For any company that relies on continuously producing products for sale, there are different technologies and methodologies in use to increase efficiency. One of the most effective and popular is the just-in-time (JIT) system.
This system aims to have the inventory to arrive at the assembly site just when it is needed. The concept is simple and effective, with plenty of advantages. However, it does have its own set of disadvantages.
Advantages of JIT
The biggest advantage of JIT is that there is only a small inventory at any one time. For a company, this can help control or lessen the amount of money needed to buy supplies. The smaller investment in supplies results in a lower quick ratio or acid test ratio at any single time.
Having less supply inventory on site leads to a need for smaller warehouse space, too. This space is usually rented by the company, and a smaller space means freeing up money for other expenses. There is also less wastage. Supplies in storage may get damaged, or the product line may no longer need them. A smaller inventory prevents supplies from sitting in storage for too long.
JIT also requires that the assembly line has more control over the processes. The workers can stop production to address a quality issue. They are also responsible for ordering stock when these reach a low supply level. This is an additional load for the line personnel, but it is also liberating and empowering for them, giving them more job satisfaction. They know that they are responsible for doing a good job and that others depend on them.
Disadvantages of JIT
One distinct disadvantage of JIT is the need for planning. Planning is part of every manufacturing process. However, JIT requires that the project take into account the supply chain.
The supply inventory cannot be restocked overnight. The supplier cannot just deliver the item at the buyer’s whim. There should be some lead time to canvass for the best price and ensure that the supply arrives on time. This lead time is included in the production’s project planning. Meticulous planning with the supplier is required to ensure the efficient flow of production.
The workers also have more responsibility. The workers on the shop floor know that when they reach a certain level of inventory they have to request for the next batch, and they should also know how long before that batch is delivered. Inventory restocking is traditionally a task done by the production manager or the plant manager.
Companies must have a manager solely tasked to plan and monitor the supply chain. An executive search should include supply chain management as a requisite for the job. With JIT, there is a mechanism to inform the workers on the floor that they are running out of inventory. This is the trigger to order more supplies. The plant manager or the production manager includes this in the production plans and coordinates with the supplier for its delivery just before it is needed.
JIT is not just a company activity. It also involves the supplier in the inventory and production planning. It involves the shop floor personnel, as well as the plant manager. It is a coordinated effort to increase production efficiency.