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Just-in-Time Manufacturing

Just-in-time manufacturing is the method of producing products with only a minimal amount of raw material and component parts on hand.

The concept of just-in-time manufacturing is nothing new. Henry Ford saw value in having a minimal amount of stock on hand—a concept which Taiichi Ohno took to heart as he developed the Toyota Production System. In fact, Just in Time manufacturing is one of the central pillars of the Toyota Production System.

Just-in-time manufacturing uses many Lean tools to achieve dramatic reductions in inventory, with kanban cards and setup reduction having the biggest impact.

In its most extreme application, just-in-time manufacturing can result in producers getting paid long before they pay their suppliers.

Consider a make-to-order computer producer that collects payment when the order is placed, but has only a few days of inventory on hand. As orders come in, they use their small amount of inventory, and re-order offsetting quantities every day, often with 30-day (or longer) payment terms.

Just in Time manufacturing creates a very advantageous cash flow position, freeing up working capital for growth or other projects.

 

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