It wasn’t long ago when organizations were buying raw-material in advance only to store them in warehouses just in case a customer demand presented itself.
Though there is nothing wrong with being prepared in advance to meet your customer expectations in time, stocking raw material which is not yet needed for production can lead to unwanted overhead expenses. Having a lot of inventory automatically means higher maintenance and storage costs for those extra resources. Logically, excess stock requires more storage area and an additional workflow which is undeniably not a profitable strategy for a business in the short and long run.
To remedy this, Toyota, in the middle of the 20th century, introduced the principle of lean manufacturing to reduce its own high inventory costs.
What is just-in-time manufacturing?
Just-in-time manufacturing, or JITM, is a management philosophy that aligns raw-material requirements from the suppliers with the production schedules to meet customer demand precisely in time, quantity, and quality. In a nutshell, JITM is an inventory ordering process in which the resources are received from the suppliers only when needed for production. The primary objective of this method is to lower inventory storage costs and increase inventory turnover.
Benefits of just-in-time manufacturing
There are several benefits of employing just-in-time manufacturing, including:
- Eliminates overproduction and accumulation of unsalable inventories, which happens when the supply of an item exceeds the demand
- Reduces inventory storage and holding costs by minimizing warehouse needs
- Lowers working capital investment to acquire raw material
- The manufacturer has more control over the manufacturing process by increasing the production of in-demand products and reducing the production of slow-moving items