Just-in-time (JIT) inventory control reduces the amount of inventory that a company maintains. The concept is based on a cluster of lean manufacturing activities that are designed to only manufacture enough products to meet customer demand. This control system does so by pulling demand through a production facility, where each step in the production process is only authorized to produce a limited amount of inventory. Just-in-time inventory control involves implementation of the following concepts:
- Pull concept. Under JIT, each step in the production process is triggered by a notification, or kanban, that is provided to it by the downstream workstation that is a request for a specific quantity of a specific item. A workstation is only allowed to produce the exact amount of the authorization. If the downstream workstation issues no kanban, then a workstation will remain idle until notified. Thus, the pull concept massively reduces the amount of work-in-process inventory. By comparison, a traditional push manufacturing system runs work orders through the production system that are based on forecasts, and which typically result in much larger quantities of inventory in the production system at any given time.
- Lot sizes. Wherever possible, JIT advocates very small production lot sizes, preferably of just one unit. This means that inventory moves through the production process in very small, discrete batches. As each lot is completed, it is immediately passed along to the next downstream workstation, where the production staff inspects it, and can reject it at once if quality standards are not met. This immediate feedback loop greatly limits the amount of scrap generated within the production system.
- Machine setups. JIT advocates small lot sizes, but this is impossible when it takes a long time to set up a machine for each production run. Consequently, there are a number of tools and concepts available for greatly shortening machine setup times. By doing so, it becomes cost-effective to rapidly re-set a machine to manufacture even a single unit. This, in turn, tends to reduce inventory levels, since there is no longer a need to spread the cost of a machine setup over a very long production run.
- Inventory movements. When inventory lot sizes are so small (as just noted), it makes more sense to place them in very small transport containers and move them to the next workstation by a conveyor belt. This eliminates a great deal of material handling personnel and equipment. In addition, management is more likely to move the workstations closer together, to reduce the amount of travel time on the conveyors. This, in turn, reduces the amount of work-in-process inventory traveling between the work stations.
- Just-in-time deliveries. A JIT system does not require a massive amount of on-site inventory. In fact, there may be no on-site inventory at all. Instead, a company requires its suppliers to submit to a quality certification process (so that it can avoid any time-consuming receiving inspections), and then has them make a large number of small deliveries, sometimes directly to wherever the parts are needed in the production process. This can nearly eliminate a company's investment in raw materials inventory.
Thus, just-in-time inventory control is a set of systems that are designed to squeeze a large amount of inventory out of a company. The weak spot of inventory control is any possible fluctuations in just-in-time deliveries; if they are interrupted, then a company has no inventory buffer, and so must shut down its production operations. Thus, a considerable amount of supply chain management is needed to make just-in-time inventory control work properly.