The Just-in-Time method is basically a system of providing each process what is required, at the time it is required and in the amount needed .
Provider
Customer
Initiator
Examples of businesses that utilize the Just-In-Time method are:
Ford Motor Company
McDonalds
Toyota Motor Corporation.
Harley Davidson
Dell
General Motor Company
Amazon.com
The Just-in-Time method has proved beneficial to businesses who adopt it. Therefore, I attempted to conduct a research on the advantages of Just-in-Time and they are as follows:
Advantages
The Just-in-Time method is able to reduce storage costs as businesses only need to buy the raw materials or components they require for the current tasks and this in turn reduces the amount of money tied up in inventories. There is also a reduction in storage space which constitutes to savings in rent and insurance costs. For example, Hewlett Packard decreased the value of stock held from $670,000 to $ 20,000.
The probability of inventories expiring and becoming outdated is less.
The Just-in-Time method prevents the build-up of unsold finished products that often occur with unexpected changes in demand.
There will be less wastage and an increase in customer satisfaction due to less defects as less time is spent on inspecting and re-working the product as the emphasis is on getting the work right the first time round.
Competitive Advantage
This method aids in creating a business which is more flexible that has better communication with suppliers and customers ant therefore enabling it to respond more quickly to the demands of the market. This, in turn promotes customer loyalty.
Improved Job Satisfaction.
This method also requires employees to participate more actively in the production process. This will aid in increment of skills, greater responsibility and cultivate an interest in the whole company as opposed to only their team or department. This also boosts self-confidence and aid in decreasing staff turnover ,reducing recruitment costs.
Higher Productivity
The Just-in-Time method is an excellent method of discipline for businesses as it forces businesses to consider how every division of the production process works and search for methods of reorganizing working practices. For example, Hewlett Packard reduced their inventory holdings and as a result, the company was able to reduce the assembly line by more than 95%.
Dell Computer Corporation has benefited greatly as a result of adopting the Just-in-Time method as shown below:
Dell has created value for their customers by integrating the entire value chain which creates visibility and fosters a stronger relationship between Dell, their customers and their suppliers.
This method has given Dell a time-to-market advantage .Dell is able to obtain for their customers the latest , most advanced Pentium 4 and all-related operating systems 85 days faster than Hewlett Packard.
Hewlett Packard has 90 days of inventory compared to Dell's five days of inventory.
Dell only starts ordering components and assembling computers and laptop when an order is booked as opposed to Compaq and IBM machines which are kept on the shelves in shops for two months. This has aided Dell in saving money as the price of personal computers parts can drop drastically in just a few months. By ordering just before assembly ,Dell opines that their computers,on average,are 60 days more new than IBM and Compaq computers sold at the same time. Therefore, it can convert to 6% in profit advantage in components only.
Dell has an economic advantage due to the minimal amount of stocks it retains as the value of components and manufacturing materials depreciates about 1% per week.
Since Dell retains a minimal amount of stock ,they do not have to fund raw materials, finished stock inventory and work in process.
Dell has altered the just-in-Time system so that if a customer orders a customized personal computer at 9 am through the internet, can be on its way to the customer via a delivery truck by 9 pm.
Dell's low cost production system permits Dell to under price it's rival by 10%-15%.
Dell's decision to adopt the Just-in-Time method has resulted in cost savings, higher revenue, customer satisfaction and limited wastage.
Toyota Motor Corporation, which is known as the pioneer of just in time have benefited immensely by adopting this strategy as shown below.
Toyota is entering the market to offer customers custom-made vehicles with minimal waiting period.
Toyota's aim is to decrease the average time between dealer order and delivery from Toyota's North American factories from 70 days to 14 days and if accomplished will not only increase customer satisfaction but reduce dealer inventory costs as well as the need to spend on rebates for slow-selling vehicles.
In its effort to provide customized orders and decrease the average delivery time, Toyota has created they own software that connects dealers to factories and factories to suppliers.
Toyota has also altered their distribution process to offer custom-made vehicles in a just in time process. Toyota sends finished vehicles to sorting docks where they are sorted out by region and this reduces delivery time by two days. This has resulted in cost savings for Toyota.
Toyota and Dell have obtained competitive advantage within their industries due to the utilization of the just in time process .
However, the Just-in-Time Method has its drawbacks as well and they are as follows:
There is no room for error as only a minimal amount of stock is kept for fixing faulty products.
Suppliers are heavily relied on for production, therefore if the products are not delivered on time, the entire production schedule will be delayed.
Businesses will find it difficult to meet unexpected orders as all products are made to meet actual orders.
The implementation through Just-in-Time procedures could prove costly and difficult to introduce as it requires a major revamp of one's current business systems.
The Just-in-Time method can be risky for certain businesses and susceptible to the supply chains in instances such as unexpected production interruptions, labour strikes, fluctuation of market demand, lack of communication downstream and upstream of the supply chain, supply lines interruptions and stock outs.
Communication is pivotal in a Just-in-Time supply chain, therefore if there is a breakdown in communication, the businesses will not be able to obtain the correct amount of supplies required to ensure the smooth running of the just-in-time system. As technology is vital in a just-in-time system, the dependence on technology can prove detrimental to businesses as it could lead to breakdowns in the information technology systems that could prove costly to work around .Businesses must return to the manual or pencil and paper methods of calculating supply/inventory demand which could prove time-consuming.
Toyota , a company which utilizes the Just-in-Time method can definitely attest to the benefits of this method but Toyota has also experienced the downside of this method as narrated below.
On one Saturday, a fire at Aisin Seiki Company's plant in Aichi Perfecture halted the delivery of all break parts to Toyota and by Tuesday, Toyota was forced to shut down all of its Japanese assembly line.By the time the supply of break components has been restored, Toyota had lost an estimated $ 15 billion in sales.
The Just-in-time has aided numerous companies in various aspects but there is always room for growth. The just in time system has evolved over the years and the result of the evolution is the just in time II.
The Just -in-time II is a customer-supplier partnership which was the initiated at Bose Corporation and practiced by main businesses and their suppliers. This method utilises systems integration, which searches for ways to improve coordination between various functional areas and bridges the gap between customers and suppliers. Just-in-time II the suppliers has a full-time employee within the organization of the customer working as a purchasing department employee for the customer's business. This method has hugely impacted the logistics and the administration of the purchasing function among other things.
The lead times decrease are greater with Just-in-time II than Just-in-time in the aforementioned areas.
The benefits of Just-in-time II are numerous and they are as follows.
Promotes more visibility throughout the supply chain which in turn reduces costs and increases responsiveness which are the primary aims of supply chain management.
Decreases administrative costs for customers and suppliers because the costs of purchasing costs are not all on the customer and the supplier obtains all the business from a particular customer.
Allows simultaneous engineering and value analysis to take place on an ongoing basis and not just during sporadic sales calls because suppliers are always present.
In conclusion, just-in-time management has greatly benefited it's adopters and the pros definitely outweigh the cons.Therefore, it is a wise choice for businesses to adopt this method. However, this method only will not suffice, businesses must adopt other methods that will be able to work concurrently with the Just-in-Time method. This is necessary as in today's competitive business environment, businesses should be innovative and should constantly strive for improvement. The introduction of the Just-in-time II is a positive step towards improving the just in time system.
