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Improved Organizational Efficiency
Why use JIT?
Just in Time Inventory Control eliminates waste and improves quality, and in the process, improves all-around organizational efficiency. JIT improves organizational efficiency in five major ways:
- The Just in Time method entails sourcing the required raw material or item for processing on demand, and scheduling the work based on order or demand for the product. This synchronization of supply with production, and production with demand improves the flow of goods and reduces the need for storage facilities.
- JIT’s focus on eliminating waste from the production process leads to redesign of the workspace to ensure a smooth flow of goods or processes, eliminating redundant tasks, and minimizing transportation of the product across the workspace.
- The traditional manufacturing process call for “batch" manufacturing or manufacturing of a particular component or model in a “lot" before moving on to another “batch" or “lot." JIT makes it possible to manufacture even single pieces or components without any delays.
- JIT’s system of kanban or specific instructions for each worker eliminates all scope for mistakes in the workfloor.
- The relentless effort to eliminate waste and achieve zero-defects improves productivity, cuts down manufacturing time, and improves product quality
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Among the major benefits of JIT system is the elimination of raw material, inventory and product storage costs.
- The traditional notion is to consider raw materials or inventory of finished goods as an asset. The JIT method turns this concept upside down and considers stock as waste or dead investment incurring opportunity costs.
- The JIT system sources raw materials close to the manufacturing time, and ships out the product to the customer immediately without storage, leading to substantial savings resultant from not storing raw materials or stocking up finished goods. Deploying funds tied up in raw materials and inventories to generate additional revenue do wonders to the finances of the organization.
- JIT’s thrust on elimination of waste from the production process and improving product quality reduces damaged goods and saves on Human Resources costs considerably.
All these cost savings translate to a lower manufacturing price for the product.
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Improved Supplier Relationships
The success of JIT depends on the ability of the supplier to produce raw materials on demand.The benefits of JIT extend to improved relationship with the suppliers on many counts:
- JIT develops a system of effective communication with the supplier, specifying the exact product required in exact quantity and the specific time of delivery. This eliminates all scope of misunderstandings or miscommunication.
- The success of JIT requires reliable suppliers and organizations takes the initiative to upgrade supplier competencies and establish a long-term relationship with the supplier to ensure compatibility and standardized products.
- The exact nature of order and the long-term proactive relationship with suppliers eliminate the need for inspection of received goods
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Facilitated Customization and Increased Customer Satisfaction
Just in Time Inventory adjusts production to demand, making possible the fulfillment of custom orders without any extra effort or extra time, leading to increased customer satisfaction.
A practical example in this aspect relates to McDonald's. The application of JIT principles has helped McDonald’s cater to the order of any special type of burger with equal ease and in the same time as any other burger. Without JIT, the workforce would be geared to deliver fast-moving burgers fast, but a peak-hour order of a rare item on the menu or a special order would throw the kitchen out of gear.
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JIT Develops Human Resources
Implementation of JIT requires workforce flexibility and a highly skilled and committed workforce. The advantages of Just in Time Inventory extend to the company’s Human Resources in the following ways:
- Investment in training to develop existing skill and broaden skill sets.
- More effective usage of employees with multiple skills.
- Increased motivation through job rotation.
- Better productivity
The remarkable transformation made by organizations that have adopted JIT answers the question, why use JIT? The many JIT benefits make it one of the most successful management strategies ever.