Just in time

Just-in-time is used to improve the return on investment (ROI) for a business by reducing the amount of inventory you carry. Inventory is essentially wasted money because it is sitting on a shelf and you are waiting for customers to purchase it. Practically every company must keep some inventory on stock if they are going to keep up with customer demands however there are numerous companies that purchase too much inventory and this is considered a waste.

Just-in-time is driven by the lean manufacturing process known as Kanban. Kanban is designed to create visual notifications when inventory levels are low and need replenishing.

Kanban uses "tickets" to notify the absence of inventory. Have you ever gone to a store and there was a sign saying a certain product was out of stock? Normally there is a small ticket you can take to the cash register to purchase the item and have it shipped to you when it comes back in stock (this is standard procedure for furniture stores). This helps companies to keep only enough stock on hand to meet their customer's demands. Holding too much inventory can dry up your cash flow and literally ruin your company.

The entire goal of just-in-time is to expose the hidden costs of inventory. Implementing JIT will not be an easy process. It involves an entire new process of working, which can be difficult for some of the employees. The philosophy is that changing the way your employees work will impact all the different areas of the company. Each department will have different views of inventory from production management to product design. Successful implementation of JIT will reflect direct upon the management team and their ability to re-train their employees to follow a new way of thinking.

In the JIT method, inventory is looked at as incurring waste, not storing value. The JIT method enforces the mindset to eliminate inventory that does not immediately compensate for some of the underlying manufacturing problems. Once JIT identifies these issues, they must then create a strategy to fix them so that they do not have wasted inventory on stock.

When there are manufacturing problems, managers are generally inclined to cover them up with inventory. Some of the problems include machinery failures, process variability, backups at work centers, lack of employees, lack of equipment, and inadequate workers or machines.

JIT is commonly called "the right" system because it is focused on using the right material for the right product to produce the right amount. This means you will have just enough product to fulfill your customers demands and you do not need to keep a large safety net of inventory on stock to compensate for higher volumes of sales. In order to get things "right" you need to have accurate predictions of your sales. Your marketing team must be able to provide you with predictions for market fluctuations so that you can order just enough products for your customers.

In order for JIT to work successfully, you must have good relationships with your suppliers.

They need to be part of your supply chain and be ready at a moments notice to bring you more raw materials to make your product.

There are some problems with JIT and they all lay on the delivery of raw materials. Since you are ordering raw materials per customer, you can waste time waiting for the materials to be delivered. This can cause you to start keeping more inventory on stock and completely defeat the purpose of JIT. The other problem with JIT is that it is based on the assumption that your products and raw materials will remain stable. In a volatile market, prices are changing daily and this can cause problems for your inventory.