The Just-in-Time Manufacturing model can take small businesses to the next level, but it comes with pros and cons. We take a deep dive into this production method.
For many small and medium businesses, managing inventory levels and manufacturing cycles can be a logistical and financial headache. But there are plenty of ways to take a more refined, 'lean' manufacturing approach, with perhaps the most widely known being 'Just-in-Time Manufacturing'.
What is Just-in-Time Manufacturing?
Just-in-Time (JIT) Manufacturing, or Just-in-Time Production, is a methodology, initially introduced by Toyota as the 'Toyota Production System', that aims to reduce times within production, and response times from suppliers and to customers, by improving efficiency and reducing inventories.
How does Just-in-Time Manufacturing work?
In contrast to mass production methods, JIT Manufacturing only requires low levels of inventory to be held as part of the ‘pull’ process of manufacturing, which creates parts only at the time they are required for the next stage of production.
This reduces the amount of time and resources needed to create a product by adopting a lean philosophy aimed at boosting efficiency and reducing waste in the manufacturing process.
The beauty of the methodology is that it does not require the huge levels of investment needed for other production methods, making it just as likely to be used by smaller businesses as a multinational corporation.
Example
To illustrate how Just-In-Time Manufacturing can transform a relatively small business into a much larger operation, let’s use a bakery chain as an example.
Instead of baking their goods in batches and freezing the inventory for the week ahead, the bakery can make smaller batches and overnight deliveries to their stores. This meant that that same factory was able to continue servicing the whole company as they expanded their retail business.
The theory behind Just-in-Time Manufacturing can even be applied to other sectors that don’t necessarily have a tangible product that needs to be assembled.
For instance, a software development company can ship code to their clients as early and as regularly as possible to make custom web and mobile apps, the same way as Just-in-Time Manufacturing processes receive inventory deliveries and then immediately add them into production.
Benefits of Just-in-Time Manufacturing
If done right, Just-in-Time Manufacturing can lead to a number of different benefits.
- It reduces costs. There is less need for large warehouses to hold parts and inventory, as well as no need for bulk orders of parts that can put a strain on cash flow.
- It can help shorten lead times. Preventing fluctuating production rates by only manufacturing what is needed makes delays less likely and shortens the time it takes to fulfill orders. Less time is also spent on managing a large number of inefficient supplier relationships.
- It improves quality control and employee satisfaction. Quality control can be performed at each stage of the process, reducing wastage and overall defects. The method requires a multi-skilled workforce, which is proven to lead to increased productivity and improved job satisfaction.
Disadvantages of Just-in-Time Manufacturing
But of course, just as with any business process, there can are also a number of negatives to consider when deploying Just-in-Time Manufacturing techniques.
- It is susceptible to disaster. Natural disasters such as extreme weather or pandemics, as well as man-made disasters such as road traffic accidents or fires, can disrupt the supply chain and lead to a temporary halting of production if parts are not held on-site to carry out necessary repairs.
- There may be a risk of running out of parts. Holding only the required level of parts means that any inaccuracies in forecasting or delays in deliveries could lead to the business running out of inventory.
- There is a lack of control over time frames. Having to rely on the timeliness of suppliers for each order puts businesses at risk of delaying customers’ receipt of goods.
Planning for Just-in-Time Manufacturing
Just-in-Time Manufacturing is built on the idea of using limited resources to produce a small number of high-quality products quickly. However, there's a need for increased levels of advanced planning to deal with this reduced level of inventory – businesses need to be able to properly forecast demand, so that production can meet the levels required and to ensure that supplies are available in time.
Forecasting technology
To achieve these requirements, businesses deploy a range of different technologies to help them forecast customer demand and highlight the stages of the production process that need additional inventory.
For example, the aforementioned bakery can build an IT system that notifies the warehouse every time a shop sells a soft drink so that a replacement can be delivered overnight ready for the next day’s customers.
Other lean software systems might forecast future demand based on historic levels, look at regional variations to identify peaks and troughs in demand for particular products, or coordinate deliveries and stock levels across multiple sites of operation.
The Kanban system
The most common tool in the Just-in-Time Manufacturing arsenal, however, is the Japanese Kanban system, which is used to automatically flag when parts are running low.
These Kanban boards give full visibility of the manufacturing process, showing team members the current tasks that need to be actioned, as well as highlighting bottlenecks in the process and where additional resources are required to ensure maximum efficiency.
Example of a Kanban board
In modern Just-in-Time Manufacturing, Kanban technologies can also make use of robotics to automate different stages of the production process, such as moving parts across a factory floor. Kanban software companies such as Kanban Zone deliver full service software integration whereas more day-to-day production tools that draw on similar principles, such as Trello and Monday.com, can be easily and affordably introduced to businesses of any size.
Since businesses deploying Just-in-Time Manufacturing only works with a selected group of suppliers, managing these relationships efficiently is all the more important. While you may not be able to negotiate payment terms, American Express can help extend the amount of time you have to pay your suppliers. The American Express® Business Gold Card gives you up to 54 days until payment is due¹, offering you greater control over your cash flow – and flexibility to your manufacturing process. So you can keep money in your account for longer and focus on meeting customer demand first.
Plus, for extra peace of mind when margins are tight, you get Purchase Protection and Refund Protection with The American Express Business Gold Card. It takes the worry out of theft, damage or, quite simply, changing your mind.
- The maximum payment period on purchases is up to 54 calendar days and is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date. The American Express Business Gold Card has an annual fee of £195 (£0 in first year).
