The Just-in-time (JIT) manufacturing process isn’t a new buzzword. An inventory management method which involves accepting continuous stocks to reduce inventory, its inception dates back to the 1970s. It was developed and immaculately implemented by Toyota within its manufacturing plants to meet consumer demands efficiently with minimum delays. This radical approach was different from the traditional one which relied on overstocking the inventory just in case a customer demand arises.
For producers or manufacturers, the profit margins are directly impacted by speed-to-market and the production cost. Implementing JIT means businesses can save costs and also reduce the flow time in the manufacturing process.
However, businesses often want to know what more value can JIT manufacturing add and if reducing safety stock can lead to additional risks. So, let us understand how implementing and optimizing the JIT manufacturing process can help your business!
How Just-In-Time Manufacturing Trumps Traditional Manufacturing
Traditional manufacturing is also referred to as just-in-case (JIC) manufacturing. Earlier, the manufacturing process involved large batches. In this scenario, the sourcing team used to estimate the forecast by analyzing historical data and trends (even though some of the data did not provide any actionable insights). There was a scope of error in such forecasts and that is why large quantities were ordered from suppliers. Procurement teams believed that large quantities gave them the power to negotiate for cost savings and also improved the assembly production line.
However, this approach created some bottlenecks—higher costs due to a large number of safety stocks and longer lead times.
On the other hand, JIT manufacturing also utilizes background data but to help manufacturers and suppliers follow a model that redistributes risks. This ensures that the purchasing department is the only entity responsible. Min/Max is one of the most popular methods used to maintain stock within a required range and involves complete visibility and clear communication between the parties involved.
How Can You Implement Just-In-Time Manufacturing Process
Like any other project, you will need to work on a business case to propose the JIT manufacturing process. To begin with, you need to do the following:
- Identify your current warehousing expenses
- Determine the percentage or amount that you can reduce or save
- Project JIT as a way to reduce warehouse carrying cost
The next step is to identify your technological or digitization capabilities. Maintaining a reduced inventory would require your team to do the following:
- Forecast for the demand
- Effectively communicate with the suppliers even when exceptional requirements arise
- Fulfil orders quickly
Ensure your team is well equipped with the right digitization tools to manage these functionalities efficiently.
One of the critical steps is to assess your suppliers and determine if they often delay the supply of goods, requiring you to keep safety stock. Usually, just-in-time manufacturing relies on locally sourced goods or suppliers to have more flexibility and agility in fulfilling demands.
Finally, to make a strong case for implementing the JIT manufacturing process, consider your industry landscape, digitization efforts, suppliers, and employee engagement.
How Can You Make JIT Manufacturing Successful in Your Business
Leaner operations and effective risk management and mitigation go hand-in-hand. That is why to ensure your just-in-time manufacturing process is a success, you should be better equipped to handle risks, pay attention to detail and maintain transparency for a smooth workflow.
To make your JIT success, consider the following:
- Source high-quality goods: High-quality will ensure that there are fewer defects, fewer returns and improved order fulfillment, leading to customer delight.
- Ensure order/load consistency: You can plan or level your orders so there is a stable, evenly scheduled delivery. This can save you from relying on large orders that when delayed can impact your production process significantly.
- Employee commitment: It is important your team is on-board and committed to the objectives of the just-in-time manufacturing process as it has a direct impact on quality and goal achievement.
Benefits of Using Just-in-time Production You Didn’t Know About
JIT production can help businesses with lean management processes, better utilization of resources, and other competitive advantages. So, let us dive in!
- Creating a pull system: With JIT, you can create a pull system for your production process, introducing a lean manufacturing strategy. This allows you to prioritize current demand and the suppliers’ orders or produce goods based on the existing sales orders in a specified quantity and timeframe.
- Eliminating wastage: Since with the implementation of a pull system you only manufacture goods based on the current demand, this means you can easily eliminate waste from your production process including waste of time, waste from overproduction, transportation waste, waste from processing, waste from product defects, inventory waste, waste of motion.
- Getting complete visibility: Most often, teams use Kanban boards in the JIT methodology so every member is able to get complete visibility of their goals/objectives. This ensures that everyone has a broader view of the tasks and what is the expected milestone.
- Ensuring smooth/uninterrupted workflow: When your team has complete visibility of the process and objectives, they are better equipped to detect bottlenecks to ensure smooth operations.
- Improving productivity: JIT production process enables the team to analyze the current processes to find ways for improvement (also known as kaizen). Since your team focuses on the current tasks and milestones, there is an improvement in productivity as well.
Although just-in-time manufacturing offers many benefits, businesses should keep the following things into consideration.
- Unpredictable or unforeseen situations (such as a pandemic) can affect the supply chain.
- Make sure your forecasts are reliable and accurate to avoid high costs due to shortages or surplus.
- Determine if your commodity costs vary a lot as it may affect your profit margins. If the costs are relatively consistent, your profits will be too.
- When practicing min/max strategy, make sure there is complete visibility to ensure proper inventory levels and execution of emergency orders.
For businesses to reduce their reliance on safety stock and cut costs, it is important to have access to the right tools that allow you to access real-time inventory data, supplier information, and order updates so you can respond quickly to current demands. With the right SaaS solution, you can not only maintain a central repository of documents for easy and quick access but also enable smooth communication and workflow among different stakeholders to achieve leaner operations and productivity in your JIT manufacturing process.
To know more about how Induzbuy, a leading provider of smart procurement management solutions can help your business optimize the just-in-time manufacturing process, speak to us today!