Businesses lose agility and profitability when they manage inventory using a “just in case” strategy. Just-in-time (JIT) inventory management, however, coordinates raw materials and parts deliveries with production schedules to fulfill orders as needed.
Businesses lose agility and profitability when they manage inventory using a “just in case” strategy. With this model, businesses tie up capital in raw materials and parts – in case they need them for the next order. They also pay for expansive warehouse space to store them, and, if they never use some of those materials because they expire or become obsolete, they generate waste. Just-in-time (JIT) inventory management, however, coordinates raw materials and parts deliveries with production schedules to fulfill orders as needed.
Just-in-time manufacturing began in Japan after World War II when Taiichi Ohno adapted the system for Toyota. The trend shifted manufacturers away from Henry Ford’s production line systems that generated large volumes of products using the same parts and materials, often ahead of demand requiring that they be stored. Instead, JIT manufacturing focuses on batch production and sourcing and finding different parts from different vendors that could be used while still maintaining the quality of the finished product.
The JIT manufacturing management model won’t deliver maximum value without a just-in-time inventory software solution to support it. To understand the features that a JIT inventory solution should include, you first need to understand the pros and cons of employing the JIT system itself.
Because a well-managed JIT manufacturing operation only orders and receives the parts and raw materials it needs from suppliers, it improves the business’ position with capital funds and maintains tighter control over warehouse and labor costs. In addition, the benefits of the JIT model extend beyond cost savings. With JIT, the operation becomes more agile, planning and executing short production runs in sync with demand and the available raw materials.
However, the just-in-time model can have a downside for operations that can’t maintain steady production. The system involved needs to be of high quality and have the right automation in place, otherwise it’s highly vulnerable. JIT manufacturing also requires minimizing downtime by ensuring equipment is maintained, and warning signs of failure are promptly addressed. Supplier-related delays will also negatively impact the operation’s efficiency, productivity, and ability to deliver finished products as promised.
A just-in-time inventory solution with the following features is vital to successfully support this manufacturing model:
- Data collection at receiving: the solution must record all parts and raw materials at receiving and include features that enable sorting by part or material type, vendor, bill of materials (BOM) for specific projects, or other necessary parameters.
- End-to-end visibility: A just-in-time inventory solution must also provide visibility beyond receiving and track where parts and raw materials are in production. The efficiency and cost savings associated with just-in-time operations are minimized by neglecting to take inventory into account when it is being used in work in process (WIP), kitting, and assemblies that are used in multiple finished products.
- Traceability: The solution should give operators the ability to trace lot or serial numbers through the production process and to shipment to customers, so if a recall is necessary, only affected products need to be returned, and waste is minimized.
- Real-time data: Maximizing the agility of a JIT manufacturing operation depends on sharing data with the people, processes, and systems that need it to perform most effectively. Operations can leverage data from a just-in-time inventory management system to create data threads that deliver data in real-time, intelligent decision-making, and automation. This data can also help operators identify and correct bottlenecks in production.
- Deployment and compliance: Software delivery should offer operations the option to deploy on-premises, in the cloud or in a compliant cloud to meet standards such as the Health Insurance Portability and Accountability Act (HIPPA), the International Traffic in Arms Regulations (ITAR), or Export Administration Regulations (EAR).
Integrations: The software should integrate seamlessly with production management solutions to enable operators to most effectively schedule and maximize labor.
- User-friendliness: JIT inventory software should also be easy to use and to leverage when changes or disruptions to operations, such as 2020’s pandemic, require agility and adaptation.
Numerous inventory management solutions are available, but not all are designed with JIT manufacturing’s requirements in mind for visibility, traceability, and integration with business applications. Operators weighing the pros and cons of just-in-time inventory solutions will find that software designed for a broad range of markets – not specifically JIT manufacturing – won’t provide them with the features and functionality they need.
Carefully vetting software and choosing a solution that is purpose-built for just-in-time inventory management will be a valuable part of an overall strategy to increase efficiency and reduce costs.