hey can be properly and appropriately implemented in individual organizations, recognizing that these organizations have unique circumstances that makes the wholesale adoption of any philosophy unlikely to be successful.
JIT is, at its fullest implementation, not merely an inventory control method, but a system of production based on the total elimination of waste. It seeks to improve the rationality on which purchasing decisions are made, and eliminates all activities that do not add value to a product or service. It requires a commitment to a high level of quality, a commitment to continuous improvement in the efficiency of an activity, and an emphasis on simplification and increased visibility to identify activities that do not add value. Under JIT, the ideal batch size is one unit, eliminating all inventory costs (Cohen, 1993, p. 40).
Benefits of JIT include reduced throughput time, better quality of the product, and direct cost savings from the elimination of non-value-adding activities (Moses & Seshadri, 2000, p. 261). Quality is of the utmost importance when using small lots because the company lacks a buffer inventory. This means that the entire production process must halt until any problem is rectified. Additionally, built-in quality yields fewer inspection costs, less rework, less scrap and fewer returns.
Within a JIT environment, a fundamental goal is the reduction of total product cost. If total cost per product is reduced, it may be possible to decrease the price per unit of the product. This translates into greater profit (assuming the contribution margin per product is not decreased too much). Higher quality will add to the demand for the product, which, in turn, generates more profit for the firm. Therefore, JIT increases the firm's ability to compete if total product cost is reduced, particularly if quality is improved.
To increase quality and receive JIT input, JIT companies use fewer suppliers. ...