traditional production systems using push vs pull systems B u s i n e s s F i n a n c e
Explain the Just-in-Time (JIT) inventory management approach. Research and select a company of your choice and discuss how JIT inventory management can be used effectively.
The requirements below must be met for your paper to be accepted and graded:
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Just In time Lecture:
Just in Time (JIT) is a process aimed at increasing value-added and eliminating waste by providing the environment to perfect and simplify the process. The JIT concept was initiated in Japan by Toyota. With a JIT system, a company starts manufacturing/purchasing once the customer orders the good, effectively making zero inventories. In other words, in a JIT environment materials are purchased and produced as needed. The whole idea is based on the phrase provide the goods just in time as promised when the order is placed by the customer. The opposite of the JIT production is known as JIC (Just in Case) system where it produces goods for inventory with the intention of having goods just in case a customer places an immediate order.
The whole concept of the JIT is differentiated from traditional production systems using push vs pull systems of production. The push system of production pushes materials to the next stage of the production irrespective of whether time and resources are needed at the next level of production creating inventories at each level of the production flow. The traditional manufacturing organizations adopt push systems where they produce for inventory and work in progress. In the pull system of production, is materials are pulled by next level of production only when it is signaled or required by the next stage of production. This drastically reduces the inventory held as it does not keep any work in progress. JIT concept is built based on the concept of pull production which eliminates the total inventory.
The main benefits of JIT have been well documented within the literature. A carefully planned implementation of JIT can directly provide increased teamwork and employee involvement, as the organization works together to find areas of waste to target and work out ways to reduce waste in that area. This results in a simplification of the inventory management system, as well as business processes involved in inventory management. Supplier relationships and data regarding the business are used to identify specific areas where inventory improvements are required.
- Lower stock holding means a reduction in storage space which saves rent and insurance costs
- Areas previously used, to store inventories can be used for other more productive uses
- As stock is only obtained when it is needed, less working capital is tied up in stock
- Funds that were tied up in inventories can be used elsewhere
- Throughput time is reduced, resulting in greater potential output and quicker response to customers
- There is less likelihood of stock perishing, becoming obsolete or out of date
- Avoids the build-up of unsold finished product that can occur with sudden changes in demand
- Defect rates are reduced, resulting in less waste and greater customer satisfaction
- Less time is spent on checking and re-working the product of others as the emphasis is on getting the work right the first time
JIT has many strong points, yet, there are weaknesses as well. “In just-in-time, everything is very interdependent. Everyone relies on everybody else” (Greenberg, 2002). Because of this strong interdependence with JIT, a weakness in the supply chain caused by a JIT weakness can be very costly to all linked in the chain. JIT processes can be risky to certain businesses and vulnerable to the supply chain in situations such as labor strikes, interrupted supply lines, market demand fluctuations, stock outs, lack of communication upstream and downstream in the supply chain and unforeseen production interruptions.
Weaknesses of Just in Time systems include:
There is little room for mistakes as minimal stock is kept for re-working faulty product
- Production is very reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed
- There is no spare finished product available to meet unexpected orders, because all product is made to meet actual orders – however, JIT is a very responsive method of production.
Slack, N., Chambers, S., & Johnston, R. (2007). Operations Management (5th ed.). London: Prentice Hall.
Waters, D. (2002) Operations Management Producing Goods and Services (2nd ed.) London: Prentice Hall.
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