Just-in-Time (JIT) inventory management system is a technique used to control and manage inventory. The inventory management methodology primarily reduces the production time while at the same time, responding appropriately to customers and suppliers. Toyota has been hugely successful in its adoption of this strategy that the technique is also referred to as the Toyota Production System (TPS). Toyota adopted the system in a bid to increase efficiency in its production while at the same time reducing wastage by using only the materials immediately required for manufacturing. This aids in eliminating holding costs, thus reducing the overall costs associated with inventory management. This article examines how the Toyota company successfully utilizes the Just-in-time inventory management technique. It reviews the thoughts on Toyota workers with regards to the inventory management methodology. It analyses the appropriate inventory levels and the value chain required to ensure Toyota is successful in the adoption and utilization of the technique.
Workers Thoughts
The main aim of the just-in-time inventory management system is to reduce wastage through enhanced efficiency. This is achieved through employee participation since they are crucial in improving productivity. In the just-in-time inventory management technique adopted by Toyota, a worker picks the quantity of material need for production from the inventory storage, and then the total material taken would be replenished thus saving on costs associated with holding costs for the additional inventory. As such, workers can work efficiently by reducing overhead expenditures while ensuring that materials are always available. Employees adopted this inventory management system in their quest for continuous improvement. Workers are required to follow a particular set of principles which are aimed at enhancing efficiency based on the quality of products and the customers’ needs. Employees are at the centre stage of the just-in-time inventory management strategy since they are central in discovering problems in production and solving them appropriately. The actual number of orders and demand for products signals workers when the product under demand needs to be manufactured. This demand-pull production strategy allows employees to maximize their productivity since they produce only what is required in the correct time and quantity. The just-in-time inventory management technique enables the company to maximize its return on investment. The successful adoption of this strategy allows Toyota workers to improve the quality of vehicles produced while at the same time ensuring timeliness in production and delivery of vehicles to the end customer.
Inventory Levels
Due to the nature of the products manufactured by Toyota, its manufacturing plants have limited space to hold all the materials required for the production process. This is where the just-in-time inventory management system comes in as the company aims at minimizing overhead holding expenses for raw materials. In the just-in-time inventory management system, Toyota produces enough cars to meet the demand for the product in the market. Toyota makes vehicles based on the nature of demand in the market. Through careful planning, Toyota can identify and eliminate all wastes and inefficiencies that prevent optimum productivity in the company. The company utilizes the available inventory to its maximum potential for improved efficiency. The level of stock maintained by the company is only sufficient to cater for the demand, which is used to determine the production. This means that the company saves on the costs associated with storing the raw materials, which translates to increased profitability and continuous improvement for the company. Through this level of inventory, Toyota can eliminate wastage of raw materials. Toyota is also able to reduce transportation costs and lead times associated with the unavailability of raw materials. Just-in-time inventory management strategy enables Toyota to effectively manage inventory and storage of raw materials, which is an expensive element for the company. This inventory technique is effective in reducing the need for warehouse storage space, thus reducing the associated expenses. This also allows the company to improve its operational efficiency. Toyota acquires raw materials that are needed expressly for production when the demand arises. As such, rather than having large volumes of raw materials in the warehouse, Toyota places small and more frequent orders from their suppliers to ensure they have enough materials to satisfy the current demand.
Value Chain
Toyota adopted the just-in-time inventory management system to maximize their production while at the same time minimizing their maintenance costs for managing inventory during production. This technique reduces costs by reducing the number of goods held as stock for production purposes. This is vital in the value chain since Toyota is in a position to produce and deliver its finished products in time to meet demand from customers. This inventory management technique also aids in the value chain process since it enables Toyota to assemble the partly finished goods into finished products according to the needs and wants of the customers. Due to the policies governing the just-in-time inventory management technique, production is made for specific customer orders to maximize customization based on the needs in the market, which guarantees customer satisfaction. The output thus starts immediately an order is placed by delivering the exact amount of raw materials required for production. This aids in minimizing losses and ensuring expected delivery of materials for production purposes. The success in utilizing this inventory management technique is entirely dependent on the proper planning to ensure materials are delivered on time as and when needed. This strategy is crucial in the value chain since it eliminates the storage of materials that are usually associated with clutter, which prevents the efficient flow of materials to and from the production line. Due to the elimination of storage need, Toyota is in a position to increase the speed associated with the production, thus allowing the company to produce more vehicles using the same resources and the same production time. This is also significant in reducing the overall production costs, thus resulting from increasing profits and earnings by the company.
The just-in-time inventory management strategy supports the overall business plan for Toyota. The motor vehicle industry undergoes rampant changes in design aspects and quality. These changes need to be incorporated in production to ensure it meets the needs and wants of customers. Toyota is among the most innovative manufacturers in the world, a factor which has enabled the company to stand out and remain competitive even in the wake of enhanced competition. The design of Toyota cars involves the collaboration of various teams from different parts of the world. This means that different parts of the vehicle are designed and manufactured in different locations and brought to Toyota for assembly. It means that there are various assembly and sub-assembly requirements before the production of Toyota vehicles. As such, the most appropriate technique to ensure all parts are available for the production of the final vehicle are available as and when needed. Just-in-time inventory management strategy aids in the ultimate value chain process by ensuring the different parts of the Toyota vehicle that are produced in different locations are delivered on time for the final assembly of the vehicle. This reduces the time and costs involved in the production while also ensuring that customers can obtain their vehicles on time. This explains the high levels of loyalty among Toyota customers since they can receive their vehicles on time according to their specifications.
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