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    Safety Stock Inventory Carrying Costs: History

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    Tefyta Sánchez
    Just-in-time (JIT) inventory management is a strategy where companies only order and receive inventory as it is needed for production and customer sales, rather than maintaining safety stock. This allows companies to operate with low inventory levels and reduce carrying costs through increased efficiency and decreased waste. Competing inventory strategies include short-cycle manufacturing, continuous-flow manufacturing, and demand-flow manufacturing. The JIT strategy originated in Japan and was first developed and implemented successfully in the country's shipyards.

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    Safety Stock Inventory Carrying Costs: History

    Uploaded by

    Tefyta Sánchez
    16 views2 pages
    Just-in-time (JIT) inventory management is a strategy where companies only order and receive inventory as it is needed for production and customer sales, rather than maintaining safety stock. This allows companies to operate with low inventory levels and reduce carrying costs through increased efficiency and decreased waste. Competing inventory strategies include short-cycle manufacturing, continuous-flow manufacturing, and demand-flow manufacturing. The JIT strategy originated in Japan and was first developed and implemented successfully in the country's shipyards.

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    Just-in-time (JIT) inventory management is a strategy where companies only order and receive inventory as it is needed for production and customer sales, rather than maintaining safety stock. This allows companies to operate with low inventory levels and reduce carrying costs through increased efficiency and decreased waste. Competing inventory strategies include short-cycle manufacturing, continuous-flow manufacturing, and demand-flow manufacturing. The JIT strategy originated in Japan and was first developed and implemented successfully in the country's shipyards.

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    Download as DOCX, PDF, TXT or read online from Scribd
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    16 views2 pages

    Safety Stock Inventory Carrying Costs: History

    Uploaded by

    Tefyta Sánchez
    Just-in-time (JIT) inventory management is a strategy where companies only order and receive inventory as it is needed for production and customer sales, rather than maintaining safety stock. This allows companies to operate with low inventory levels and reduce carrying costs through increased efficiency and decreased waste. Competing inventory strategies include short-cycle manufacturing, continuous-flow manufacturing, and demand-flow manufacturing. The JIT strategy originated in Japan and was first developed and implemented successfully in the country's shipyards.

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    Just-in-time (JIT) inventory management, also know as lean manufacturing and

    sometimes referred to as the Toyota production system (TPS), is the process of


    ordering and receiving inventory for production and customer sales only as it is
    needed and not before. This means that the company does not hold safety stock and
    operates with low inventory levels. This strategy helps companies lower
    their inventory carrying costs by increasing efficiency and decreasing waste.

    This method requires producers to forecast demand accurately.

    Just-in-time inventory management is a cost-cutting inventory management strategy


    though it can lead to stockouts. The goal of JIT is to improve return on investment by
    reducing non-essential costs.

    Competing inventory management systems are short-cycle manufacturing


    (SCM), continuous-flow manufacturing (CFM) and demand-flow manufacturing
    (DFM).

    This inventory system represents a shift away from the older just-in-case strategy, in
    which producers carried large inventories in case higher demand had to be met.

    History

    The management technique originated in Japan and is often attributed to Toyota.


    However, many believe that Japan's shipyards were the first to develop and successful
    implement this approach. Its origins are seen as three-fold: Japan's post-war lack of
    cash, lack of space for big factories and inventory and Japan's lack of natural
    resources.

    Thus the Japanese "leaned out" their processes. "

    News about JIT/TPS reached western shores in 1977 with implementations in the US
    and other developed countries beginning in 1980.

    An Example

    Toyota started with just-in-time inventory controls in the 1970s and it took more than
    15 years to perfect. Toyota sends off orders for parts only when it receives new orders
    from customers.

    For Toyota and just-in-time manufacturing to succeed, the company must have steady
    production, high-quality workmanship, no machine breakdowns at the plant, reliable
    suppliers and quick ways to assemble machines that put together vehicles.
    Concern

    Just-in-time inventories court disruptions in the supply chain. Just one supplier of raw
    materials who has a breakdown and cannot deliver the goods on time can shut down
    the entire production process. A sudden order for goods that surpasses expectations
    may delay delivery of finished products to all customers.

    For instance, in 1997 a fire at a brake parts plant owned by Aisin decimated its
    capacity to produce a P-valve for Toyota vehicles - Aisin was the sole supplier and
    had to shut down production for several weeks. Toyota ran out of P-valve parts after
    just one day.

    A fire in the company was the sole supplier of the part, and the fact that the plant was
    shut down for weeks could have devastated Toyota's supply line. The auto
    manufacturer ran out of P-valve parts after just one day. Fortunately, a supplier of
    Aisin was able to retool and start manufacturing the necessary values after two days.
    Nevertheless, the fire cost Toyota nearly $15 billion in revenue and 70,000 cars.

    Other suppliers for Toyota also had to shut down because the auto manufacturer didn't
    need other parts to complete any cars on the assembly line. It could have been much
    worse.

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