Just-in-Time manufacturing is a business methodology that is targeted towards minimizing lead times, inventory, and the costs associated with the production and storage of goods. JIT also helps companies uncover inefficiencies that are being masked with excess inventory.
What is Just-in-Time Manufacturing?
All manufacturing organizations hope to contain the costs of production and get their products shipped as quickly as possible. There exist various methodologies that have been developed to address these concerns. One of them is just-in-time.
Just-in-time manufacturing is a system that aims to reduce the time a product spends going through production and, at the same time, cut back the response time from suppliers. Controlling the variables is the key to holding down production costs while increasing productivity.
Similar to lean manufacturing, just-in-time manufacturing is designed to meet demand rather than create a surplus in anticipation of a future need. Its primary purpose is to eliminate the waste that comes from overproduction, waiting, and excess inventory. Let us take a look at these wastes in a bit more detail:
Overproduction is manufacturing products in advance of or more than the demand specifies. It’s considered to be the most severe of the wastes by proponents of just-in-time manufacturing because it squanders time, space, and money, all the while masking the other problems within a company’s processes.
Waiting to begin one process until another one finishes is ineffective and a colossal waste of time. The flow of all operations should be efficient and continuous. Some estimates claim that more than 90 percent of a product’s time in manufacturing is spent waiting.
Excess inventory typically means that a company has ordered more than the market demands or the demand falls dramatically after the inventory is ordered. Either way, it hurts business because it takes up space and must be managed. Companies often rid themselves of excess inventory by selling it at a reduced cost or tossing it out, either of which can lower profits significantly.
History of Just-in-Time Manufacturing
Just-in-time manufacturing began in earnest after World War II. Cash-strapped Japanese manufacturers began adopting the system because they could not finance the large inventory production methods that developed countries were using. They also lacked natural resources and available employees to take on large-batch inventory production.
As a result, these manufacturers built smaller plants and quickly turned small amounts of raw materials into small batches of products or components. These smaller quantities allowed the manufacturers to generate maintainable levels of working capital while minimizing their financial risk.
While the original just-in-time concept is credited to Toyota (it was even called the Toyota Production System in the Western media), some argue that Japan’s shipyards successfully developed and implemented the approach first. No matter which of these was the originator, the idea was born from Japan’s post-war lack of cash, lack of space for large factories and inventory, and their lack of abundant natural resources.
News of the just-in-time manufacturing technique reached the United States around 1977, and by 1980 most of the developed countries had implemented some version of it.
Just-in-Time Manufacturing vs. traditional methods
In the past, manufacturers carried larger inventories of raw materials and produced larger quantities of finished goods just in case there was an increased demand for their product. Not surprisingly, that philosophy is often called just-in-case manufacturing (JIC). Companies referred to this extra inventory as safety stock and it forced them to manage this excess inventory and absorb a dent in their profits.
Just-in-time manufacturing, however, aims to order smaller quantities of raw materials more frequently, just as they are needed for short-term production. Ordering inventory as needed means a business operates with low inventory levels at all times and does not hold safety stock. The just-in-time manufacturing strategy thereby lowers or eliminates their costs to carry excess inventory, while also decreasing waste.
When to use Just-in-Time
Just-in-Time manufacturing is the almost natural state of business for make-to-order manufacturers, e.g. if you engineer to order or run a small job shop. However, the idea is of JIT is to bring the advantages of those manufacturing modes to larger scale manufacturing.
The core ideas of JIT in manufacturing are that on end, the materials for production should arrive exactly when production is scheduled to begin, and not any earlier. And on the other end, the manufactured products should be finished just about when they should be delivered to customers.
This means that JIT could be used best when the market demand for the products can be forecasted with high accuracy, demand is without sudden fluctuations, and when you have highly reliable vendors.
Just-in-Time Manufacturing advantages
When companies put the proper time and effort into implementing a just-in-time manufacturing system, they can expect to see a sweeping impact on their productivity, risk management, and operating costs. Here are some of the benefits that JIT manufacturers worldwide are experiencing:
- Drastically reduced inventory levels
- Shorter lead times
- Lower labor costs
- Less space needed to operate
- Reduction in work-in-process inventory (WIP)
- Improvements in quality (fewer defects)
- Reduction in throughput times
- Fewer standard hours
- Increased number of shipments
The inventory reduction brought on by JIT could also unveil an array of problems and inefficiencies that were previously masked with high inventory levels. These may include frequent breakdowns, long set-ups, ineffective scheduling, skills shortage, etc.
