Just-in-time manufacturing systems have been adopted by various industries and work by producing goods in small batches and only when they are needed. Then, you create a production flow to minimise this waste and maximise efficiency. Toyota Motor Corporation utilized the same principle in the 1970s and called it the Toyota Production System.

Key Takeaways

• On-demand production means companies must find suppliers that are willing to fulfill small, frequent orders on very short notice, which often means using local suppliers to reduce shipping time and expenses.
• Vanderlande, which has a strong presence in airport logistics, said it recognizes the evolving trends in the sector and sees tremendous potential for sustained growth.
• It helps you accurately forecast demand, optimise stock levels, and reduce waste.

They went through the motions of assessing risk, but did not adjust their inventory profiles and were left empty handed during the pandemic. In a world where adaptability and efficiency are paramount, JIT manufacturing remains a powerful approach. However, without the right tools and technology, companies may struggle to reap its full benefits. By leveraging Propel Software’s comprehensive platform, manufacturers gain the agility, data accuracy, and real-time insights needed to build a resilient JIT system.

Just-In-Time vs Lean Manufacturing

It took over a year to correct the inventory overages, meaning the traditional peak season did not materialize in 2023, as firms continued to run inventories down. While just-in-case has value, that’s not to say that companies should completely abandon just-in-time as inventory levels remain elevated. A modified version of just-in-time can be beneficial where companies only stockpile certain vulnerable items to avoid fallout gambling winnings from potential disruptions. Clearly consumers still have an expectation of high variety, rapid delivery and reasonable cost that defined just-in-time supply chains. A low inventory figure on the balance sheet means a higher inventory turnover ratio, making the company look more efficient. The inventory turnover ratio is a metric used in corporate finance to estimate how efficiently a company is selling its products.

Ensure effective internal communication

This led to speculation that firms should move away from JIT management and toward a just-in-case (JIC) model. The subsequent rapid buildup of inventories then resulted in the opposite problem in 2022. Inventories spiked up to near-record levels, and measures needed to be taken to reduce inventories, leading directly to the contraction of U.S. gross domestic product (GDP) in Q2 of that year.

Disadvantages of Just-in-Time Inventory

Since the 1970’s, Toyota are renowned for their pioneering use of JIT principles, fathered by Taiichi Ohno, which form the core of the Toyota Production System. This system has become a benchmark for lean manufacturing techniques worldwide. The adoption of Just-In-Time manufacturing has increased significantly over the past few years, driven by the need for companies to become more efficient and responsive in a highly competitive and volatile global market. Therefore, the longer that it takes from manufacturing to final sale, the more costs that are incurred by the importer. Dell’s computer manufacturing demonstrates the effectiveness of JIT in the technology manufacturing sector. The JIT model at Dell involves a sophisticated supply chain system where components are procured and assembled only as needed to produce computers with a high degree of customisation.

Just in Time production also leads to better supplier relationship management. Suppliers and manufacturers must work together to ensure that materials and components deliveries are on time, based on the production schedule. This close collaboration helps build trust and mutual understanding between manufacturers and suppliers, leading to more effective communication and problem-solving.

If a business is not looking to produce a backlog of goods for sale, it need only purchase those materials required for items that have already been ordered, leading to a reduction in COGS. One of the main differences between JIT manufacturing and traditional manufacturing involves production and storage processes. In JIT manufacturing, production occurs only on customers’ orders, which helps to reduce waste and increase efficiency. In conventional manufacturing, goods are produced in advance and stored in inventory. Just in Time manufacturing borrows heavily from the “lean manufacturing”  philosophy.

As a result, Japanese industrial engineer “Taichii Ohno” invented this inventory system in the 1970s, wherein raw materials would be appropriately utilized and less wasted. The just-in-time concept is widely employed in manufacturing and production units. It involves production scheduling according to demand without rushing the process. As a result, firms can minimize wastage and reduce warehouse costs by producing only necessary goods in response to demand, automatically reducing the holding cost in a just-in-time method. The JIT inventory system contrasts with just-in-case strategies, where producers hold sufficient inventories to have enough products to absorb maximum market demand. The result of ordering supplies only as needed is lessened inventory costs due to a lesser need for storing raw materials.