Explain what JIT is and how JIT impacts costs Explain what J

Solution

JIT is nothing but Just in time, it is a very important and useful concepts of lean manufacturing derived by Toyota. It basically means that doing things exactly when required and in exact amount in which it is required. This concept is aimed at reducing the eight types of lean wastes,espcifically over processing,overproduction, over stocking etc. Let us understand this with the traditional example of a manufacturing line. As per Just in time, the production unit will produce exactly the quantity which is demanded and at that time itself. This will insure even the inventory levels between the manufacturing stations to exactly of the order of the quantity to be produced.

In terms of cost JIT is aimed at reducing overall cost levels, which basically includes costs for over stocking and over producing. The other aspect that has to be looked at with respect to cost is cost of stockout. If JIT is implemented it has to be insured that demnd is certian or else there will be risk of stock out and thus there will be additional cost associated to it. Overall at a broad level JIT is aimed at reducing the total inventory cost.