JIT & Lean Implementation Uses & Drawbacks – implementation | uses | drawbacks
JIT & Lean Implementation Uses & Drawbacks
Manufacturing companies make products on large scales, but there are challenges with storing materials for these companies. Discover the possible solutions that can come from implementing lean and just-in-time manufacturing as well as the uses and drawbacks to each.
Manufacturing
Peter has just been promoted to CEO of a company that makes lotions, soaps, and hair products. He’s happy to be in charge but wonders if the company is running as smoothly as it can. For example, he’s noticed that they have a warehouse full of raw ingredients and materials that they use to make their products. Do they really need to keep all those materials on hand?
Manufacturing is the process of making a product on a large scale. Peter’s company makes money from making bottles of lotion, so they are a manufacturing business. Like Peter, many manufacturers worry about whether they are working efficiently or not. To help Peter and others answer their questions, let’s take a look at two related concepts in manufacturing: lean and JIT manufacturing.
JIT and Lean
Peter wants to know if his warehouse of ingredients and materials is really useful for his company’s manufacturing. Is there a better way to keep these things?
Lean manufacturing focuses on eliminating waste in production of products. For example, Peter’s company buys ingredients for their lotions and soaps in bulk and stores them in a warehouse. But if some of those ingredients aren’t as potent after being stored for a while, then Peter’s company might need to use more of those ingredients to get the same result. That’s wasteful!
Instead, Peter might want to buy less of certain ingredients and use them faster, rather than storing them.
Related to lean manufacturing is a concept called just-in-time manufacturing, or JIT for short. In JIT, companies order materials to arrive just as they are needed. If Peter knows, for example, that they need a certain amount of an ingredient in order to produce 1,000 bottles of lotion, and if he knows that his company sells 1,000 bottles of lotion every month, then he would order only the amount of the ingredient necessary to make those 1,000 bottles.
Because JIT is about not keeping too many materials on hand, it is one way to implement lean manufacturing. With JIT, Peter will get rid of the warehouse. Storing ingredients and materials for future use is the antithesis of JIT. Instead, Peter will order just what he needs, when he needs it. That way, there’s never anything extra lying around. He will get the materials ‘just in time’ for his manufacturing, hence the name of the system.
Drawbacks
Peter can easily see the benefits of choosing just-in-time manufacturing. His company will save money and space by not having to use a warehouse. But, he wonders if there’s a catch. What are the drawbacks to JIT?
First of all, there are costs associated with coordinating with suppliers. For example, in order for JIT to run smoothly, Peter needs to keep his suppliers (the people who sell him the materials he needs) in the loop as to how much of a particular material he needs. He can do this many ways, including through information technology and by having a person at the company keep in constant contact about orders. But either of those comes with a cost, so Peter needs to understand what his different options will cost his company.
Another drawback is that the company is vulnerable to unexpected supply issues. For example, if Peter uses lavender in his lotions and soaps, and a tornado wipes out the farm that supplies his company with lavender, Peter could be left with no lavender if he’s running a JIT operation. In contrast, if that same tornado comes around when Peter has a warehouse full of lavender, it’s not a big deal. JIT comes with the risk that problems in the supply chain will leave the company without the materials they need to manufacture their products.
Finally, a JIT company is less flexible in the ability to fulfill orders. Right now, if Peter’s company suddenly gets a huge order for several thousand bottles of lotion and the customer needs those bottles next week, he can fill that order by just making more lotion. But if he doesn’t have a warehouse of materials, he wouldn’t be able to make the lotion and could lose the order.
Lesson Summary
Manufacturing is the process of making a product on a large scale. Many manufacturers worry about whether they are working efficiently or not. To increase efficiency, some manufacturers use lean manufacturing, which focuses on eliminating waste in production of products and/or just-in-time manufacturing, or JIT, where companies order materials to arrive just as they are needed.
Despite the benefits, there are some drawbacks to using JIT or lean manufacturing. First, there are costs associated with coordinating with suppliers. Another drawback is that the company is vulnerable to unexpected supply issues. Finally, a JIT company is less flexible in the ability to fulfill orders.