Just In Time
My first exposure to any process improvements was JIT (Just In Time) Purchasing where goods are purchased and delivered when they are needed and only in the quantities needed.
The idea behind this was explained to me (along time ago) by a Warehouse Manager as a way to reduce costs of stocking inventory (storage costs, insurance, etc). I didn’t know much about the purchasing/inventory of this manager’s business at the time. After asking more questions I found that his warehouse was the same size, his insurance costs may have reduced, but now he was paying more in freight charges because a lot more deliveries were being made. I understood less capital was being tied up in inventories, but the additional freight charges made me question the value of JIT Purchasing.
Fast forward several years when I was undergoing Lean training I had an A-Ha moment. Reducing excessive stocks and purchasing to meet customer demand made sense! Whether Just In Time was previously badly explained to me, or I was focusing too much on the financial side and not seeing the bigger picture, some of the thoughts behind Lean made it clearer.
Imagine a ship, SS JIT, is floating along on water. The ship is our company and the water is our inventory. Let’s call the captain of this ship Justin.
Justin is happily floating along, but underneath the surface there is a lot of “waste” (the rocks) going on that he isn’t fully aware of. This is because his high levels of inventories allow him to sail along, happily ignorant of what is happening deep down.
He will continue in this way as long as the extra inventory is acting as a buffer to hide the waste.
Now, if we remove the buffer stock Justin has to face and remove these forms of waste, or sink.
Removing these forms of waste and ‘leaning’ out processes have more than just financial benefits. As well as the financial benefits first mentioned to me, I could now see that leaner processes could possibly also result in lower operating costs, a more robust and flexible organisation and more focused on what the customer wants.
Lean is much bigger than Just In Time Purchasing and has many more benefits. This isn’t a post on Lean, but one may be done in the future….. if that’s what the customer wants!