The just-in-time (JIT) refers to the method of production’s management that brings necessary material orders from providers right at the exact moment of time when it is needed. As a result, a company that consistently implements such a principle eliminates downtime, minimizes inventory, or can achieve their reduction to zero. This inventory strategy can be used by companies if they need a better production process with reduced inventory costs. JIT makes manufacturers predict the amount of demand carefully.
How Just-in-Time works
The just-in-time (JIT) system allows to reduce expenditure and raises production efficiency. The just-in-time method minimizes spending on stockpiles as producers get materials and different details as necessary and do not have to take responsibility to pay for storage costs. Producers do not keep useless inventory if it is fulfilled or canceled.
For example, car makers who work with lower stock levels, however, largely rely on their custody chain for details’ delivery, which is necessary for building vehicles as needed. Therefore, the producer orders the required details to assemble cars right after the materials are arrived.
For a successful just-in-time manufacturing, companies should have a stable level of production, a high quality of manufacturing, serviceable machinery and reputable suppliers.
The main characteristics include:
- Have only the necessary stocks when it is needed.
- Improve the quality to the state of "zero defects".
- Reduce cycle time by reducing equipment time.
- Queue size and production batch size.
- Gradually modify the operations.
- Perform these activities with minimal costs.
Advantages of JIT
- Reducing the cost of maintaining inventory (warehouse workers, warehouse equipment, rental of storage facilities, etc.).
- Reducing the time of the order (due to a reduction in the size of the batch, changeover time, downtime).
- Better provision of materials, parts and semi-finished products due to the placement of suppliers closer to manufacturers (in addition, more jobs, development of regions).
- Long-term planning for suppliers and better sales of goods.
- Rationalization of production through specialization of suppliers on ordered goods, etc.
Disadvantages of JIT
- High costs of transport and arrangement of the transport way (high load on the way, the possibility of traffic jams, noise due to transport).
- High dependence on a single supplier (production losses are possible if delivery deadlines are not met).
- High dependence on compliance with the quality of supplied materials (input control costs, complaints).
- Constant information exchange is required (the obligation to confirm the financial condition of the supplier and manufacturer).
- High fines for suppliers due to non-compliance with delivery deadlines, high dependence on one consumer.
- The need for suppliers to move production facilities and warehouses closer to the consumer.
- Large losses for suppliers from specialization in crisis situations.
The use of Just-in-Time
- JIT in the production area – covers the JIT-controlled production process.
- JIT in the area of supply.
- JIT in the area of sales – provides supply to many consumers who submit their requests to online information systems.
In a just-in-time model only important stocks are got and so less funds and investment is needed for finance procurement. Thus, because of the short amount of stock kept in the inventory, the organization’s return on the investment would be decreased. The JIT model utilizes the concept “right first time” which meaning has been interpreted as “to implement the activities directly the first time when it’s done, decreasing inspective work and rework costs”.
Nowadays, the just-in-time system is gaining momentum at Russian enterprises: many large companies are already trying to introduce JIT (KamAZ, AVTOVAZ, Uralsvyazinform). For example, at the Ulyanovsk Automobile Plant, the introduction of this system allowed us to achieve such a result as saving time by 20%. The Zavolzhsky Motor Plant also rebuilt its production in accordance with the JIT concept. Severstal OJSC has started to supply rolled metal products to Caterpillar Tosno LLC on the just-in-time principle. Also in Russia, deliveries via the JIT system are made by the company MasterSNAB, a leading supplier of industrial equipment and a leader in the field of integrated supply in the markets of Tver, Tver and Moscow regions.
The company "EUROSIB-Logistics" offers delivery of automotive components and large diameter pipes using the JIT system. In trade, just-in-time involves the arrival of goods on the shelves "directly from the wheels." In Moscow, for example, there is a network of self-service stores "ABC", deliveries to which are carried out using the JIT system. The use of this concept made it possible to increase the volume of retail space at the expense of warehouses, avoid overstocking and ensure a high level of filling of the declared assortment. In the field of construction, the Russian-Czech construction company "U-Group" offers its clients its services in the design and construction of facilities using prefabricated steel structures, using JIT.