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Just-in-Time (JIT) Philosophy
Known as the lean production
philosophy/culture Includes
Increased coordination through the value chain Reduced inventory
Reduced production times
Increased product quality
Increased employee involvement and empowerment
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JIT/Lean Approach to Reducing
Incoming Materials
Elements of reducing incoming materials
1. Developing long-term relationships with a limited
number of vendors2. Selecting vendors on the basis of service and materialquality, as well as price
3. Establishing procedures for employees to order
materials for current needs directly from approvedvendors4. Accepting vendor deliveries directly to the shop floor
or only as needed
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JIT/Lean Approach to Reducing
Work-in-Process Inventory
Key element is reducing cycle timeTotal time required to complete a process
Cycle time consists of:
Movement Time Inspection Time
Processing Time
Waiting TimeSetup Time
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Materials Push and Pull Systems
Materials Push System Materials Pull System
Employees work to
reduce the pile of
inventory building upat their workstations
Employees push
the work to the next
workstation after
completing their
operation
Employees at each
station work to provide
inventory for the nextworkstation as needed
Work stops when
inventory units reach a
specified limit until that
station catches up
Known as a Kanban
system
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JIT/Lean Approach to Reducing
Finished Goods Inventory
Can be reduced by Reducing cycle time
Reduces the need for speculative inventories
Better predicting customer demand for finished
unitsTo improve, adopt a value chain approach to inventory
management by which the manufacturer or supplier is
working as a partner with its customers to meet inventory
needs
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Performance Measures Under
Lean Production and JIT
Goal is to eliminate inventory and reduce cycle
time to processing time
Performance emphasis on Inventory turnover
Cycle time
Cycle efficiency
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Gross Margin Return on
Inventory Investment (GMROI)
Measures the effectiveness of inventory levels
GMROI =Gross margin
Average inventory
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Cycle Time
Measures the total time required to produce
one unit of a product
Cycle Time =
Setup
Time++++
Processing
Time
Movement
Time
Waiting
Time
Inspection
Time
The only component
that adds value
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Simplified Recordkeeping
Lean production and JIT enable significantreductions in the number of accounting
transactions required for purchasing and
production Purchasing
Standing purchase orders allow production personnel to
requisition materials directly from vendors
Limited quantities are delivered Product costing
Ending inventories are close to nonexistent so costs are
insignificant
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