Just-in-Time Manufacturing risks
For the most part, businesses that employ just-in-time manufacturing practices will see lower inventory levels, reduced cycle times, faster times to market, and reduced operating costs. But there are risks, especially for smaller companies. One supplier that experiences a breakdown and can’t deliver the materials that a company needs can disrupt or shut down the entire production process.
Additionally, a customer’s orders for products could exceed the company’s forecasted expectations, which could delay the shipment of finished goods to several customers.
To have the best chance of success with just-in-time, it’s critical that companies find suppliers that are either located close by or can supply materials quickly and with little advanced notice. It’s also important that these suppliers waive any minimum order requirements that could hurt smaller businesses, which typically purchase smaller quantities of materials.
JIT implementation requirements
Just-in-time manufacturing leans heavily on supplier relationships, communication, standardization, and continuous improvement. That is why some businesses, especially smaller ones, often struggle with implementing the system.
1. Strong supplier relationships
For one, larger companies have an advantage over SMEs due to their sheer size – as they make up a large portion of a supplier’s business, they easily achieve priority status. And when issues occur in the supply chain, smaller clients are neglected in favor of the larger ones. With just-in-time manufacturing, however, this kind of a disruption could derail the whole operation as the business is depending on their suppliers and not keeping any safety stock. That is why strong supplier relationships are key to just-in-time manufacturing. Another way to mitigate this problem would be to select suppliers that are physically close to your facility.
2. Effective internal communication
Internal communication could prove to be an issue as well. When information pertaining to the operation is siloed, i.e. every department has separate data systems, communication suffers. That in turn slows down the whole operation, causes data inaccuracies, and could have a significant effect on the bottom line of the company. For just-in-time manufacturing to work, a customer order should reach the planning department just as the sales representative enters it into their system. And that requires a centralized data system such as an ERP/MRP system.
3. Standardized processes
Having standard procedures in place for every operation ensures that the outcomes are reliably predictable. That includes how long the procedure should take and what quality items it should produce. When a deviation from the norm is detected, measures can be taken to identify the cause of the inconsistency.
4. Smaller lots
Working in smaller lots has many advantages, including better quality, less work-in-process inventory, and a reduction in inventory costs and required storage space. As for just-in-time manufacturing, smaller lots mean that only the immediately required amount of goods is produced, and nothing is made to stock.
5. Efficient workflows
In addition to standardizing the procedures and working with smaller lots, a just-in-time manufacturer has to have a well-planned facility layout that would support the production flow. This can be created with an approach called cellular manufacturing, wherein equipment, parts bins, tools, and workstations are arranged in cells to accommodate optimized workflows, reducing set-up and changeover times, and ensuring a streamlined movement of materials.
6. Backward scheduling capability
Backward scheduling means that production orders are scheduled precisely so they would be finished and promptly delivered by the clients’ requested delivery dates. That means everything is scheduled for the last minute, including the ordering of the materials and the production itself. This, however, cannot be manually done on a consistent basis and requires an ERP/MRP system with a backward scheduling functionality.
Just-in-Time Manufacturing with a cloud-based ERP/MRP system
Not only can just-in-time manufacturing work alongside an ERP/MRP system, software could play an integral part in the JIT approach. Aligning with the goals of just-in-time, ERP systems have been designed to trim the extra fat from a business, streamline operations, and efficiently manage resources.
By providing a centralized data system and effortless and accurate communication between departments, an ERP system creates a basis for the implementation of JIT. As each data entry is reflected throughout the software, all departments instantly receive the necessary information. For example, a customer order is automatically converted into a manufacturing order. By using backward scheduling, an ERP/MRP system can seamlessly schedule an order so that it would be finished right when it should be dispatched.
- Just-in-time manufacturing is a system that aims to reduce the time a product spends going through production, cut back the response time from suppliers, and eliminate the waste that comes from overproduction, waiting, and excess inventory.
- As opposed to traditional forms of manufacturing, just-in-time manufacturing orders smaller quantities of raw materials more frequently, just as they are needed for short-term production, and finished goods are delivered promptly. That way, inventory is kept at a minimum.
- Apart from reduced inventory levels, the benefits of JIT include shorter lead times, lower labor costs, less space needed, reduction in WIP and throughput times, quality improvements, etc.
- JIT could be used best when the market demand for the products can be forecasted with high accuracy, demand is without sudden fluctuations, and when you have highly reliable vendors.
- The risks of JIT for small manufacturers include the danger posed by supply chain disruptions, as well as inaccurate forecasting.
- For just-in-time manufacturing to work, a company has to have strong supplier relationships, effective internal communication, standardized processes, small lots, efficient workflows, and the capacity for backward scheduling.
- Much of these aspects can be supported with the implementation of an ERP/MRP system.
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