Just-in-time is a management approach where production is not initiated until a customer has ordered a product. In this approach, the company only purchases raw materials that are used for producing product demanded by customers, which leads to minimum inventories. Under ideal conditions, the company that applies this concept will only purchase enough materials each day to meet that day’s needs. There will be no work-in-process inventory since all the raw materials are processed and shipped to the customers on the same day. This widely accepted management strategy was originally created by the Japanese to makes production more effective and reduces unused inventories. One of the key components of this approach is to reduce waste and add value. By implementing this strategy, activities such as monitoring waste can be prevented. The company can also prevent inflated inventory, unneeded people or material movement, unnecessary processing steps, and other non-value adding activities.
For example, in Caterpillar’s new plant, reducing the number of bucket repositioning process while it was being welded was able to reduce the amount of time the bucket spent in the welding line, labor costs can be reduced by limiting idle time at the welding station and efficiency of the whole manufacturing process can be increased. By having work-in-progress close to the next station in the manufacturing chain, company can reduces the time it takes for supplies to get to the next step in process. Furthermore, costs that are related to that movement can be reduced. In order to implement JIT, a company must adjust the schedule of ordering raw materials and delivering finished goods. With not much room of error, if goods are failed to be delivered on time, production will be disrupted and may even stop. Thus, communication and relationship with supplier are very important in JIT. According to Bryan (2002), strategy nowadays has to align itself to the fluid nature of this environment. It must be flexible and adaptable enough with outside and internal conditions. During the disastrous earthquake or tsunami in Japan, factories were destroyed and power supplies were disrupted for months, many companies stop their production due to insufficient raw materials, they don’t have supplies for production because the shipment process of the raw materials can’t be done. Just in case the companies have raw materials stocked in their inventories, they can still continue producing goods.
Advantages of using JIT
Firstly, JIT makes production operations more efficient, cost effective, and customer responsive. It can also reduce the cost and burden of housing and managing idle parts. Dell’s spokesman stated “With our pull-to-order system, we've been able to eliminate warehouses in our factories and have improved factory output by double by adding production lines where warehouses used to be“ (Broyles et al., 2005). Furthermore, this strategy helps prevents manufacturer from being stuck with inventory that may become obsolete. Companies can minimized their investment in raw materials and finished goods inventory, which allow them to optimize their transportation and logistics operations. It can also leads companies to lower their costs and inventory, reduce waste, and improving product quality.
Disadvantages of using JIT
Aside from the listed advantages, JIT does have some disadvantages. This approach is very interdependent; manufacturer relies heavily on the raw material suppliers. If the raw materials are not or lately delivered, it can affect production. JIT processes can be quickly disrupted by labor strikes, stock outs, and port lockouts. During some period of the month, such as holiday seasons, manufacturing companies that don’t have stock in their inventory will be forced to halt their production because the raw materials can’t be shipped. In addition, companies that apply JIT can’t make custom products for their customers because this system respond best to mass produced and highly automated production items. Communication plays a crucial role in JIT, if there is a miscommunication between manufacturer and supplier, production will be totally ruined.
In conclusion, Just-in-time (JIT) can be very effective in some cases, but not in other cases. It depends on the type of products the manufacturer produced. The main important point of using JIT is the reduction of cost in controlling waste and inventory, but simple problem such as miscommunication can cause a fatal loss to the manufacturer. It all depends on the company whether they want to use JIT or not. If you are a manufacturing company will you use this system? J
Sources:
Garrison R.H, Brewer P.C., Noreen E.W., Cheng N.S., Yuen K.C.K. (2012). Managerial Accounting: An Asian Perspective. New York: McGrawHill
Jquinn, M. (2011). Just in case or just-in-time?. Martin's Accounting Blog. Retrieved from http://martinjquinn.com/2011/06/02/just-in-case-or-just-in-time/
Bryan, Lowell L. (2012). Just-in-Time Strategy for a Turbulent World. Inc. Retrieved from http://www.inc.com/articles/2002/06/24344.html
Broyles. D, Beims. J, Franko. J, Bergman. M . (2005). Just-In-Time Inventory Management Strategy & Lean Manufacturing. Academic Mind. Retrieved from http://www.academicmind.com/unpublishedpapers/business/operationsmanagement/2005-04-000aaf-just-in-time-inventory-management.html
0 comments:
Post a Comment