Advantages and Disadvantages of Just-In-Time Inventory in Production

Just-in-time (JIT) inventory within production has been a long discussed topic within the manufacturing industry. With correlations between lean, six sigma, and JIT, these tools are extremely beneficial to your manufacturing operation and can provide thorough insight into your operation. With JIT, your production facility will utilize lean methodology that enables your operation to effectively reduce costs, increase profitability, and ultimately eliminate waste.

Remember, inventory is essentially looked at as stacks of cash that are being set on fire, which is considered to be wasteful within your operation. Your goal should be to reduce your inventory to its lowest possible point, meaning utilizing JIT and lean. Before implementing JIT, it is important to understand its capabilities and the advantages and disadvantages associated with the methodology. Therefore, within this blog we are going to discuss the advantages and disadvantages associated with the methodology. 

Advantages of JIT Inventory in Production 

A JIT inventory system enables inventory levels to be low and only produce specific customer orders. The result would be a substantial reduction in inventory investment and scrap costs, though a high level of coordination is required. Through utilizing JIT concepts, there is a greatly reduced need for raw materials and WIP, while finished goods inventories should be close to non-existent. With JIT, you are able to witness the following advantages: 

• Minimal amounts of inventory resulting from a high rate of inventory turnovers that keep any items from remaining in stock 
• With production runs being short, it is much easier to halt production of one product type and switch to a different product that meets consumer demand 
• Low inventory correlates with low inventory holding costs 
• The company is investing in less cash in its inventory, since less inventory is needed 
• Less inventory also means a lesser chance of an accident or damage to the inventory that is being held  
• Production mistakes are also able to be spotted and corrected quickly, producing large quantities of inventory that is incorrect and defective could leads to thousands or millions in lost revenue 

While these are the advantages associated with JIT inventory, it is also important to understand the drawbacks associated with the methodology as well. 

Disadvantages of JIT Inventory in Production 

The disadvantages of JIT Inventory in production pertain to the following: 

• A supplier that does not deliver goods to the manufacturing facility on time and in correct amounts could lead to a substantial impact on the production process 
• Natural disasters could interfere with the flow of goods to the company from the supplier, which may halt production almost all at once 
• Investments needs to be made in information technology to link computer systems to the company and its suppliers to ensure that coordination of supplies/parts is completed in the timeframe requested 
• Manufacturing facilities may struggle with being able to meet requirements of a massive and unexpected order, since it has few or no stock of finished goods 

A software that is able to aid with the implementation and control of JIT production/inventory is PlanetTogether’s Advanced Planning and Scheduling (APS) Software. Advanced Planning and Scheduling (APS) Software is by far one of the most effective and efficient production planning softwares that enable manufacturers to have thorough insight into their overall manufacturing operation. Advanced Planning and Scheduling (APS) Software is able to be integrated into manufacturing facilities that utilize ERP, MRP, and other forms of manufacturing softwares that aid with waste elimination. APS software is being utilized by manufacturing operations around the globe and is enabling smaller manufacturers to maintain a competitive edge within the industry. 

Advanced Planning and Scheduling Software 

Advanced Planning and Scheduling (APS) software has become a must for modern-day manufacturing operations due to customer demand for increased product mix and fast delivery combined with downward cost pressures. APS can be quickly integrated with a ERP/MRP software to fill gaps where these system lack planning and scheduling flexibility and accuracy. Advanced Planning and Scheduling (APS) helps planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans.

• Create optimized schedules balancing production efficiency and delivery performance
• Maximize output on bottleneck resources to increase revenue
• Synchronize supply with demand to reduce inventories
• Provide company-wide visibility to capacity
• Enable scenario data-driven decision making

Implementation of Advanced Planning and Scheduling (APS) software will take your manufacturing operations to the next level of production efficiency, taking advantage of the operational data you already have in your ERP.

Related Capacity Planning Video

 APS Resources