During sixties of twenty century due to intensive development of Japanese economy the local steel suppliers can create the enormous production facilities. The main result of it was a process of supplies in very limited terms. Shipbuilders reduced the inventories of produced product from monthly rate to daily rate. So they received the possibility to receive the steel in time without growth of stocks.
Relatively soon another producers of finished goods took this idea on board. And in the mid of seventieth the Vice-President of Toyota, Taiti Ono and his colleagues provided the clear explanation of the definition «just in time». «Just in Time» production is a philosophy of the whole business and it is not a particular management technique.
The main approach in this way is identification of inefficient expenses and their elimination on every branch of the production system. Herewith all activity of managers is based on continuous improvement concept.
The company, which is going to realize JIT, is usually can achieve the significant improvement of the quality of own production. In case of production organization as JIT you can see the essential intensification of company’s staff efforts on elimination of bottlenecks, including non-efficient work with suppliers. Your main task is cost reducing on all stages of the whole supply chain. If you decided that there are not any big stocks of raw materials, these stocks should be kept in supplier. As a result the expenses in whole supply chain will be reduced. When stocks are located in supplier, their value is equal to the amount of suppliers expenses on purchase of raw or other materials and own expenses on production. The cost of stocks in the customer in value terms is equal to selling price of supplier.
During providing of JIT the costs for placing an order are reduced, and therefore the cost saving on keeping stocks, which is created as a result of reducing purchased batch level, is remaining on the optimal level (see the Graph 1).
EOQ
