Just in Time (business) - Philosophy

Philosophy

The philosophy of JIT is simple: inventory is waste. JIT inventory systems expose hidden cost of keeping inventory, and are therefore not a simple solution for a company to adopt. The company must follow an array of new methods to manage the consequences of the change. The ideas in this way of working come from many different disciplines including statistics, industrial engineering, production management, and behavioral science. The JIT inventory philosophy defines how inventory is viewed and how it relates to management.

Inventory is seen as incurring costs, or waste, instead of adding and storing value, contrary to traditional accounting. This does not mean to say JIT is implemented without an awareness that removing inventory exposes pre-existing manufacturing issues. This way of working encourages businesses to eliminate inventory that does not compensate for manufacturing process issues, and to constantly improve those processes to require less inventory. Secondly, allowing any stock habituates management to stock keeping. Management may be tempted to keep stock to hide production problems. These problems include backups at work centers, machine reliability, process variability, lack of flexibility of employees and equipment, and inadequate capacity.

In short, the Just-in-Time inventory system focus is having “the right material, at the right time, at the right place, and in the exact amount”-Ryan Grabosky, without the safety net of inventory. The JIT system has broad implications for implementers.