Definition: Just in time manufacturing is a manufacturing process that acquires and produces inventory as soon as it is needed or ready to be sold. In other words, manufactures that use just in time processes wait for orders before they manufacture goods. Once the goods are finished, they can be shipped to the customers instead of sitting in storage facilities as excess inventory.
What Does JIT Manufacturing Mean?
Just in time manufacturing is a lean business practice that is based on the concept of continuous improvement. Basically, companies started to look at traditional manufacturing process and discovered that producing products before they were ordered tending to increase holding costs .
Just in time manufacturing eliminates almost all inventory costs by only producing products when they are ordered. This is often called a demand-pull system because the customer demand pulls the order through the company.
Since just in time manufacturers only produce goods when they are ordered, they only order raw materials when they are needed. This is another lean business practice that most JIT manufactures use. Instead of ordering large quantities of raw materials, just in time manufacturers order smaller quantities of raw materials only when they need them. This eliminates the holding costs of storing large amounts of raw materials.
Automakers are the prime example for just in time manufacturing. A Honda plant will be located just miles from all of its raw material supplies, so it can receive shipments everyday or even in some cases every few hours. Once Honda receives an order, it immediately orders the raw materials, manufactures the car, and ships it to a dealer for sale.