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.