Just in time is a concept that we’ve been working with a lot recently. Although it is often mistreated as a management buzz-phrase rather than the process strategy it represents, in its proper form its an approach that can deliver tangible cost benefits.
It is generally accepted to have originated in Japan, and is summed up by the philosophy of ‘the right thing, in the right quantity, at the right place, at the right time.” It’s by no means a new concept, but the result is reduced inventory costs, reduced over-production, reduced stock carried, and reduced waste whist improving customer response times.
Whilst it originates in manufacturing, we’ve recently helped clients use the same concepts not only in manufacturing, but in retail and food service too. So how does a ‘research’ firm end up working on process improvement? Anyone who has worked with us for long enough knows that we do more than just research; we use great analysis to solve difficult problems. And Just in Time is just one of those problems we like to get our teeth into.
However, the modern world is determined to throw many barriers in the way of this quest for better efficiency. For example, customer expectations are now so high that we’ve seen customers’ timescales for a bespoke product less than the suppliers’ manufacturing times. This means that manufacture has to start even before the customers’ orders are received – before the customers themselves had decided what they wanted.
In another example, a global economy requires global solutions. Manufacturing abroad can reduce costs, but the increase in delivery times poses further problems, even to the point where Just in Time dictates the next order is placed even before previous orders are received.
Delivering Just in Time against constraints such as these can feel like an intractable problem. How do you start manufacturing something before the customer him/herself has decided what they want? How do you order months in advance, when you don’t yet know how the last two orders have been used? All too often companies adopt a costly increase in inventory to mitigate these challenges. We believe the answer is great analysis.
For example forecasting techniques can anticipate customer demand to within 5%, allowing manufacture to begin early, and combined with a sprinkling of programming expertise, it is possible to deliver continuously updating forecasts. Alternatively analysis of historical time series can give insight into demand cycles and allow you to order months in advance. Combine these with the more obvious tools of process mapping, process optimisation, and queuing theory and you have a powerful toolkit to help you navigate the challenges on your journey to just in time.
Of course there are problems with Just in Time. A common challenges is that carrying a large inventory masks other process problems, which can then surface. In addition it can leave you vulnerable to supply shocks further down the supply chain. It can also simply shift inventory problems to suppliers. As such it is important that a total systems approach is taken, and again great analysis combined with robust financial modelling can help you make the case with your supply partners to improve both your and their efficiency.
So this blog post finishes with a challenge. Take a critical look around your organisation and see if you can see inventory problems. Are you over-ordering supplies? Do you manufacture surplus stock just in case you have a supply hiccup? Do the barriers stopping you from reducing inventory seem impossible? If so, it may be time to investigate, as our recent experience shows that these problems can be overcome with some robust analysis.