The Benefits of JIT Production

Traditionally manufacturers have tried to forecast the demand for their products in the future in order to smooth out production to meet the anticipated need. They have tried to keep their employees as busy as possible in order to maximize profit and efficiency and reduce operating costs but this approach has a number of significant drawbacks that should be re-examined. These drawbacks include:

• Large inventories;
• Long production times;
• High defect rates;
• Production obsolescence;
• Inability to meet delivery schedules; and
• High costs.

Just-in-time (JIT) production is a new way of looking a manufacturing which seeks to cut manufacturing time and reduce waste for a smoother process and more efficient business. This production and inventory control system emphasizes purchasing materials and producing units only as there are needed in order to meet consumer demand. In this case the manufacturing system’s inventories are reduced to a minimum keeping operating costs and storage costs low. This type of approach can be effectively applied in three ways:

• 1. Raw materials
• Keeping some inventory of raw materials provides insurance in case suppliers are late with deliveries.
• 2. Work in progress:
• Inventory is maintained at a certain point in completion in case work stations are unable to operate due to breakdowns.
• 3. Finished goods:
• Small inventory maintained in order to accommodate unanticipated fluctuations in demand.

There are many benefits to choosing one of these methods including:

• Access to funds previously tied up in inventory or storage space;
• Access to space previously tied up with inventory storage;
• A reduction in throughput time ultimately increasing potential output and guaranteeing a faster response to customers; and
• Reduced defect rates resulting in fewer wasted materials and greater customer satisfaction.

There are also, however, some disadvantages which must be taken into consideration. First, it will require a complete overhaul of your business systems which is difficult and expensive to introduce. Secondly, it opens your business up to a number of risks associated with the reliability of your supply chain. For these reasons it may not always be a feasible option in every aspect of your business. There is one place, however, where you can relatively safely rely upon Just-in-Time production and that is your packaging. Because supplies are often limited and readily accessible and production time is not excessively long, it is easy to switch the packaging side of your business over to this type of inventory control system. Simply place an order for your business packaging as you require it and you will save significant amounts of storage space and overhead costs you never noticed.