Joshua B.

Resus July 26, 2019

BSA-2 A22

What is Just-In-Time inventory management?

By Michael Field
December 2, 2018
A relatively new (and increasingly popular) management system is called Just-In-Time or JIT. That
approach relies on a scheme in which company suppliers deliver their products directly to the company
production center in small quantities but more frequently – they deliver just the products needed for
current production. In fact, the products arrive “just in time” instead of being sent to storage first and
then sent to a producer when they are needed.
Honda implements Just-In-Time inventory management system very effectively. In addition to the
agreement with Donnelly about supplying its American plants with mirrors, Honda cooperates with
independent suppliers of stereo loudspeakers, seats, and dozens of other different parts. Each supplier
delivers parts to a Honda plant three times a day, and each delivery goes directly to the assembly line
and is used immediately. The advantages of the system are obvious: the producer does not have to
maintain large stocks of necessary parts and the potential damages are minimal. The system is useful
for the suppliers as well: they do not have to maintain the final goods inventories because they are
shipped to producers immediately after being made. They can also make an exclusive and long term
deal with supplying companies.
Many companies adopted the Just-In-Time system that was originally developed in Japan. For example,
an important ingredient of Harley-Davidson’s success in re-mastering the heavy motorcycle industry
was the adoption of JIT system.

Strengths of JIT inventory management

There are lots of advantages of incorporating Just-In-Time inventory management in a company. If
there is a good coordination with suppliers, the company will certainly have benefits from JIT, and it
will be reflected with more efficiency in production operations and will result in inventory and cost
control, so it will also have positive impact on customers’ expectations.
Through successful JIT management, companies will prevent the risk of being stuck with inventories
that may become obsolete. Some researches show that some companies reduced their supply by more
than 50 percent by implementing Just-In-Time inventory management. It means that those companies
reduced the costs of maintaining inventories and, at the same time, the supplies were not threatened.

Weakness of JIT inventory management

Just-In-Time inventory management also has weaknesses. The biggest problem in JIT is dependency.
If a supply chain is not well interconnected or something breaks anywhere, it may have negative impact
on supplies, and the product or the service will not be delivered on time. Any problem will have a chain
of consequences for other companies relying on the one having troubles. These problems could be
caused by labor protests, strikes, interruptions in the production line, bad communication among
supplying partners, fluctuations on the market, and many others.
JIT might be beneficial, but, as with any approach, it has to be implemented wisely, and management
should be aware of the possible consequences of this approach.
http://www.financeinanswers.com/what-is-just-in-time-inventory-management