- JIT (just-in-time) manufacturing is a strategy where raw materials and other components are only produced or sent to the production process when needed.
- JIT businesses that only manufacture an item if a customer wants it are by extension more responsive to their needs. The strategy also minimizes waste and reduces the amount of inventory sitting idle in a warehouse or distribution facility.
- Two successful implementations of JIT manufacturing include Dell and CPG giant Procter & Gamble.
Understanding JIT manufacturing
JIT (just-in-time) manufacturing is a strategy where raw materials and other components are only made or sent to the production process when needed.
JIT manufacturing can trace its roots back to post-World War 2 Japan. Once the war ended, the country found itself in a situation where it lacked the resources to finance mass production. There was also a shortage of natural resources and high unemployment.
For businesses to survive in this environment, operations were scaled back. Smaller factories transformed fewer raw materials into similarly small amounts of finished product, which enabled them to reduce financial risk and better manage their working capital.
Just-in-time manufacturing is a strategy that requires discipline, structure, and specific processes. To produce what is needed, when it is needed, and in the exact quantity required, JIT manufacturing is a pull-based strategy where production is only initiated when there is demand from the customer. This contrasts with a push-based system where a business produces the item first based on forecast demand.
JIT businesses that only manufacture an item if a customer wants it are by extension more responsive to their needs. The strategy also minimizes waste and reduces the amount of inventory sitting idle in a warehouse or distribution facility. In the latter case, it reduces storage costs and the likelihood that inventory is damaged or becomes obsolete whilst awaiting sale.
Other characteristics of JIT manufacturing
In addition to restricting inventory, some key JIT characteristics include:
- Elimination of defects.
- Close collaboration with manufacturers and suppliers who must also be flexible and responsive.
- Cellular manufacturing – a subsection of JIT where workstations are arranged in sequence to support the smooth movement of materials and components.
- The active management of flow by limiting batch sizes (balanced flow).
- Multi-functional workers with diverse skillsets.
- Control by visibility – where visual tools improve communication.
- Housekeeping and physical organization.
- Streamlining the movement of materials.
JIT manufacturing use cases
- Automotive Manufacturing:
- Efficient production based on customer demand.
- Reduces inventory costs.
- Electronics Assembly:
- Manages rapid technological advancements.
- Ensures product freshness.
- Fast-Food Restaurants:
- Minimizes food waste.
- Optimizes kitchen operations.
- Aerospace Manufacturing:
- Reduces storage costs.
- Ensures quality control.
- Fashion and Apparel Industry:
- Reduces risk of unsold items.
- Important in trend-driven industry.
- Pharmaceutical Manufacturing:
- Ensures product quality.
- Minimizes drug expiration risk.
- Print-on-Demand Services:
- Eliminates large pre-made inventories.
- Offers customization options.
- Construction Projects:
- Reduces excess material storage.
- Minimizes risk of theft or damage.
- Retail Inventory Management:
- Optimizes supply chains.
- Reduces overstock and understock situations.
- Medical Supplies and Equipment:
- Efficient resource allocation.
- Minimizes waste in healthcare settings.
JIT manufacturing examples
JIT has been popularized in the West as part of the Toyota Production System (TPS), but in truth, many other companies use the strategy to great effect.
Here are two examples.
Computer manufacturer Dell was likely the first in its industry to implement JIT manufacturing. When an order is placed for a computer on Dell’s website, demand is created and the production of a custom computer commences.
Dell does not manufacture all of the numerous components that go into its products. To ensure parts arrive on time and as they are needed, the company has adopted aspects of a push-based system. In this case, algorithms that predict sales volume are utilized by component suppliers to anticipate production volume.
Procter & Gamble
Consumer-packaged goods powerhouse Procter & Gamble also uses JIT manufacturing. While other companies manage their supply chains with 30-day demand forecasts, Procter & Gamble uses an approach called robust continuous planning where demand is matched with supply more frequently.
For Tide – one of the company’s laundry detergent brands – demand/supply matching occurs multiple times per day. For other products with global supply chains such as Oral-B toothbrushes, the cycle spans a matter of weeks. In either case, the company is more agile and responsive to customer needs.
The company has not revealed the finer details of its JIT strategy, but Forbes theorized that factories run at 90 to 95% capacity with the remainder used to respond to fluctuations in demand. One example mentioned in the article is a retail customer request for an incremental promotion, which a P&G rep claimed it could respond to in a matter of minutes.
- Definition of JIT Manufacturing:
- Origins of JIT Manufacturing:
- JIT manufacturing originated in post-World War 2 Japan due to resource limitations and unemployment.
- Smaller factories scaled back operations to manage risk and working capital efficiently.
- Principles of JIT Manufacturing:
- JIT is a pull-based strategy, producing based on actual customer demand.
- It contrasts with push-based systems that produce based on forecast demand.
- Benefits and Characteristics:
- JIT reduces waste and inventory storage costs.
- It emphasizes defect elimination, collaboration with suppliers, cellular manufacturing, flow management, and multi-functional workers.
- Toyota Production System (TPS):
- JIT is a key part of the Toyota Production System (TPS), popularized in the West.
- TPS emphasizes efficient production and minimizing waste.
- JIT Examples:
- Dell: Dell uses JIT manufacturing for custom computer orders placed on its website. Component suppliers predict production volume using algorithms.
- Procter & Gamble: P&G employs JIT for consumer-packaged goods like Tide and Oral-B. It matches demand and supply frequently, adapting to customer needs.
- P&G’s Approach:
- P&G utilizes robust continuous planning to match demand and supply more frequently.
- The company remains agile by running factories at high capacity and allocating a portion for responding to demand fluctuations.
Connected Agile & Lean Frameworks
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- Business Strategy
- Business Development
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- Marketing Strategy
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Main Case Studies: