Just in Time (jit)
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Introduction
Just In Time (JIT) is an advanced system of inventory management that reduces inventory and holding costs (Shin, Ennis, and White, 2011). Yet, JIT is much more than an inventory control system. In order for JIT to be implemented successfully, many processes and relationships must be synchronized in a way to reduce defects and waste in a firms supply chain. Once implemented, JIT boast many benefits including improved quality, short cycle times, increased productivity, optimized capacities, and reduced warehouse space. According to Hilton, Maher, and Selto (2008), there are six major success factors and all of these are present in firms that have successfully executed JIT.
Commitment to quality
Flexible capacities or predicable orders
Reliable supplier relations
Smooth production flow
Well-trained motivated workforce
Achievement of shorter cycle times
Thus, JIT can bring cost reductions throughout the supply chain by the weeding out of defective and inefficient processes to create a leaner more value-added environment. This in turn helps cultivate a competitive advantage for those who have successfully incorporated JIT into their strategic processes. “Some well-known JIT inventory case studies are Dell Computer and Wal-Mart. In their annual reports, trends of inventory assets and gross profit are investigated, and cost efficiency of JIT inventory systems is confirmed” (Shin, Ennis, and White, 2011). Therefore, JIT is a trend that has established itself through its effective use in manufacturing and service industries.
Definition
JIT is part of a new business culture called lean manufacturing. Although it may be a modern lexis, the idea has been around a long time. In fact Henry Ford wrote in 1922;
“We buy only enough to fit into the plan of production, taking into consideration the state of transportation at the time. If transportation were perfect and an even flow of materials could be assured, it would not be necessary to carry any stock whatsoever. That would save a great deal of money, for it would give a very rapid turnover and thus decrease the amount of money tied up in materials.” (Scarlett, 2010).
Henry Fords idea was later improved upon by Toyota manufacturing in the 1930s and 1940s into a process, which later became known as the Toyota Production Process. The principles developed and perfected by Toyota are the foundation of modern lean manufacturing (Kocakülâh, Austill, and Schenk, 2011). This lean manufacturing or “lean” concept is a long-term cultural initiative within an organization that is continuous in nature and used to remove waste and add value to the firm. Thus, JIT is just one of the principles that has emerged from this lean concept.
JIT is defined as an “inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs” (“Just In Time (JIT)”, 2012). JIT attempts to accomplish this through the introduction of the philosophy of continuous process improvements. Anything in the system that causes a defect is improved or eliminated. Because Just-in-time strives to reduce errors and improve quality it dovetails with total quality management (TQM) efforts, which are used to design quality performance improvements at every level of an organizations supply chain.
A supply chain can be defined as a “system of people, organizations, technology, activities, information, and resources involved in moving something of value (a product, as service, or a person) from a source to a customer” (Just-in-Time Recruiting, 2011). In a traditional supply chain, production is driven by forecasts and production schedules based on estimated demand for a product. Resources are purchased, converted into products that then sit in warehouses until shipped out to fulfill customer orders. This is called “push” manufacturing because products are pushed through the process by forecasts and production schedules not actual demand from customers (Hilton, Maher, and Selto, 2008).
In JIT manufacturing, the customer order is the driving force behind production. The customers order triggers purchases of resources and production, which minimizes unnecessary inventory and reduces their associated costs. Thus, JIT is considered to be “pull” manufacturing because the product is pull through the process by the customers order or actual demand. Thus, the JIT strategy involves holding minimal inventory, work in process, and finished goods, which avoids an array of holding costs from finance and insurance to warehouse and spoilage (Scarlett, 2010).
Although JIT can be used in service organizations such as JIT recruiting, which provides hiring managers with candidates that meet their needs where and when they need them (Just-in-Time Recruiting, 2011). JIT is most often implemented in the manufacturing arena. Therefore, we must look at the manufacturing processes that are affected by JIT. These processes include procurement, supplier relationship management (SRM), transportation, conversion, warehousing, shipping, and customer relationship management (CRM). Lastly, the glue that brings all of these elements together into a cohesive system that adds value is information technology (IT). Each of the following process is part of the summation earlier discussed and defined as a supply chain.
Processes
Procurement and SRM work hand in hand to ensure the production or conversion process has the necessary equipment and materials. Where procurement is the internal process of obtaining resources for the production process, SRM is the external process of creating relationships with reliable providers of those resources. This is essential to the implementing of JIT because without high quality reliable inputs, it would be impossible to create an error free process of outputs. The only way this can be accomplished is by forging ongoing flexible relationships with venders through reciprocal communication processes available over the Internet (discussed in detail later). Long-term relationships that create mutual benefit can allow for flexibility in order cycles times, frequency of orders, and smaller order sizes, which eliminates waste, lower inventories, and reduce holding costs.
Transportation is the next link in this process. Reliable transportation is key to relocating resource to the location of manufacturing. On-time shipments – both