“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
Pull (demand) driven inventory system in which
materials, parts, sub-assemblies, and support items
are delivered just when needed and neither sooner
nor later. Its objective is to eliminate product
inventories from the supply chain.
Origin : JAPAN.
Initially known as : Toyota Production System.
Taiichi Ohno : father/originator of JIT.
Scenario After Second world war.
Taiichi Ohno Examined American
Devised a new system based
on elimination of waste.
• Flexible resources
• Cellular layouts
• Pull production system
• Small-lot production
• Quick setups
• Uniform production
• Quality at the source
• Supplier networks
•General Purpose Machines
•Study Operators & Improve Operations
•Standard Operating Routine
•They Group Dissimilar Machines In Manufacturing Cell
To Produce Family Of Parts
•Work Flows In One Direction Through Cell
•Cycle Time Adjusted By Changing Worker Paths
•Cells Operated By Worker Teams Who Are Cross-trained
Pull Production System:
•A Pull System Where The Production Or Movement Of
The Next Batch Of Material Is Not Started Until The
User Signals A Need For It
•The User Comes To The Producer To Withdraw
Materials In The Quantity Needed At The Time Needed
•The Producer Produces Only The Exact Quantity
Withdrawn By The User
•Requires less space & capital investment
•Moves processes closer together
•Makes quality problems easier to detect
•Makes processes more dependent on each other
•Inventory Hides Problems - Lower Levels Of
Inventory To Expose Problems
•Preset Desired Settings
•Use Quick Fasteners
•Use Locator Pins
•Make Movements Easier
•Results From Smoothing Production Requirements
•Kanban Systems Can Handle +/- 10% Demand Changes
•Smooths Demand Across Planning Horizon
•Mixed-model Assembly Steadies Component Production
• Locate near to the customer.
• Use small, side loaded trucks and ship mixed loads.
• Consider establishing small warehouses near to the
customer or consolidating warehouses with other
• Use standardized containers and make deliveries
according to a precise delivery schedule.
•Become a certified supplier and accept payment at
regular intervals rather than upon delivery.
•The philosophy of JIT is simple: the storage of unused
inventory is a waste of resources. JIT inventory systems
expose hidden cost of keeping inventory, and are
therefore not a simple solution for a company to adopt
it. The company must follow an array of new methods
to manage the consequences of the change. The ideas
in this way of working come from many different
disciplines including statistics, industrial engineering,
production management, and behavioral science. The
JIT inventory philosophy defines how inventory is
viewed and how it relates to management.
•In short, the Just-in-Time inventory system focus is
having the right material, at the right time, at the right
place, and in the exact amount without the safety net
of inventory. The JIT system has broad implications for
TRANSACTION COST APPROACH
•JIT helps in keeping inventory to minimum in a
firm. However, a firm may simply be outsourcing
their input inventory to suppliers, even if those
suppliers don't use Just-in-Time (Naj 1993).
Newman (1994) investigated this effect and found
that suppliers in Japan charged JIT customers, on
average, a 5% price premium.
• Level Schedule
• Establish Freeze
• Underutilized Capacity
• Demand pull
• Reduce lot sizes
• Implement Carousel To
Reduce Motion Waste
• Implement Conveyor
Belt To Lower Motion
• Standard Production
• Standardize And
Reduce The Number
• Process Design With
• Quality Expectations
The service industry has recognized that the JIT system
can be adapted successfully in their processes and add
value to the end product. JIT lays emphasis on the
process and not on the end product.
Synchronization And Balance Of Work Flow
Flexibility In The Use Of Resources
Respect For People
Continuous Improvement Of The Process
Who doesn’t recognize the Big Yellow ‘M’?
McDonald’s is the best example of JIT in Services !
What used to be the case was McDonald's would pre-cook a
batch of hamburgers and let them sit under heat lamps. They
would keep them for as long as possible and eventually discard
what couldn't be sold. The only way to get a fresh hamburger
under the old system was to make a special order.
McDonald's now doesn't begin to cook until a customer has
placed a specific order.
The major benefits are better food at a lower cost.
Wastage is reduced along with an improvised taste that makes
you want to scream out I’m Lovin’ It !
Just-in-time manufacturing involves the sophisticated
coordination of suppliers, delivering component parts at just the
moment they’re needed in the manufacturing process ; dynamic
For Marketing with JIT, inventory is essentially the content. The
marketing campaign process is step-wise assembly of content
that’s delivered to the buyer through any number of channels to
a prospect database. Traditionally, marketing would build an
inventory of marketing messages to deliver in batches to
prospective buyers and customers.
This Inventory is virtual, there aren’t holding costs, but it comes
with an opportunity cost. There may be some branding and
awareness benefits, but there’s probably as much risk that your
email is viewed as junk to-be-deleted.
With India it’s most essentially Not Time For Just In Time.
CHENNAI: The earthquake and tsunami that flattened Japan's
north eastern industrial hubs in March this year could have a
more long-term impact on the way Japanese companies do
business across the world. Honda and Toyota suffered huge
production losses worldwide as parts supplies from Japan were
held up due to the twin disaster.
Now the two Japanese biggies may be taking a relook not only at
their famed management mantra—just-in-time (JIT)—but also at
the concept of sourcing critical components only from Japan. JIT
—a production philosophy born on the factory floors of Japanese
car companies—is now a global management practice and has
saved companies billions of dollars. The idea behind JIT, or lean
manufacturing , is to have the supplies a firm needs at the exact
moment that they are needed. But even Toyota, which put in
place the Toyota Production System based on just-in-time
inventory management, understands keeping minimum
inventory has its risks.
