JUST IN TIME INVENTORY
Just In Time:- An inventory strategy companies employ to increase efficiency and
decrease waste by receiving goods only as they are needed in the production
process, thereby reducing inventory costs.
Inventory - .important assets that most businesses possess
.turnover of inventory is the primary sources of revenue
.generation and subsequent earnings for the company's
Just- In- Time, commonly known as “Toyota Production System”
JIT consists of 3 parts
JIT purchasing JIT manufacturing JIT distribution
Examples of Just-in-Time Inventory
•Gift Basket Drop-Shipping –
•Fast-Food Restaurants- use just-in-time inventory to serve their customers on a daily basis
during breakfast, lunch and dinner.
•Florist - can use a just-in-time inventory system to manager her orders, save time and money.
•Print-on-Demand Publishing - take advantage of just-in-time inventory by working with a
printer that offers print-on-demand services.
•Computer Manufacturers - use just-in-time inventory to control the manufacturing and
ordering of their computer systems.
use the just-in-time inventory system to service their customers.
Type of Inventory:- The function of the inventory, the firm maintain the four type of
Raw material inventory
Work in progress inventory
Finished goods inventory and
Classification of Inventory
Pipeline Inventory or Inventory Transit
Inventory within the Supply Chain Network
Stock as material
Work in Progress
Type of cost Associated with Inventory
Inventory Holding or Carrying Cost
Taxes, insurance and shrinkage related costs
Storage and handling costs
Inventory models for Independent Demand
Basic economic order quantity(EOQ) model
Production Order quantity model
Quantity discount model
Order Quantity = Q (Maximum inventory Level
Optimal order quantity
Curve for total cost of holding and setup
Q = Number of piece per order
Q* = Optimal number of piece per order (EOQ)
D = Annual demand in units for the inventory item
d = Daily demand rate, or usage rate
S = Setup or ordering cost for each order
H = Holding and carrying cost per unit per year
t = Length of production run in day
P = Daily production rate
L = Order lead time
How Just-in-time benefits your organisation.
Just-in-time is itself, based on four key principles that work together to support this
unique concept at every level
Heijunka is the . elimination of uneve ness in workload (mura).
. Heijunka also eliminates muri
. Both mura and muri are thought of as types of muda
Waste (muda) is defined as anything that does not add value.
Takt time – the heartbeat of production
Takt is the rate of customer demand. , determines the flow-rate and enables the
calculation of how much work can be done.
The kanban card is a simple, highly visible device that the Toyota Production System uses
to call-up components as they are required,
Heijunka Elimination of waste Takt time Kanban
Just in time Efforts:- Following are the various JIT efforts
Multi skilled workforce
set-up time reduction
Stable production schedules
Total productive maintenance (TPM)
Total Quality management (TOM)
Reason for Just In Time Efforts
Simplifying stable production plan, or minimum variability
High volume repetitive manufacturing
Proximity of suppliers
Rising inventory level
To gain competitive advantage in the market
Mission of the Just In Time
Elimination of in transit inventory
Elimination of in plant inventory
Elimination of unnecessary activities
Elimination of redundant
Reduce lot sizes
An inventory system designed to
produce efficient output with
minimum lead time at the lowest
possible cost, minimizing waste, with
Create only want the customer
wants at the rate the customer
Produce at products of consistent
With minimal waste of
labor, material, and equipment.
Just-In-Time Inventory System
Vendor Managed Inventory:- Vendor managed inventory (VMI) can be
define as a
Mechanism where the supplier create the purchase orders based on the demand
information exchanged by the focal firm manufacture, retailer, or customer.
VMI is a backward- replenishment model where the supplier does the demand
Creation and demand fulfilment.
Advantage of Vendor Managed Inventory
Planning and ordering cost will decrease due to the responsibility being shifted to the
The overall service level is improved by having the right product at the right time.
The manufacturer is more focused than ever on providing great service.
Visibility of the Distributor’s Point of Sale data makes forecasting easier.
Promotions can be more easily incorporated into the inventory plan.
A reduction in Distributor ordering errors
Advantages of JIT
Less space required for stock
Closer relationships with suppliers
Reduced the cost of production
Less vulnerability to fashion and
Reduction in stockholding costs
Increase in cash flow
Reduce the wastage
Disadvantages of JIT
Danger of lost sales
High dependence on suppliers
Less time for quality control on arrival of
Increased ordering and admin costs
May lose bulk-buying discounts
It takes time to established
To increase efficiency, Henry
Ford had components and
raw materials delivered to
his factories just as they
Businesses that use just in time
inventory strategies often utilize
intermodal shipping systems.