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Value of Just in Time

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  • Value of Just in Time

    How does one quantify into monetary the value of moving to JIT, changing planning perimeters e.g. changing from holding 3 months to 1 month.

  • #2
    Re: Value of Just in Time

    The value of JIT system as a strategy can be quantified by first answering the following questions?

    Inventory is 'evil', how is it evil?

    1. Because it ties up capital in stock,
    2. It has a cost incremental effect in terms of warehouse costs, theft, insurance premiums, obsolescence, pilferage and other risks associated with keeping inventory,
    3. Involves a lot of handling hence costs to it,remember 'the best handling is no handling at all', if you don't want your glasses to break, don't use them.
    4. Inspection is done at the supplier's site. Return materials to the supplier due to poor quality is eliminated.
    5. To achieve this, there is a need to engage your suppliers and they need to understand and be part of your supply strategy.
    6. The benefits of a JIT strategy in supply chain management outstrip the risks associated with running your plant without the use of a warehouse.

    From this, you should be able to quantify the benefits.