Just-in-time production reduces costs by minimizing in-process inventory with visual cues. It improves quality and efficiency, and has been used in the automotive industry since Henry Ford’s time. Toyota modified the process, leading to higher productivity rates and reduced risk. However, it relies on accurate demand forecasts, or else it could lead to problems with inventory or the manufacturing process.
Just-in-time production is a strategy used in the manufacturing industry to reduce costs by reducing the level of in-process inventory. It is guided by a series of signals that tell the production line to make the next piece for the product and when it is needed. The cues used are usually simple visual cues, such as the absence or presence of a part that is needed in the manufacturing process.
In just-in-time manufacturing, reorder levels are set for certain inventory items and new stock is ordered only when those levels are reached. There is no excessive inventory of parts or items, which saves warehouse space. This manufacturing strategy can lead to improvements in quality and efficiency. It can also lead to higher profits and a higher return on the company’s investment.
While this specific manufacturing strategy was created by the Toyota company in Japan in the 1970s, earlier companies used manufacturing processes based on similar concepts. One of the first was created by Henry Ford, whose automobile company bought materials only for its immediate needs in the production process. Ford purchased only the amount of material needed in the production plan and planned the transportation of materials so that product flow was smooth. This created a rapid turnover and reduced the amount of money that was tied up in raw materials.
Ford’s manufacturing process has been adopted by many other automakers. Toyota used the process to satisfactory effect and modified it to overcome some of its weaknesses, which resulted in what is now known as just-in-time production. The process has allowed Toyota to reduce costs and build cars more quickly. Many vehicles were built to order which reduced the threat that they would be built and not sold, thus eliminating a risk to the company.
Unlike other types of manufacturing processes, with just-in-time manufacturing, assemblers don’t have the ability to choose which parts to use; each part must fit correctly. This means that the use of multiple suppliers is usually avoided and quality assurance is higher. The parts used are all of the same quality, which means that downtime for quality checks is almost eliminated, leading to higher productivity rates. Just-in-time production
principles have been applied to many industries and companies with successful results.
A potential flaw in just-in-time manufacturing is that it relies on an accurate demand forecast. Manufacturers must measure the levels of materials and parts they need based on past or current sales data. If there is an increase or decrease in the demand for the product, it could have serious effects on the just-in-time manufacturing process. Manufacturers need to ensure they have reliable sales forecasts to account for these sales fluctuations, or else they could run into problems with inventory or the manufacturing process.
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