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Presentation on:Just in time

Definition Just in time :

An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.

History of just in time:

Just-In-Time is a Japanese manufacturing management method developed in 1970s.

After the first introduction of JIT by Toyota, many companies followed up and around mid 1970s’, it gained extended support and widely used by many companies.

The natural constraints and the economy constraints after World War II, Japanese Manufacturers looked for a way to gain the most efficient use of limited resources. They worked on "optimal cost/quality relationship".

Method of just in time : The just-in-time method is an inventory strategy

where materials are only ordered and received as they are needed in the production process. The goal of this method is to reduce costs by saving money on overhead inventory expenses. The company must be able to accurately forecast demand for goods and services for the just-in-time method to be effective.

Benefits of JIT Minimizes storage space needed. Smaller chance of inventory breaking/expiring. Reduced setup time: Cutting setup time allows the

company to reduce or eliminate inventory for "changeover" time. The tool used here is SMED (single-minute exchange of dies).

Increased emphasis on supplier relationships: A company without inventory does not want a supply system problem that creates a part shortage. This makes supplier relationships extremely important

Key Elements of just in timeReduce or eliminate setup times: Aim for single digit setup times (less than 10 minutes) or "one touch" setup this can ‑‑be done through better planning, process redesign, and product redesign.

Preventive maintenance: use machine and worker idle time to maintain equipment and prevent breakdowns.

Reduce lead times (production and delivery): production lead times can be reduced by moving

work stations closer together, applying group technology and cellular manufacturing concepts, reducing queue length

Flexible work force: workers should be trained to operate several

machines, to perform maintenance tasks, and to perform quality inspections.

The purpose of just in time approach

Reduce Inventory CostsLead Time ReductionEfficient Manufacturing LayoutImprove Customer Satisfaction

the purpose of just in time approach

Reduce Inventory Costs: Using a Just-in-Time inventory system reduces the amount of material on hand in the production facility.

Lead Time Reduction: Just-in-Time manufacturing also uses a pull system to

move materials through the production cycle. Efficient Manufacturing Layout: Companies must create a layout on the production

floor to move materials through the process efficiently.

Improve Customer Satisfaction: Companies implement a Just-in-Time system or

lean manufacturing to satisfy the demands of customers. The voice of the customer is always present in a Just-in-Time manufacturing environment

Advantage of just in time:

There should be minimal amounts of inventory obsolescence.

Since production runs are very short.The very low inventory levels mean that inventory

holding costs are minimized.The company is investing far less cash in its inventory. Less inventory can be damaged within the company.Production mistakes can be spotted more quickly and

corrected.

Disadvantage of just in time:

A supplier that does not deliver goods to the company exactly on time.

An investment should be made in information technology to link the computer systems of the company and its suppliers.

A company may not be able to immediately meet the requirements of a massive and unexpected order.

Implication of just in time on accounting

The changing of global competitive business environment has forced the organizations to transform themselves in order to become more competitive. Many companies adopted Just-in-Time system to process reengineering among the competitors. The adoption of JIT manufacturing system will implicate all the organization’s control system such as accounting information system.

Apply just in time for business firm Just in time in Manufacturing: JIT in manufacturing is a system to operate and develop a system in factory. It is mainly based on the total decrease of waste by producing only the necessary units.

Just in time in Purchasing: Management accounting are familiar with the use of Just-in –Time (JIT) in purchasing with the aim to reduce the finished goods inventory that a company has to keep and to overcome.

Just-In-Time System and Variance Analysis :JIT approach can reduce or eliminate many unfavorable cost variances. For instance, long-term pricing agreements with select group of suppliers can virtually eliminate material price variances.

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