Just-in- time production

What is Just-in-Time Production?

Just-in-time production minimizes the time, labor, and materials in a
manufacturing process. It does so by only producing goods as they are
needed. The desired outcome is a streamlined production system that
maintains a minimal amount of on-site raw materials, minimal wait
times in the production process, and small batch sizes. Several
characteristics of a just-in-time production process are:

Daily or hourly deliveries of small quantities of parts from suppliers

Certification of supplier quality, so that no receiving inspections are
needed .The use of kanbans to drive the demand at each workstation
The arrangement of the production area into flexible work centers The
compression of the production area so that in-process goods can be
directly handed off to the next work center in a production flow On-site
inspection of each in-process product from the preceding work center,
so that flaws are discovered at once The use of rapid
machine setups, so that production runs can be as short as one unit
The cross-training of employees, so that they are certified to work on
multiple tasks Production stops as soon as the immediate demand level
has been fulfilled Immediate shipment of completed goods to
customers as soon as an order has been fulfilled
Advantages of Just-in-Time Production

There are several benefits of a just-in-time production system. One is a

drastic decline in the amount of working capital needed, since inventory
levels are quite low. Another benefit is a reduction in the amount of
waste, since inspections are conducted at every workstation, not
allowing defective goods to pile up anywhere in the process. Further,
there is no finished goods obsolescence, since goods are only produced
if they can be immediately sold. In addition, the square footage needed
by the production area is reduced, since the work area is compressed.
There is also a reduced need for materials handling equipment, since
the work centers are positioned so close together that parts can be
manually handed off from one workstation to the next.
Disadvantages of Just-in-Time Production
The main flaw with a just-in-time system is that an interruption to the
system can quickly shut down the process, since there is no buffer built
into the system

What Are the Main Benefits of a JIT (Just in

Time) Production Strategy & ?
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By INVESTOPEDIA

Just-in-time production (JIT) is a business strategy in which a

manufacturer produces each item as it is ordered, rather than keeping
an extensive amount of surplus products on hand. The chief benefit of
the strategy is that it allows businesses to ensure that there is always a
buyer for any item produced, keeping inventories low. If there are no
customers wanting to purchase an item, production stops.
KEY TAKEAWAYS
Just-in-time (JIT) is a production strategy in which a company only
produces an item after a buyer has made an order, therefore keeping
inventories low. Lower inventories make a company look more efficient
and also boosts the return on total assets (ROTA), a key measure of how
well a company uses funds to boost profits. JIT allows companies to
spend less on parts and labor, as well as limit the risk of items losing
value from sitting around too long.

Why Low Inventories Matter

The JIT production process means inventory levels are kept to a
minimum. 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. By dividing
the total cost of goods sold (COGS) by the average inventory over a
given period, the inventory turnover ratio reflects the number of times
the company has sold its total average inventory. A company with little
to no inventory has a much higher ratio than a company with equivalent
COGS expenses that utilizes a more anticipatory production
strategy.High inventory turnover ratios are considered a good sign of
operational efficiency, effective purchasing management, and
productive use of advertising and promotional campaigns aimed at
generating sales. How the JIT
Strategy Boosts Profitability
The JIT production strategy has an important effect on other measures
of corporate efficiency and profitability. Lower inventory means a
reduced total asset figure on the balance sheet, all else being equal.
This translates directly into a higher return on total assets (ROTA) ratio.
The ROTA ratio divides a company's earnings before interest and taxes
by its total assets to determine profit.The asset turnover ratio is another
efficiency ratio that reflects a company's ability to generate revenue by
dividing net sales by total assets. Decreased inventory means a smaller
denominator in both these formulas, leading to healthier ratios across
the board.

JIT Means Lower Costs For Materials and Labor

Apart from the improvement in comparative metrics, the JIT production
strategy is advantageous to a company's profitability in many other
ways. Sales-contingent production means lower costs for both raw
materials and labor. 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. fulfill
orders is likely lower than would be required for full-time production.
On-demand production means fewe depreciating in value if sales take a
downturn, and the risk of losing money if a product becomes obsolete
is virtually eliminated. While many companies must invest capital in
large warehouses to store products for sale, minimal inventory means
almost nonexistent storage expenses. The reduction of these key
production and operational expenses means higher gross and
operational profits, which directly
Benefits Of Just In Time Production
Industry
Benefits of Just In Time Production
Just-in-Time production, popularly known as JIT is a
common business strategy that aims to maximum returns by reducing
carrying costs and inventory. This strategy seeks to improve quality and
reduce waste, bringing an array of benefits in production. Read on and
find out why most companies implement just in time production.

1. Reduces costs
Just in time production primarily helps reduce storages costs.
Many companies have come to the realization that buying only the
components or raw materials they need, improves cash flow.
Similarly, storing fewer finished produce helps reduce space
requirements. The same case also applies to retail; suppliers have
to sign up to deliver in time to reduce costly storage requirements.

2. Improves productivity
While it might seen a disheartening prospect, re-organizing
production geared towards implementing Just in Time work can help
improve discipline for companies that desire to excel. This way, a
company can evaluate how to improve production by looking for
effective ways of restructuring working practices.
3 . Better competitive advantage
Just in Time production also helps improve the flexibility of your
business by improving communication between suppliers and
customers, in order to react promptly to competitive market demands.
Many companies attest that increased customer satisfaction is evident
after adopting this way of production. In other words, implementing
Just in Time in production can help move your business towards a
new level.
4. Eliminates misconception
This system of production improves effective communication between
suppliers and the business, specifying the product required as well as the
expected quantity and time of delivery. By doing so, any
miscommunication or misunderstanding is done away with.

5. Minimizes waste in production

Just in Time in production also aims to reduce waste in production as
well as improving quality in production.