• JIT eliminates organizational barriers and
• Accounting changes or relies on activity-
• Marketing by interfacing with the customers.
• Finance approves and evaluates financial
• Information systems create the network of
information necessary for JIT to function
• A surprising effect was that factory response
time fell to about a day. This improved
customer satisfaction by providing vehicles
within a day or two of the minimum economic
• Also, the factory began building many vehicles
to order, eliminating the risk they would not
be sold. This improved the company's return
• Since assemblers no longer had a choice of
which part to use, every part had to fit
perfectly. This caused a quality assurance
crisis, which led to a dramatic improvement in
• When a process or parts quality problem
surfaced on the production line, the entire
production line had to be slowed or even
stopped. No inventory meant a line could not
operate from in-process inventory while a
production problem was fixed.
• The just-in-time philosophy was also applied
to other segments of the supply chain in
several types of industries. In the commercial
sector, it meant eliminating one or all of the
warehouses in the link between a factory and
a retail establishment. Examples in sales,
marketing, and customer service involve
applying information systems and mobile
hardware to deliver customer information as
needed, and reducing waste by video
conferencing to cut travel time.
• Like all other production strategies , Just In Time
systems have their own benefits and drawbacks.
• Maintaining sub-normal inventories can be beneficial
or harmful to an organization , depending on how
efficiently it is applied.
• Reduced Setup time , also known as
• Funds tied up in inventories can be
• Storage area used up can be utilized.
• Throughput Time is reduced
resulting in greater output
• Production scheduling and work
hour consistency is synchronized with
• Supplies come in regular intervals throughout the
• The risk of inventory breaking/expiring is reduced
• Inventory flow becomes simpler and easier to
manage due to smaller lot sizes.
• Cuts the risk of supply system problems.
• JIT operation leaves suppliers and
downstream consumers open to
• The organization will not be able to
cater to large orders on time.
• Just-in-time operation leaves suppliers and
downstream consumers open to supply shocks and
large supply or demand changes.
• Very low stock levels means shipments of the same
part can come in several times per day. This means
Toyota is especially susceptible to flow interruption.
For that reason, Toyota uses two suppliers for most
• As noted by Liker (2003) and Womack and Jones
(2003), it ultimately would be desirable to introduce
synchronized flow and link JIT through the entire
supply stream. However, none followed this in detail
all the way back through the processes to the raw
• . It is for the reasons stated raw materials companies
decouple their supply chain from their clients'
demand by carrying large 'finished goods' stocks.
• The JIT delivery is critical for
• When the material does not
arrive on time, the station will
starve and fail
• When the material arrives ahead of time Inventory
takes space and creates problem.
• Flow in time is the name of the game in JIT.
Toyota is considered by many to be the
poster child for JIT success.
The Toyota Production Strategy is
highlighted by the fact that raw materials
are not brought to the production floor until
an order is received and this product is
ready to be built.
No parts are allowed at a node unless they
are required for the next node, or they are
part of an assembly for the next node.
This philosophy has allowed Toyota to keep
a minimum amount of inventory which
means lower costs
– Small amounts of raw material inventory must be kept at
each node in production, so that production can take
place for any product. These parts are then replenished
when they are used.
– Accuracy of forecasting is important so the correct
amount of raw materials can be stocked.
• The history of Harley-Davidson started way back in 1903
in Milwaukee when William S. Harley and Arthur
Davidson developed a one cylinder motorcycle in a shed
bearing the name board ‘Harley-Davidson Motor
• Faced with tough competition from Japanese companies,
Harley-Davidson decided it would make more sense to
join the competition rather than beat it
• Harley-Davidson successfully adopted
Japanese manufacturing principles which
many considered were impossible for US
manufacturers to achieve because of
cultural and political reasons.
• After implementing these Japanese
techniques, Harley-Davidson succeeded in
manufacturing high quality motorcycles at
lower cost.It witnessed the success of JIT in
the late 1980s.
• Achieved inventory turnover from 5 to 20,
reduced the inventory by 75%
• Dell has also leveraged JIT principles to make its
manufacturing process a success.
• Dell’s approach to JIT is different in that they
leverage their suppliers to achieve the JIT goal.
• They are also unique in that Dell is able to provide
exceptionally short lead times to their customers, by
forcing their suppliers to carry inventory instead of
carrying it themselves and then demanding (and
receiving) short lead times on components so that
products can be simply assembled by Dell quickly
and then shipped to the customer.
• Dependable suppliers with the ability to meet Dell’s
demanding lead time requirements.
• A seamless system that allows Dell to transmit its
component requirements so that they will arrive at Dell in
time to fulfill its lead times.
• A willingness of suppliers to keep inventory on hand
allowing Dell to be free of this responsibility.
• Top Management
• Development Of A JIT
• Development Of A JIT
• Develop And Implement A
Continuous JIT Training
Program For Employees At
• (5) Develop and maintain a JIT
circle involving key employee
• (6) Redesign the organization
to make it flexible and dynamic
for allowing JIT permeate
through the system
• (7) Develop and maintaining an
effective communication and
control system in order to
provide feed backs and control
at all levels of the organization.