Just-in-time (JIT) manufacturing has been revolutionary for manufacturing and inventory management companies around the globe. JIT strives to maximise efficiency and minimise costs. The concept that underpins the JIT approach is simple, it aims to eliminate waste. Essentially, when inventory is required, it is delivered. The JIT approach differs from other inventory systems, where warehouses build up piles of inventory weeks or months in advance, waiting to be used until there is a demand for that product.
Conversely, JIT works on very low inventory levels and only acquires inventory from the supplier right before it is needed for production or sale. This nearly-instant inventory delivery means that manufacturers place orders in small batches, very regularly. These frequent small orders mean that on-site inventory is kept to a minimum.
There has been a long list of success stories as businesses around the world have implemented JIT systems to reduce waste and decrease costs. Since waste is one of the key factors affecting inventory management, they all sought to minimise this problem in their own way. They achieve their manufacturing needs and still manage to provide quality, timely products to their customers. Let’s take a closer look at some of the businesses who have thrived with the JIT model.
Toyota is one of the quintessential companies that had great success with a JIT model. As one of the first companies in the world to implement it, they recognised raw material delivery was of their main factors affecting inventory management.
Raw materials used to be delivered days, weeks or months in advance at Toyota. Now, with JIT, raw materials are delivered to the production floor after the client has placed an order for the product. This makes Toyota agile and responsive to customer demands. They minimised excess raw materials and as a result, saw a reduction in their waste and costs. Small amounts of raw materials are replenished when they are used and needed again.
The infamous American motorcycle manufacturer, Harley Davidson also had several factors affecting inventory management that were solved through JIT methods. They curtailed their large inventory habits with a leaner approach using the JIT method.
They reduced their inventory by 75 percent and did not have costly inventory sitting around waiting to be used. They were able to be responsive to customer orders with minimal lead time and increase their productivity along the way.
McDonald’s is a household name and their business model has become a global phenomenon. It’s one of the most famous fast food restaurants who have optimised their ordering process with a JIT system. If you go into a McDonald’s you’ll notice that everything required to assemble an order is laid out in a very systematic way. The boxes are lined up waiting to be filled and the onions are chopped, ready to be layered onto the burger. Once the customer places an order for a burger, the burger is assembled right then and there. This streamlines the production and the customer experience. People behind the counter know what they are doing and the people ordering know what they are getting. This level of consistency is a reason why people return to McDonald’s. The JIT system benefits the ordering process and keeps customers happy.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.