Part 3 of our “Effective Ways to Reduce Manufacturing Costs” series introduced the importance of inventory reduction in lean manufacturing. After waste has been eliminated, companies must then assess their inventory costs. By reducing all in-process or current inventory, businesses can lower costs and, ultimately, raise their profits. While companies use several techniques to go about reducing inventory, the Just-in-Time (JIT) strategy is one of the more popular techniques.
According to the principles of the Just-in-Time strategy, inventory is considered to be waste. Many companies view a warehouse full of goods as an asset to their business; however, lean manufacturing considers goods that are not being shipped or sold wasteful. If those products are just sitting there (racking up storage costs) and no profit is being made on them, the company is essentially wasting money. The Just-in-Time strategy encourages companies to hold little or no inventory beyond what is required for immediate production or distribution.
With that in mind, you do not want to get rid of your inventory entirely. On-hand inventory can alleviate the stress of unforeseen production problems, such as holdups, mechanical errors, equipment errors and workforce challenges. The extra inventory can help protect your business should a problem arise.
The goal of the JIT strategy is to help businesses make sure they have the right amount of inventory on hand as it is needed. Any extra is considered to be a waste. For this strategy to work, consistency is key. Find suppliers that will comply with the Just-in-Time strategy and offer a reasonably priced, high-quality product.
The Just-in-Time strategy reduces costs, eliminates waste and improves efficiency, allowing the company to get products to the customer on time with little cost. Learn more about reducing costs through lean production by downloading our article series on Lean Manufacturing Insights. This informative guide will show you how to effectively eliminate waste and introduce several lean manufacturing strategies.