CAT / FIA FFM Syllabus A. Working Capital Management - Just-In-Time - Notes ^{5 / 5}

An inventory strategy which reduces in-process inventory.

• In order to achieve JIT the process must have signals of what is going on elsewhere within the process. These signals tell production processes when to make the next part.
  They can be simple visual signals, such as the presence of a part on a shelf.

• Quick communication of the consumption of old stock which triggers new stock to be ordered is key to JIT and inventory reduction.

• JIT emphasises inventory as one of the seven wastes (overproduction, waiting time, transportation, inventory, processing, motion and product defect), and so aims to reduce buffer inventory to zero.

  Zero buffer inventory means that production is not protected from external shocks

5 Key aspects to JIT

1. Multi skilled workers

2. Close relationship with suppliers

3. Reduced set up times

4. Quality

5. Teams working in cells

Benefits

1. Lower level of investment in working capital

2. A reduction in inventory holding costs

3. A reduction in materials handling costs

4. Improved operating efficiency

5. Lower reworking costs due to the increased emphasis on the quality of supplies