low due to higher demand or service interruptions. Prior to the JIT inventory system, producers would use the “just-in-case” approach. Fast fashion designs respond to shifting trends and keep pace with consumer demands. Retailers and distributors are adopting the JIT approach to position products nearby to restock shelves when popular items run low. Food producers like Kellogg's follow a similar discipline, continuously feeding raw materials into production. Apple keeps its inventory of expensive electronic devices low. Since then, companies such as Apple, Motorola, and Kellog's have adopted the process.įor an automobile manufacturer, components such as seats arrive at the exact time the workers are ready to bolt them in place. JIT got its start when Toyota put their system in place for automobile production in the 1970s. There may be an arrival window that the supplier can deliver the parts ahead of time to ensure the assembly line doesn't have to slow down. Over the past several decades, companies large and small have adopted a Just In Time (JIT) Inventory strategy to reduce costs and eliminate waste.Īs the name implies JIT means inventory arrives at the point of use when it's needed, and not a moment before.
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