Although accountants list inventory as an asset on company balance sheets, too much inventory can be a liability when it comes to efficiency and making the most of precious capital. Even if you receive a discount on manufacturing parts by buying in bulk, the parts you think you need today often aren't the parts you need when orders arrive. Just-in-time manufacturing systems increase efficiency by keeping inventory to a minimum and waiting to order parts until orders have been placed.
Where Did Just-in-Time Manufacturing Start?
Eli Whitney, the inventor of the cotton gin, spearheaded a precursor of just-in-time manufacturing during the early days of the Industrial Revolution by developing machinery production systems that used many interchangeable parts. The fact that specific parts could be used for multiple functions decreased the need for large stocks of specialized inventory. Henry Ford took Whitney's ideas about manufacturing to a new level in the Model T production plant, streamlining processes on an assembly line and simplifying inventory procurement by offering limited options – a single model available in a single color. The Toyota Motor Company build on Ford's ideas and systems, coining the description "just-in-time" to describe this scientifically efficient approach to manufacturing that is focused on meticulously tight inventory control.
Lean Manufacturing vs. Just-in-Time Manufacturing
Lean manufacturing and just-in-time production systems are related, but the terms don't have precisely the same meanings. Both systems place a strong value on the role of inventory. Lean manufacturing focuses on excess inventory as a waste of resources and time, emphasizing the savings that can be reaped by keeping on hand only as much as you need and being able to replace stock quickly and accurately. Lean manufacturing also places a premium on the customer experience and the importance of delivering goods to customers in ways that provide maximum value. Just-in-time manufacturing adds the dimension of matching workflow to inventory by developing systems that rely on a short supply chain to reduce lead time for orders.
Examples of Just-in-Time Manufacturing
Toyota is the most famous and obvious example of just-in-time manufacturing. The company gave the process its name and used it as the basis for historically efficient systems. Toyota modeled its just-in-time practices on a Japanese grocery restocking inventory system called Kanban, which relies on protocols for communicating when an item needs to be restocked, relaying information through links in the supply chain. General Electric and Kawasaki have also used just-in-time manufacturing successfully as models for their industries.
Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.