Munufacturing companies are faced with a make or buy decision for every item or component they use ( as well as for every process and service). Do they make it themselves or do they outsource, and buy from a subcontractors, they face the problem of how much inventory they requireIn just –in –time production- also called lean production, stock less production, and continuous flow manufacture- nothing is bought or produced until it is needed. Each section of the production process makes the necessary quantity of the necessary units at the necessary time- which is when it is required by the next stage of the manufacturing process, or by distributors or customers.The JIT system is usually credited to taiichi ohno, who was vice- president for manufacturing with Toyota in japan in the early 1950s- although he stated that he got the idea from American supermarkets! JIT is wholly contrary to the European and American logic of encouraging greater productivity, and welcoming production that exceeds the agreed schedule or quota and stocking extras in case of future problems.JIT minimizes the cost of holding inventories, which era regarded negatively, as avoidable costs, rather than as assets: The large Japanese manufacturing component on time , the whole production process is sabotaged, but the Japanese industrial system relies on mutual trust and long term relationships.Small suppliers often attempt to situate their facilities close to the location of a larger company with which they workThe Japanese also prefer small, specialized production plant with a limited capacity , in which , wherever possible, all the machines required for a certain job are grouped together. This avoids all the waiting and moving time involved in sending half –finished items from one department to another, although it often requires flexible, multi- skilled employeesJIT thus greatly reduces transportation and inventory costs, and should ensure that there is no waste from overproduction,or from idle workers waiting for parts. It allows increased productivity because of shortened throughput time. If factories are equipped so that set up times are should be noticed more quickly, production lead time are reduced, and the firm can react more rapidly to demand changes
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