Just-in-time inventory systems rely on effective communications and coordination with suppliers to deliver production requirements "just in time" to insert them into the production process. This system reduces the need for storing production supplies, but increases the reliance on suppliers, quality control and an error-free ordering process. Cost savings can be a byproduct of a JIT system, but it depends on supplier requirements and the general industry. Overall, a JIT system offers a quality-focused inventory and manufacturing process.
JIT systems require a long-term focus for production development and supply needs. Changes in product offers, raw material specifications, and even production levels must be established and coordinated with suppliers. Securing supplies, locking in dedicated transportation and staffing requirements must be done in advance so production is not hampered by resource constraints. Some JIT benefits such as higher customer satisfaction, cost savings and lower manufacturing costs may be realized over a longer period.
An automated purchasing system supports the intense coordination needed to ensure a steady, consistent stream of materials for production. Agreements and contracts are established with a limited number of suppliers, and the ordering and purchasing process is automated based on the agreements. Generally, production levels, established lead times and current inventory levels are automatically calculated within the production processing system. When supplies are needed, an electronic message is sent to the supplier for reorder levels and requirements.
JIT systems exhibit strong relationships between suppliers and the manufacturer. Suppliers are often viewed as an extension of the primary company. Communications and information are open and free-flowing to help support tight supply coordination. At a minimum, dedicated product managers are assigned in each business to coordinate purchasing, planning and transportation requirements. These strong relationships are backed up by long-term agreements and contracts.
Efficiency in the supply process is essential for a JIT system, but these efficiencies often spill over to the rest of the production and supply process. Since there is little room for errors, raw materials and products must conform to strict standards. Employees are generally trained to spot errors early in the production process and instructed to take corrective actions. Multiple quality checks help ensure an efficient production line.
Just-in-time manufacturing inventory processes rely on constant improvement to help eliminate production problems, quality issues and to help drive more simplistic operations. These improvements may come in the form of developing foolproof manufacturing steps and establishing systems to identify production errors quickly; they may also eliminate steps that do not add value to the product.