Just-In-Time is a business strategy aimed at increasing production efficiency. It is designed to increase return on investment by reducing costs associated with keeping inventories used for production. It assumes that keeping unused inventories during production is wasteful and decreases production efficiency. Just-In-Time is presumed to be a strategy that practices the philosophy of the right materials, at the right time, at the right place and at exact measurements of every material involved in production. In manufacturing, the Just-In-Time strategy implies that parts of a unit are manufactured when they are specifically needed.
History of Just-In-Time
The Just-In-Time strategy emerged from Japan where some firms used it as a means to influence effective production processes. The pioneering firms of this strategy intended to design a production process where parts of a unit were separately produced. Each part was to be produced when its need arose during the process of developing a unit. Its early success in Japan prompted other firms from all over the world to adopt it and in recent years, it has grown to be one of the most popular strategies for production firms in the modern market.
Benefits of using Just-In-Time
The Just-In-Time strategy has been observed to be benefitting businesses in various ways. For instance:
- This business strategy allows an efficient flow of goods from warehouses to shelves. Businesses applying this strategy generally have a faster production rate when compared to those applying other strategies.
- Another of the benefits of this strategy is that it enhances the reduction of set-up time in production. This strategy incorporates a tool referred as SMED (Single-Minute Exchange of Dies) which is intended to eliminate inventory change-over time. The Just-In-Time strategy greatly influences waste elimination for firms that apply it.
- Apart from ensuring proper use of inventories and other production materials, this strategy allows employees with multiple skills to be effectively used in fostering the agenda of a business.
Limitations of Just-In-Time
There are some limitations that have been observed in the application of the Just-In-Time strategy. For instance:
- This strategy is not effective in shielding the consumers and suppliers to the firm from supply shocks. Because production is intended to be conducted depending on the current demand, suppliers only deliver supplies when they are needed.
- This strategy generally discourages stocking of inventories and in instances when supply prices are affected by inflation, the firm fails to effectively project its profits and revenue that it can generate. However, in recent years, the Just-In-Time strategy has devised some philosophies intended to shield it from instances of an unpredictable market.