JIT: Just In Time is a fairly straight forward lean operations supply chain concept. Throughout the manufacturing and distribution process the focus is on reducing inventory related expenses.
“JIT – Just In Time : An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.” (source: www.investopedia.com)
In Speaking Business term when you need something it arrives then not before, not after, but just in time to get the job done. There are some schools of thought that you have to be a large operation to benefit from a just in time supply chain system. I would challenge that assumption and say that production on any scale can find benefits in the implementation of the principles from a just in time supply chain strategy.
Smaller organizations can take advantage of just in time principles. To do so takes a well-defined plan and far greater discipline than a larger organization. The discipline required is tedious, but when applied to supply change the cost-benefit ratio is tremendous especially on a smaller scale where every nickel counts.
I’ve had the opportunity over my career to implement just in time strategies for both large international operations and for small independently owned, made to order production. On the international scale the logistics component becomes extremely complex and often the perceived benefits can be eliminated in additional “hidden” costs for the process. For the small operator there is actually the ability for greater transparency in the process to avoid some of the “hidden” costs associated with a JIT plan.
One of the last international projects I worked on the manufacturer, thanks to NAFTA, had moved short-run assembly manufacturing to Mexico. The challenge they were having was in JIT execution due to several factors the least of which was the fact that a great deal of their small parts inventory was located in a couple of different plants on the east coast, supply materials were spread across U.S. operations, and sub-assemblies were cast in a mid-west plant. So logistic costs were eating up a big portion of their profits. Then they had inventory control issues across the border due to theft and product damage. We were able to create an inventory control system that tracked individual parts and pieces from order and manufacture through delivery and installation. We reconfigured the logistics routing and load configurations to maximize shipping weights and scheduling. The final major component was to revise production forecasting to create greater efficiencies in the process to bring the cost-benefit ratio back in line with original expectations.
The smallest manufacturer I have ever worked with to implement the principles of just in time philosophy was a small custom order manufacturer. Basically a one-man artisan shop that utilized part-time, contract labor when needed. The complete antithesis of the global operation. The bottom line determined if this individual’s family earned revenue for the month. We were able to develop a system of vendor supported initiatives that created a successful just in time program and created a built in economy of scale that created a substantial profit increase for each order produced. In this case nickels counted and we were able to create thousands of dollars in additional revenue without any increase in revenue generating sales by simply utilizing just in time supply chain philosophy.
So at the end of the day JIT philosophy not only works for the little guy, but if applied properly can have an outstanding impact of business profitability.