Just In Time

From ArticleWorld

Just In Time, or JIT for short, is an inventory strategy that aims to improve the return on investment of a business. This goal is achieved by the reduction in the cost of in-process inventory through a series of signals.

The first comprehensive manufacturing strategy was formulated by Henry Ford and his right-hand man, Charles E. Sorensen. They arranged all the elements of a manufacturing system such as people, machines, tools and products into a continuous system, and this is considered by many to be the first 'Just In Time' manufacturing process. Ford achieved instant success with the strategy. However, many emulators, inspired by Ford’s achievements, followed the strategy without understanding the fundamentals, and did not achieve the same amount of success.

'Just In Time' components

A series of signals that form the integral part of 'Just In Time' are called Kanban. These are simple visual signals. They aim to improve the financial return on an investment. In business management, an inventory refers to available stock of goods and materials at any point of time. The 'Just In Time' strategy requires that there is no hoarding or piling up of stock, and only stock required for immediate production shall be indented. Thus receipt of stock is regulated by the requirement of production at any point of time.

'Just In Time' example

The 'Just In Time' technique came into use for the first time when Ford Motor Company introduced the system of perfect flow and even transportation of raw materials to their company. Cargo of raw materials would arrive as per schedule in a planned manner and go for direct use into production resulting in a great deal of savings. Incoming materials are neither stored nor warehoused before they go into production. This technique was later adopted by the famed Toyota Motor Corporation of Japan for different reasons.

Japanese companies traditionally suffer from lack of land and returns were poor on investment with the use of the then prevalent economic lot size system. Toyota implemented a strategy known as Single Minute Exchange of Die or SMED, developed by Shigeo Shingo.

Implementation of the 'Just In Time' strategy thus improved the utilization of space, ordering of stock and return on investment.

Just in time limitations

The 'Just In Time' process is, however, not without limitations. One of the major constraints of JIT is that it leaves consumers and suppliers open to supply shocks. Moreover, the strategy is heavily dependent on the demand curve of the time when it is applied.

Heavy market demands will result in indent of large amounts of stock, while lower demands will result in the requisition of small amounts of cargo. When Ford achieved his success with the 'Just In Time' strategy, he was dealing with a labor force that was desperate for money and did not have much for self-esteem. The prosperity of the 1920's and the advent of labor unions as well as product proliferation resulted in conflict with the 'Just In Time' process implemented by the Ford foundations. In spite of all these limitations, 'Just In Time' strategy has survived and continues to be accepted.