Pros and Cons of "Just in Time"

Baylor's online Master of Business Administration program includes a course in Manufacturing and Service Operations which examines various concepts linked with successful operations practices in today's firms. Of these, one of the most important is "Just-in-Time" (JIT) manufacturing.

The fundamental JIT model was first developed in Japan in the 1970s as a way for organizations to become leaner and more profitable. The concept behind this radical new approach to manufacturing was simple: produce only what is needed when it is needed.

Taiichi Ohno, the father of the Toyota Production System, advanced the basic model described by Henry Ford in his 1923 book, My Life and Work. In it, Ford wrote, "We have found in buying materials that it is not worthwhile to buy for other than immediate needs." Ohno is credited with two major achievements in developing the JIT model into what is widely applied today:

  1. Identification and Elimination of the 7 Categories of Manufacturing Waste:
    • Overproduction: The manufacture of excess product.
    • Waiting: Delays in the flow of production.
    • Transportation: Unnecessary moving of product between processes.
    • Inappropriate Processing: Overly expensive equipment.
    • Excessive Inventory: Resources wasted through costs of storage.
    • Unnecessary Motion: Resources wasted in unnecessary physical work.
    • Defects: Wastes of time and money in inspecting and quarantining inventory.
  2. The "Kanban" System: Otherwise known as the "Supermarket Method," this system uses product control cards to automate reordering of only the quantities of parts needed to carry on with production.

To successfully implement JIT, an organization requires advanced technologies and the highly trained personnel to use them, flexible resources, reliable suppliers, steady production, high quality machines that do not break down and can be set up quickly, and organizational discipline. Many companies meet these demands, while many others fall short. Just-in-Time is a concept that is easier explained than executed.

Advantages of JIT

This model has the potential to dramatically reduce waste, lower costs and improve profitability. Organizations that avoid the seven categories of waste can operate with leaner staffs, less space and fewer resources. Because they reduce their investments in inventory, they have more capital available for investment and growth.

The financials of JIT companies are far more attractive to investors, who can see that they are organizationally better managed, more efficient and capable of producing outsize returns on investments. This results in inflows of capital that enable more growth and expansion to continue the cycle. The manufacturing organizations you know best, from Coke to Toyota rely heavily on JIT.

Disadvantages of JIT

JIT is highly complex and requires expertise and skills that many organizations do not have. It requires precise predictive and planning capabilities in all operations, from manufacturing to sales. It is also somewhat dependent on the ability of organizations to control for variables like inclement weather, delayed shipments, or labor strikes or shortages.

The model has many interdependencies that raise risk levels if something should go wrong. For example, relying on untimely suppliers can jeopardize all of the steps in the process that follow, whereas having more inventory on hand mitigates this risk. Suppliers may be affected by natural disasters, unavailability of raw materials or management shakeups. Or they may go out of business.

Some raw materials and supplies may have fluctuating availability, which may not work within the JIT model. Larger organizations have the financial power to form exclusive agreements with suppliers to ensure tight controls, but many smaller organizations are vulnerable to suppliers' mistakes.

Despite some of its risks, the upside of Just-in-Time is so strong that its application is becoming more widespread -- and smaller organizations are increasingly embracing the concept.

Learn more about the Baylor online MBA program.


Sources:

Chron: The Just-in-Time Method

Toyota: Just-in-Time -- Philosophy of Complete Elimination of Waste

The Economist: Just-in-Time

WhatIs: Just-In-Time Manufacturing

WhatIs: Seven Wastes

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