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Main benefits of JIT includes
- 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).
- The flow of goods from warehouse to shelves improves. Small or individual piece lot sizes reduce lot delay inventories, which simplifies inventory flow and its management.
- Employees with multiple skills are used more efficiently. Having employees trained to work on different parts of the process allows companies to move workers where they are needed.
- Production scheduling and work hour consistency synchronized with demand. If there is no demand for a product at the time, it is not made. This saves the company money, either by not having to pay workers overtime or by having them focus on other work or participate in training.
- 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.
- Supplies come in at regular intervals throughout the production day. Supply is synchronized with production demand and the optimal amount of inventory is on hand at any time. When parts move directly from the truck to the point of assembly, the need for storage facilities is reduced.
- Minimizes storage space needed.
- Smaller chance of inventory breaking/expiring.
Despite the many advantages, there are also some disadvantages associated with just-in-time inventory, which are
- A supplier that does not deliver goods to the company exactly on time and in the correct amounts could seriously impact the production process.
- A natural disaster could interfere with the flow of goods to the company from suppliers, which could halt production almost at once.
- An investment should be made in information technology to link the computer systems of the company and its suppliers, so that they can coordinate the delivery of parts and materials.
- A company may not be able to immediately meet the requirements of a massive and unexpected order, since it has few or no stocks of finished goods.
