Essentials of Just In Time Inventory Management
By: Breanna Huff |
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Many companies deal with inventory every day, especially when you are dealing with manufacturing companies. Inventory can be the mostly costly area for businesses when managed poorly. Businesses thrive by finding the areas to increase quality, improve efficiency, and reduce costs. Within manufacturing you have all your raw materials and you have to record all direct materials going into your manufactured products. Therefore one system created to improve quality, efficiency, and reduce costs was just in time theory.
Just in Time Theory
Just in time inventory is a process created to manage and increase efficiency within manufacturing companies. It is the process created to answer the long time issue of inventory management within companies. "Just-in-Time inventory system focus is having 'the right material, at the right time, at the right place, and in the exact amount' Ryan Grabosky" (Wikipedia). In order to achieve this process effectively you have to have some advanced technological processes in place. You need to have engineering processes behind just in time so that you can have your inventory at the exact time you need it.
Pros
Using just in time, you have a reduction of storage space, opening up space for more manufacturing and production. You don't have to worry about expired inventory. You are able to cross train employees on a production line, increase flexibility of your employees and eliminated possible boredom. This also accommodates for shifts in demand within your company. Also there could be possible reduction of costs. (Wikipedia and John T. Williams)
Cons
Cons of just in time theory are it can be expensive to switch your inventory process too. It is a lot of upfront costs to establish the system within your company, and then there is a possibility it could fall through within your company. Also with vendors and deliveries it could increase costs for your company if it is not being performed correctly. It can be a very complex system. You are very reliant on your supplier, putting more power in the supplier. (Wikipedia and John T. Williams)
Real World Example
My real world example of just in time working as a process within a manufacturing company is the BMW plant. This example and detail comes from a video I watched within my operations management class. It could possibly be from McGraw Hill, however I am unsure, but it is not my own research. BMW uses just in time inventory management for their car seats. When are car is being manufactured it flows around a production line. When the body of the car is complete and pasts a certain point in the production line, the computer systems sends a job order to another plant near by that produces the seats for the BMW. The seat plant receives the order via their computer system and as soon as they receive the order they know they have an hour to complete the seats and ship them back to the BMW plant at the exact time they need it. As the car finishes the rest of the assembly line and reaches the point when they need the seats, they are taken from the truck and inserted into the car. This keeps their assembly line efficient and improves quality because allows the plant to focus on what they are good at. That is the manufacturing of a beautiful car.
In conclusion, just in time theory was created as a solution to the processes of inventory. It is a creative way to increase efficiency and quality within your company.
Breanna Huff is a Business and Accounting Specialist at Whitworth University
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