Just in Time inventory is an inventory strategy used to increase efficiency and reduce costs by only keeping exactly enough parts on hand to meet current demands—no less and no more. It’s an innovative, yet risky, method of managing inventory used primarily in manufacturing plants. It’s associated with significantly reduced production costs, but it requires very precise planning to carry it out successfully. Learn more about Just in Time inventory and how a CMMS can streamline its success.
What is Just in Time Inventory?
Just In Time (JIT) inventory management involves ordering and receiving inventory as it’s needed. Its overall principles are closely aligned with those of lean manufacturing. The following conditions should be met when implementing JIT inventory management:
- Keep stock counts at exactly what’s needed for current production
- Order only what’s needed without any excess for emergencies
- Order and receive stock frequently
- Be precise with demand forecasts as it relates to your product
- Keep in close contact with suppliers to eliminate potential downtime
- Identify backup suppliers in the event of emergencies
The advantages of JIT inventory management for companies are reduced inventory costs, decreased waste, increased efficiency and improved return on investment (ROI). It also helps free up warehouse space that may have traditionally been used for keeping excess inventory. Money that was previously allocated for spares inventory can then be used to fund other important business objectives.
How/When Was it Introduced?
“Just in Time” was the term used to describe an inventory management strategy employed in Japan by the manufacturing company, Toyota. Following WWII, Toyota slimmed down operations as much as possible, thus leading to a process of continually receiving inventory just in time to produce what’s needed at that given point in time. After Toyota’s success, many companies in the United States and other countries began utilizing JIT inventory in the 1980s.
The popular inventory management strategy is successful as long as production continues steadily, machines are reliable, inventory shipments are on time and deliveries can be made quickly, if needed. When things go awry, JIT can be problematic. For example, Toyota had to shut down production for weeks in 1997 after it ran out of a specific part. The part could not be delivered because of a fire that took place at one of the supplier’s locations, leading to a complete stock-out at Toyota after one day.
Success with JIT Inventory
Dell, a computer manufacturer, is recognized for meeting its customers’ demands with a short turn-around period and minimum delays. It accomplishes these goals by utilizing JIT inventory management, relying heavily on its suppliers and maintaining little to none of its own stock of materials. This spares Dell the depreciation costs of computer parts and gives them a competitive edge.
Another example of a company that experienced success with JIT inventory is Harley-Davidson, a motorcycle manufacturer, whose inventory levels decreased by 75% after implementing the strategy. By implementing JIT inventory, Harley-Davidson “could identify and solve the inefficiencies of the process because wastefulness could no longer hide under a large amount of costly inventory.” According to a recent Harley-Davidson news release, the company expects to ship approximately 217,000 to 222,000 motorcycles in 2019.
How Can You Utilize CMMS for Just in Time Inventory?
Computerized maintenance management software (CMMS) systems were designed to streamline maintenance data and automate a variety of tasks to decrease downtime, enhance productivity and improve ROI.
One way CMMS software enables manufacturers to implement JIT inventory is its ability to identify and assign ideal stock levels for inventory. Reorder points can be identified by comparing data on how often a part is used and the length of time it takes to ship. The optimal quantity, referred to as the Economic Order Quantity, can be calculated by the CMMS using the purchase order cost and applying it against the carrying cost of inventory. Users can set up reorder points for the optimal quantity of specific inventory within their CMMS based on minimum stock levels dropping below a certain threshold.
There are many other modules included in maintenance management software that enable companies to not only implement Just in Time inventory management strategies, but a multitude of other possibilities. Work order management, preventive maintenance, scheduling, asset management, inventory control, purchasing, cost-tracking, advanced reporting and mobile/internet access are a sampling of the features available within iMaint enterprise asset management software. To learn more about this robust CMMS/EAM software solution, or to discuss JIT inventory management further, contact our sales team