9.2 THE STRATEGIST IN YOU: Reducing Inventory, Minimizing Waste, and Responding to Your Customers

SHARED FROM:

(SHORT NOTES FROM STRATEGY TOOLS:

Manufacturing and Operations at http://www.mindtools.com)

 

Just In Time (JIT)

Holding a lot of items in inventory means you're locking away a huge amount of cash unnecessarily.  Items can be lost, stolen, damaged, obsolete, or deteriorate.  It also occupy space, which could otherwise be devoted to operations.  All of this represents financial loss to the business.

If items are ready just in time, it will not be sitting idle and taking up space.  However, there is a need to tightly control your manufacturing process so that parts are ready when they’re needed.  With JIT, organization can be very responsive to customer orders.

The key benefits of JIT are:

·         Low inventory

·         Low wastage

·         High quality production

·         High customer responsiveness

By using JIT for inventory and product handling, companies can cut costs significantly.  Inventory costs usually contribute heavily to the in manufacturing organizations.  By minimizing the amount of inventory held, space can be saved, increase availability of cash resources, and the waste from obsolescence can be reduced.

To facilitate a JIT approach, there’s a need to have a variety of systems in place.  The most notable is a Kanban, a Japanese approach to ensuring continuous supply of inventory or product.  Kanban gives visual signals that indicates the time to replenish stock and possibly reorder.

JIT also exists in concert with continuous improvement systems such as Total Quality Management and Six Sigma.  By applying JIT, production processes are continuously being monitored.  Thus giving the opportunities to make production process smoother and more efficient.  JIT can be spread throughout the organization, and it can have an impact on many areas through improvements in processes.

When using JIT, it is necessary to build strong ties with the supply chain as it will ensure that to the supplies needed will be available.  A secure source of supplies will ensure continued improvements in the production and inventory systems which in turn helps to increase responsiveness to customer demand such as:

·         When production need to be ramped up, you can be confident knowing your suppliers will help you.

·         When customers demand a newer technology, product switch can quite easily be done, without worrying about writing off a large stock of obsolete supplies and finished goods.

·         Ability to meet changing customer needs more quickly.

·         Simpler to manage custom orders.

·         Allowance for last-minute changes.

·         Allows company to get the right products to the right customers at the right time.

·         Give a huge competitive advantage.

·         Helps save a large amount of money.