When ordering inventory, two of the

When ordering inventory, two of the biggest issues are quality and cost. When all else is equal, choosing one supplier over another generally comes down to which supplier offers the best price break for the largest order.

But stock eventually runs low and negotiations begin again. Multiply that by the number of supplies you use, and picture how much time your purchasing agents spend trying to cut better deals. Just-in-Time (JIT) inventory management is designed to help streamline your operation, ensure consistent quality and reduce on-site inventory.

JIT is an inventory management system based on placing smaller, more frequent, inventory orders. JIT can quickly reveal areas that need improvement, improve efficiency and productivity, free up additional workspace and free up more working capital.

In this Quick-Read you will find:
•A description of JIT.
•Four quick tips to help determine if JIT might work for you.

SOLUTION [top]

Switching between suppliers to secure the lowest price is fine when you have extra storage space and won’t suffer if the order is a day or two late. The problem is, when faced with overlapping deadlines, suppliers have to put their best customers first, so if you’re a first-time or occasional customer, you could get caught short.

That’s why JIT relies on long-term contracts with reliable suppliers, often ordering several parts from the same supplier, even if the parts might be cheaper through another vendor. By working closely with suppliers — in effect, making them partners in your manufacturing process — they are in tune with your immediate needs and can provide smaller, more frequent shipments designed to meet your current requirements. This collaboration often results in:
•A consolidation of efforts on the part of the supplier.
•Long-term contracts securing the lowest prices possible.
•Freeing up your purchasing-and-receiving employees to work on other things.

For JIT to work, you need to have reliable suppliers who provide consistent-quality products, preferably with warehouses close enough to your location to make speedy deliveries. Cutting-edge automated equipment and high-tech inventory management systems — things as universal as bar coding — are making JIT increasingly easier to implement.

A key part of JIT is the Kanban, a system of tracking supplies throughout the entire manufacturing process. It can be anything from a high-tech computerized system to a low-tech card or ticket system. Sort of a microcosm of JIT as a whole, a well-planned Kanban helps track the speed at which each part works its way through the system. This makes it easier to keep track of inventory. There are two basic models for the Kanban, a station-based system or a container system.

Station system. Workers "order" the exact number of parts they need from another station above them in the production line. When a station receives a request, they supply the part, then make or order a replacement (in turn, the stations they received parts from then order replacements for the parts they provided, and so on up the line).

Container system. Workers take parts directly from a container on the floor. Inventory is tracked by knowing precisely how many parts each container holds. A replacement container is brought out shortly before the first is emptied so workers are never short of supplies.

JIT programs won’t work for everyone. Not only do you need fairly consistent production so you can accurately predict how rapidly you go through every part or ingredient you use, but you also need to have a good communications system in place among your employees.

To help determine if JIT is for you:
•Assess your production flow. Do you produce a steady or predictable amount of products each day, week, month? Can you predict how much inventory you will need in a given day, week, month? If you cannot, implementing a JIT program could be difficult, if not impossible.
•Talk to your suppliers. Are they willing to make smaller, but more frequent, deliveries? Will they negotiate good deals, given the promise of guaranteed, long-term business from your company? Not every supplier is going to want the responsibility of being part of your JIT program, but some will accept the challenge and sign on for the long haul. Can you rely on them to make deliveries just in time?
•Talk to your employees. How well do the employees communicate with one another and with you? Is each willing to take the time to learn a new system and do what it takes to have it run smoothly?
•Be honest. Not just with your employees and suppliers, but with yourself. Switching over to a JIT system will take a lot of commitment. Don’t get involved with JIT simply because other companies have; do it if you think it will work for your company.
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