Further, with retailers in particular having less inventory means less risk of having inventory that has to be deeply discounted. The JIT system also allows organizations to be more flexible to operational challenges like a buildup in inventory -- orders can be halted quickly in response to this, something Wal-Mart has done from time to time in response to variable demand conditions (Dudley, 2013)
Not only do "big data" applications have the ability to process massive volumes of information to deliver more accurate demand forecasts, but RFID technology has been employed to help companies track their inventory throughout their system. Wal-Mart uses RFID technology to track goods throughout its supply chain, which allows the company to execute its JIT system with an even higher level of accuracy than ever before, redeploying goods to wherever they are needed within the system (Millsap, 2012)
The purchase of inventories on JIT basis should only be purchased if activities throughout the entire supply chain is properly planned, coordinated, and controlled. JIT has strong supply interdependence that can cause higher costs with a weak supply chain (Broyles, 2005)
It involves straight work time divided by the number of required units of production based on demand. Economic Order-Quantity Decision Model, EOQ, determines how much of a product to order under a given set of assumptions (Horngren, 2006)
Although the principles of JIT are usually only applied to fairly simple rote processes, they have proved uniquely successful in organizing those rote processes to produce highly sophisticated machinery. "Waste results from any activity that adds cost without adding value, such as the unnecessary moving of materials, the accumulation of excess inventory, or the use of faulty production methods that create products requiring subsequent rework" (Ashland 2006)
Making a Case for JIT In high tech, semiconductor, consumer electronics and distribution-based businesses where inventory turns are critical for profitability to be attained, JIT is essential. Those industries that rely heavily Return on Invested Capital (ROIC) including auto manufacturing also have built entire supply networks predicated on JIT, including the Toyota Production System (TPS) (Amasaka, Sakai, 2009)
The benefits of using this approach to inventory management also include the sharing of risk with suppliers when Vendor Management Inventory (VMI) is supported as a distribution strategy (Song, Dinwoodie, 2008). All of these factors combined also provide companies relying on JIT with a minimal amount of wasted inventory and reduction of unnecessary costs while increasing the ability to respond more rapidly to customers' needs (Epps, 1995)
All of these factors combined also provide companies relying on JIT with a minimal amount of wasted inventory and reduction of unnecessary costs while increasing the ability to respond more rapidly to customers' needs (Epps, 1995). In addition to the high level of dependence on single supplier JIT also can create a bullwhip effect if demand is not accurately predicted (Ouyang, Li, 2010)
Those industries that rely heavily Return on Invested Capital (ROIC) including auto manufacturing also have built entire supply networks predicated on JIT, including the Toyota Production System (TPS) (Amasaka, Sakai, 2009). The integration of quality management functions into JIT by Toyota has since been replicated by Dell, HP, IBM, Lucent, and many other corporations (Parveen, Rao, 2009)
For the CEO of a company in these industries that rely on rapid inventory turns for their financial stability and growth, adopting JIT is required for competitive parity to the industry. The benefits of using this approach to inventory management also include the sharing of risk with suppliers when Vendor Management Inventory (VMI) is supported as a distribution strategy (Song, Dinwoodie, 2008)
Their goal at the time they upgraded their system was to reduce the average time between dealer order and delivery from Toyota's North American factories from 70 days to 14 days. This change resulted in making customers happy, as well as cutting dealer inventory costs and the need for Toyota to spend on rebates for slower-moving vehicles (Broyles, Beims, Franko & Bergman, 2005)