Supply Chain Optimization: Just-in-Time Inventory Management

October 19, 2023 - 11 minutes read

Inventory management software makes just-in-time delivery a reality instead of a goal.

When Taiichi Ohno implemented just-in-time (JIT) inventory management as part of the Toyota Production System in the 1970s, the world took notice. The self-explanatory name embodied a concept focused on reducing waste—primarily in the handling, storage, and transportation of raw material—to optimize both efficiency and quality.

Ohno and his counterparts managed to redefine manufacturing and the automotive industries without the benefit of order management software, which makes their accomplishments even more remarkable. Today, everything from item location, quantity, and availability to supplier performance, demand statistics, and real-time pricing are at our fingertips. The benefits of inventory management software put the hypothetical ideal of the JIT philosophy within our reach. Let’s take a closer look at some of the tools and practices that have made this transition possible.

Is it really “just-in-time”?

The idea is simple in concept but difficult in execution. To minimize waste, you minimize the number of parts being stored, transported, or reworked at any given time. This also reduces opportunities for scrap and errors in the process. Parts aren’t pushed onto the production floor just in time to build an assembly, they are pulled through the supply chain just in time to fulfill a customer order.

In the real world, there are always defects, forecasting issues, labor strikes, vehicle breakdowns, and other variables that unfailingly create waste and prevent JIT from becoming a reality. What are the benefits of just-in-time we should realistically expect?

Reduced costs: Working capital is reduced as inventory levels, storage costs, and purchase orders shrink. A leaner approach also allows you to build more products without hiring additional workers.
Improved quality: Why does just-in-time improve quality? When products are built, inspected, and shipped one at a time, defects are caught before they have a chance to propagate throughout production.
Improved efficiency: More inventory turns not only reduce carrying costs, but they also prevent products from going to waste due to expiration or obsolescence. Waste can be further reduced by locating suppliers closer to your facility and asking them to deliver in smaller batches.
Improved customer service: With less time spent moving parts and correcting defects, you have more time to focus on your customers. A lean JIT model also lends itself well to build-to-order and customization to meet individual customer needs.

“It’s not that we have little time, but more that we waste a good deal of it.” – Seneca

6 keys to successful just-in-time implementation

What are the best ways to implement or improve JIT for your organization? Each company must pursue a unique approach depending on the size, type, and complexity of the business. Over the past 50 years, JIT experts have discovered and passed on the elements of JIT inventory management that should provide you with:

Reduced lead times
Continuous improvement
Improved supplier relationships
Reduced waste and overproduction
Improved forecasting

The following six suggestions will help you achieve these goals and keep your just-in-time implementation pointed in the right direction.

1. Choose the right software

Your inventory management software is the engine that makes JIT possible, which means choosing the right one is among the most important decisions you’ll make for your business. Accurate forecasting, real-time inventory tracking, and effective supply chain management are among the JIT prerequisites that can only be accomplished with the right tools.

Advanced inventory management software helps you optimize just-in-time performance. Features and capabilities that can give you an edge in JIT implementation include automated reordering, real-time inventory visibility, forecasting tools, and analytics. A mobile and user-friendly interface complements the JIT philosophy by allowing data to be flexibly collocated with products and materials.

Inventory management software delivers the data and analytics necessary to implement valuable just-in-time inventory management practices. See how a best-in-class solution can transform your business.

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2. Establish a JIT supply chain

JIT is only possible when everyone in the supply chain buys in. Large manufacturers like Toyota and Boeing wield the power to implement just-in-time principles as a condition of supplier approval, but how can smaller businesses establish a consistent supply chain built for JIT?

Negotiate: Do suppliers want to deliver smaller quantities more frequently? Probably not. These extra material handling steps might be leaner for you but can complicate life for suppliers. Be willing to pay a bit more for consistent JIT service from suppliers.
Build partnerships: Personalized, long-term relationships foster the teamwork and flexibility needed to involve suppliers in your JIT vision. View suppliers as partners who benefit from your successes and extend your vision.
Utilize buffers: Not all suppliers can or will buy into the just-in-time concept, including some you can’t do without. Building internal or third party buffers into your supply chain can smooth out some of the kinks. These buffer locations can be located conveniently close to the plant to support just-in-time operation while reducing supply chain risks.
Implement kanbans: A labeled bin or other visually identifiable part container allows you to pull rather than push inventory to reduce waste. When the kanban is empty, this becomes a visual queue for the warehouse or outside supplier to replenish a set amount based on the kanban size.

3. Optimize inventory tools and processes

Along with advanced software, successful JIT implementation calls for optimized inventory tools and processes. Real-time tracking and accurate counts are essential, so a well-designed barcoding system should be included in the operation. For manufacturing and high-volume warehouse operations, automation can make workflows more predictable and reduce wasteful human errors.

Ordering, forecasting, and quality control processes can also be optimized to minimize the surprises that disrupt flow. An intelligent floor plan supports JIT by minimizing travel times between stations and making items and equipment more visible to workers.

4. Engage employees

Increased employee engagement is both a prerequisite and a benefit of just-in-time inventory management. Success stories like Harley-Davidson and Nike demonstrate how the complementary goals of reduced inventory and reduced waste can unite workers in a common purpose.

Training and feedback are extremely important as employees learn the basics of JIT and how it can improve company-wide performance. Once the system has been implemented, rewards and recognition help to ingrain best practices into the company culture.

5. Remain flexible

Practices like Lean Six Sigma and just-in-time are successful because they encourage feedback and innovation rather than imposing rigid practices and rules. This openness to new ideas helps JIT inventory management programs stay flexible and adapt to continuous industry changes.

Spikes in demand, problems with suppliers, or frequent priority shifts cannot be allowed to derail the goal. This also applies to new products or offerings that require unique ways of working to stay lean and minimize waste. The forecasting capabilities of the best inventory management software improve flexibility by analyzing demand patterns and predicting future fluctuations.

“Research shows that the climate of an organization influences an individual’s contribution far more than the individual himself.” – W. Edwards Deming

6. Continually monitor and improve

The first practitioners never reached the ultimate goal of just-in-time inventory management, but they got a little bit closer with each passing year. The Kaizen philosophy that evolved in parallel with JIT requires teams to continuously identify and act upon improvement opportunities. Once changes are implemented, they must be measured and monitored to verify their effectiveness. Continuous improvement projects also contribute to improved employee engagement.

Just-in-case? Our final thoughts

With the list of just-in-time success stories reading like a multi-industry who’s who list, it might be surprising to learn the opposite approach, just-in-case (JIC) inventory management, has gained traction in recent years. This shift in philosophy was partially due to unprecedented part and labor shortages and lockdowns caused by the global Covid-19 pandemic. Over-ordering and overproducing ensure you are never out of stock or unprepared, but the higher part and storage costs can be prohibitive for many companies. The JIC approach also discounts the benefits of JIT as a source of customer responsiveness and fast turnaround.

If you need more convincing, there is no shortage of just-in-time proponents available to share their success stories, tips, and cautionary tales born of experience. By carefully integrating just-in-time practices with the best inventory management tools, a number of businesses have experienced upticks in quality, productivity, and employee engagement, ultimately leading to satisfied customers.

Just-in-time inventory management is one of the practices taken to new heights through the use of mobile and versatile inventory management software. To learn more, schedule a consultation today. Our solution experts are happy to explain how inventory management impacts all facets of your business.