Advantage And Disadvantage Of Just In Time (JIT)

TOPIC 6 (WEEK 7)

ADVANTAGE OF JUST IN TIME (JIT)

Just-in-time inventory systems, pioneered by Toyota, move inventory through a production system under a pull ideology, with customer orders pulling the inventory through the system. Production begins with a customer order and the order is moved through production with visual symbols, called Kanban, that tell workers to start making the next part. While just-in-time has many advantages, it is important to know that the system has weaknesses as well. Examples of the companies that implement the JIT production such as TOYOTA.

By using just-in-time concepts, there is a greatly reduced need for raw materials and work-in-process, while finished goods inventories should be close to non-existent. Just-in-time inventory has the following advantages:          

There should be minimal amounts of inventory obsolescence, since the high rate of inventory turnover keeps any items from becoming old.

Since production runs are very short, it is easier to stop the production of one product type and switch to a different product to meet changes in customer demand.

The very low inventory levels mean that inventory holding costs are minimized such as warehouse space.

The company is investing far less cash in its inventory, since less inventory is needed.

Less inventory can be damaged within the company, since it is not held long enough for storage-related accidents to arise.

Production mistakes can be spotted more quickly and corrected, which results in fewer products being produced that contain defects.

DISADVANTAGE OF JUST IN TIME (JIT)

Despite the magnitude of the preceding advantages, there are also some disadvantages associated with just-in-time inventory, which are:

A supplier that does not deliver goods to the company exactly on time and in the correct amounts could seriously impact the production process.

A natural disaster could interfere with the flow of goods to the company from suppliers, which could halt production almost at once.

An investment should be made in information technology to link the computer systems of the company and its suppliers, so that they can coordinate the delivery of parts and materials.

A company may not be able to immediately meet the requirements of a massive and unexpected order, since it has few or no stocks of finished goods.