Just in Time (Lean) Purchasing

Lean manufacturing and "just in time," or JIT, are often treated as two different phrases for the same thing, but they are not identical concepts. Just-in-time manufacturing is focused on efficiency, while lean manufacturing is focused on using efficiency to add value for the customer. Just-in-time manufacturing can be practiced on its own or as one step in the lean manufacturing process.

Just in Time Definition :

"Just-in-Time" means making "only what is needed, when it is needed, and in the amount needed." For example, to efficiently produce a large number of automobiles, which can consist of around 30,000 parts, it is necessary to create a detailed production plan that includes parts procurement. Supplying "what is needed, when it is needed, and in the amount needed" according to this production plan can eliminate waste, inconsistencies, and unreasonable requirements, resulting in improved productivity.

The advantages of a just-in-time are:

1. Cashflow is improved, as less money is tied up in raw materials, work-in-progress and finished goods.
2. Less need for storage space for raw materials and finished goods.
3. The business builds up strong relationships with its suppliers.
4. Communication and co-operation between the marketing and the production departments are improved.

The disadvantages of a just-in-time are:

1. The business may struggle to meet orders if their suppliers fail to deliver the raw materials on time.
2. The business is unlikely to 'bulk-buy' its raw materials and, therefore, it may lose the benefit of achieving economies of scale.
3. Buffer stocks are minimal and this may lead to the business having to reject customer orders requiring delivery immediately.

Lean Production Definition :

Lean manufacturing takes the concept of JIT and reexamines it from the perspective of customer value. The first step in the lean manufacturing process is to consider what aspects of the product add real value for the customer. For instance, if a customer is buying a stereo speaker, he might be looking for sound quality, durability and affordability. The first principle of lean manufacturing is that every step in the production process must add something of value that the customer actually wants.

Kanban System

In the TPS (Toyota Production System), a unique production control method called the "kanban system" plays an integral role. The kanban system has also been called the "Supermarket method" because the idea behind it was borrowed from supermarkets. Such mass merchandizing stores use product control cards upon which product-related information, such as a product's name, code and storage location, are entered. Because Toyota employed kanban signs for use in their production processes, the method came to be called the "kanban system." At Toyota, when a process refers to a preceding process to retrieve parts, it uses a kanban to communicate which parts have been used.